Optimizing Accounts Receivables with Billing Classification and Billing Codes in Dynamics 365 Finance

I recently had the opportunity to work on a project using billing classification and billing codes. I haven't found enough details/blogs on this topic yet, which made me do in-depth studies of this super helpful functionality. Here, I'm sharing some knowledge that I have on this topic so that it can benefit other Dynamics 365 users.

Billing Classification functionality allows us to categorise sales orders or invoices based on specific criteria. This classification can be helpful for various purposes, such as reporting, analysis, running some integrations and managing customer accounts.

Billing Codes, on the other hand, complement Billing Classification by providing a standardised way to categorise transactions for billing and invoicing purposes. These codes can represent different billing methods, payment terms, tax rates, or other billing-related attributes.

Billing classification can be used in sales order-based customer invoices, free text invoices, customer reimbursement processes, and the project management and accounting module.

In this blog, I will only be talking about how to use the billing classification functionality with Free Text Invoice, but I will try to cover most of the other setup-related topics.

The setup and process are pretty simple.

Let's dive deep into the Billing classification functionality...

Setup

There are only Four primary setup pages that need to be taken care of to implement Billing Classification and Billing Code functionality:

1. Enable Billing Classification
2. Configure Billing Code Custom Fileds (Optional)
3. Configure Billing Codes
4. Configure Billing Classification

Enable Billing Classification

To start using the billing classification functionality, we must first enable it from Accounts Receivable Parameters. Under the General Option of the Parameters, we will find a bullion to allow the same.

Path: Accounts Receivables > Setup > Accounts Receivables Parameters

Note: Once enabled, no Free Text invoices can be raised without using Billing Classification.        

Configure Billing Code Custom Fileds (Optional)

Path: Accounts Receivables > Setup > Billing Code Custom Fields

There are many scenarios/business use cases where, as per the business need, we might need additional fields filled in while raising the invoice, and we ended up adding custom files using customisation. But now we can use this option to add custom fields on the free text invoice without customising and just with the help of the setup.

There are options to add multiple types of fields that can be added.

• Currency –Currency fields accept only numbers with two decimal places. Here we can specify the minimum and maximum values for the field.
• Decimal – Decimal fields accept only decimal numbers with four decimal places. Here we can set minimum and maximum values for the field.
• Text—Text fields can hold any text, and any input entered into them will be interpreted as text. Here we can set a maximum field length for each field.
• Integer – Integer fields accept only whole numbers. Here we can set minimum and maximum values for the field.
• Boolean – Boolean fields allow yes/no selections.
• Date – Date fields accept only dates. The date is stored as mm/dd/yyyy.

Depending on the requirement, we can add custom fields. Options under 'Details' FastTab are different based on the Type selected.

We can add these Custom fields to the Billing Codes, which then get linked to a Billing Classification.

Configure Billing Codes

Path: Accounts Receivables > Setup > Billing Codes

Billing codes provide a set of default billing values for a defined type of service or charge. The values that we define for each billing code are automatically entered in the free text invoice line when the billing code is selected.

Generally, the default values from the billing code can be changed on the free text invoice. However, we can set the billing code to allow or prevent changes to specific fields.

The billing code can be a date range code or set with a never-ending date.

Fileds like 'Item Sales tax group, Main account, Line Dimensions and Interest code can be defaulted.

Set "Allow ledger account changes" to Yes if we want to allow changes in the Main account.

Set "Use line values for unspecified dimensions" to Yes if the Line level dimensions need to be flown from the current setup.

Note: All the Codes, once created, need to be activated first to map them to the Billing classification. One Billing Code can be mapped to only one Billing Classification, so if the business requirement is such that the same billing code needs to be used in multiple Billing Classifications, then we will have to make multiple Codes with the same details.        

We can add the Custom Fileds to the code and make them active or inactive on the same page. We can also do that if the user must fill in the details mandatorily in the custom field.

Configure Billing Classification

Path: Accounts Receivables > Setup > Billing Classification

Once we have configured the Billing Codes, we can configure the Billing Classification. Billing classifications are used to group similar free text invoices/billing codes for processing and reporting.

Billing Classification can be used to default:

• Terms of payment
• Number sequence for invoice number
• Number sequence for credit notes
• Collection letters sequence
• Interest Code

Note - If you want the default/standard settings for interest and collection letters to be used, then enable the Boolean instead of selecting the new code.        

We can use billing classifications to control the settlement priority of free text invoices. This can be done by first setting the priority of the billing codes and then using the Up and Down buttons available for both billing codes and classification. (I will need to write a separate blog for this detailed process on Priority Automatic Settlement)

When we select a billing classification on a free-text invoice, only the billing codes listed on the billing classification are available for the invoice dropdown.

Process

Processing a Free Text Invoice along with Billing Classification remains almost the same except for one significant change: we need to select the Billing Classification 1st and then the Billing code. The system will populate the rest of the files automatically if configured correctly.

• Navigate to Account Receivable> Invoices > Free text Invoice.
• Click New to create a free text Invoice.
• The difference we will see here is that Billing Classification is now a mandatory field.

• When we select the billing classification and the customer, the system will populate the other fields, such as date, currency, terms of payments, etc.
• Going to Invoice Lines, select the Billing code; the list will be limited to the list available under the Billing classification selected.

• When we select the billing code, a new screen will pop up to update the custom field we mapped while setting it up.

• Fields like main account, amount, and line level dimensions will also be auto-populated here.
• Verify the details and send them for Approval or Post the entry.

Note: We can also create a Free-text Invoice Template using the billing code, which can then be used for recurring invoices.        

Other important Details

• Billing classification becomes a required field on the free text invoice as soon as it is enabled.
• The customer's default financial dimensions configured on the customer card will be used to populate the Header level Dimension.
• If an invoice was not yet posted when we enabled billing classifications, we must assign a billing classification to it before we can post it. When we open the page to view the invoice, we'll get a message stating that the billing classification is required.
• When we select a billing code, default values are automatically entered in many fields on the invoice line. This makes data entry faster and more accurate.
• If the billing code on a free text invoice line doesn’t allow changes to the ledger accounts, we can’t change the accounting distributions on the line. We can change the main account that displays on the free text invoice line, but that change affects only what is displayed. Changing the main account does not affect the distributions.

Most important Note:
> Billing Classification functionality can also be used by non-public sector companies, even if it is stated in the Microsoft documents that it is for public sector companies. As per the last update, while using version 10.0.39, the functionality was open for all types of companies.

> The only risk that is seen today is if Microsoft decides to move this functionality to only Public Sector companies (highly unlikely), then it will lead to either an increase in license cost or the company's need to change the implemented solution.        

Next Step

This is it for the blog. I hope this will be of help and that you can benefit from this long yet comprehensive blog.

Try this out, as this function adds to automating the free text invoice process with low chances of manual errors and efforts.

Keep Reading and Sharing.

Happy Learning..!!

Nandish Kothari ????

Ref link: https://learn.microsoft.com/en-us/dynamics365/finance/public-sector/billing-classifications-billing-codes-public-sector

https://learn.microsoft.com/en-us/dynamics365/finance/public-sector/public-sector-functionality