Understand settlement profitability calculations

Proposed settlement profitability

The settlement line shows the proposed profitability for settlements using Account Sale or Pooling accounting method. Profitability is calculated by deducting dedicated commission amounts before determining the amount to settle with vendors.

When you initially calculate the settlement, the Proposed Settlement field value is determined using the following logic:

Proposed Profitability Amount = Revenue − Claims − Costs − Prop. Amount to Settle (LCY)

Depending on the accounting method, the origin of this component is different:

For accounting method, Account Sale,

Input	Source
Revenue	Sum of the Proposed Net Revenue field value on the Account Sale Revenue page for the settlement line.
Claims	Sum of the Proposed Claim Value Net field value on the Account Sale Claim page for the settlement line.
Costs	Sum of the Cost Amount (Proposed) field value on the Account Sale Cost page for this settlement line.
Proposed Amount to Settle (LCY)	Calculated as: Proposed Net Revenue − Proposed Claim Value Net − Costs (Proposed, excl. Document deduction methods) − Commission (Orig. Proposed Comm. Value)

For accounting method, Pooling,

Input	Source
Revenue	Sum of the Net Revenue (indirect) field value on the Pooling Detail page where the Type field value is set to Revenue.
Claims	Sum of the Net Revenue (indirect) field value on the Pooling Detail page where the Type field value is set toClaim.
Costs	Derived from the pooling detail lines where the Type field value is set to Cost.
Prop. Amount to Settle (LCY)	Derived from the pooling line linked to the settlement line. The value is calculated as: (Pooling line Proposed Purchase invoice Amount × relational factor of the settlement line quantity received versus the pooling line quantity received)

The Proposed Profitability % field value is then determined by the following formula:

Proposed Profitability % = (Proposed Profitability Amount / (Revenue − Claims)) × 100

After initial calculation, the proposed settlement profitability amount and percentage will never change.

Settlement profitability

The Settlement Profitability and Settlement Profitability % field values show the profitability of a settlement line after you adjust the initial settlement values.

The Profitability Amount field value shows the settlement line’s actual profitability after manual adjustments. It uses the same formula as the proposed settlement, but calculates based on the manually adjusted Amount to Settle field value. The field is calculated using the following logic

Profitability Amount = Revenue − Claims − Costs − Amount to Settle (LCY)

The Profitability % field value is then determined by the following formula:

Profitability % = (Profitability Amount / (Revenue − Claims)) × 100

The Settlement Profitability field value differs from Proposed Settlement Profitability field value because it uses the manually adjusted Amount to Settle field value. Any changes to settlement values, such as updating reported revenue, update the Amount to Settle field value, and the Profitability Amount field value changes accordingly.