Letter of Credit & Bill of Exchange

Letter of Credit & Bill of Exchange Module - User Guide

1. Introduction 📝

The Letter of Credit (LC) & Bill of Exchange (BE) module is responsible for managing critical financial instruments and payment commitments. These instruments are used to secure high-value transactions, providing a structured way to handle bank-guaranteed payments (LC) and documented calls for payment (BE).

2. Document Types 💳

📜 Letter of Credit (LC)

A forward-looking financial agreement.

• Key Fields: LC Number, Issue Date, Valid Upto Date, Issuing Bank, Party, and Total Amount.
• Workflow: Once an LC is issued by the bank, it is recorded here and later linked to incoming material or bills.

🧾 Bill of Exchange (BE)

A document-specific payment demand.

• Key Fields: BE Number, Issue Date, Due Date, Party, Source Bill Number, and Amount.
• Workflow: Typically generated after a Purchase Bill is recorded to formalize the payment term/deadline.

3. Features ✨

🏗️ Linked Reconciliation

• LC and Bill Connectivity (LC1): An LC can be “consumed” by multiple Purchase Bills. The system tracks these links in the LC1 table to monitor the remaining balance of the LC.
• BE and Bill Connectivity (BE1): Maps a Bill of Exchange directly to its source Purchase Bill.

🛡️ Financial Safeguards

• Amount Invariant: The system prevents a Bill of Exchange from being raised for an amount greater than the original Purchase Bill.
• Date Integrity: Automated checks ensure that LC validity periods (1 year) and BE due dates (100 days) fall within legal and banking norms.

📑 Operational Control

• Auto-Formatting: Documents use a 6-digit auto-numbering system for systematic tracking.
• Audit Trail: Every creation, modification, or deletion is logged in the MFGLog with a timestamp and the user’s name.

4. Validations and Logic ⚠️

Letter of Credit (LC) Validations

• Issue Date: Must fall within the active Financial Year.
• Validity Period: The ValidUptoDate must be:
  • Greater than or equal to the Dated (Issue Date).
  • Less than Dated + 1 year (e.g., if issued on 01-Jan, it must expire before 01-Jan next year).
  • System Message: “Valid Upto date must be between {Dated} AND {ExpiryDate}”

Bill of Exchange (BE) Validations

• Due Date Invariant: The BeDueDate must be:
  • Strictly greater than the Dated (Issue Date).
  • Less than or equal to Dated + 100 days.
  • System Message: “Due date cannot exceed {100DaysFromIssue}”
• Amount Cap: When linking to a Purchase Bill, the BE amount cannot exceed the source bill’s total amount.
• Lock Check: Before deleting a Bill of Exchange, the system checks for any linked LC records in the LC1 table that reference this BE.

5. Complete Workflow 🔄

6. Reports 📊

• 📊 LC Register: A list of all recorded Letters of Credit, their issuing banks, and their current validity status.
• 📊 BE Due Date Report: Tracks upcoming payment demands based on the BeDueDate field.

7. Best Practices / Tips 💡