Interest on Cash Best Practices

Owned by Jawann Swislow
Last updated: Aug 03, 2023 by Jawann Swislow
3 min read

Overview

Eagle Accounting provides functionality to post interest on cash balances. The use of miscellaneous income transactions allows it to be incorporated into Accounting, Data Management, and Performance.

Entity Setup

There is no special entity set up required. However, if performance will be run for the entity, the appropriate S2P Direct Interface Flags need to be set. Create Performance Cash Flows in PACE and Store Cash Positions in PACE must both be set to Yes.

Reference Data

Because miscellaneous income transactions are used, there is no extra security setup involved.

Posting Interest

Miscellaneous income transactions depend on Rec/Pay Events that must be defined ahead of time.

Set Up Rec/Pay Event

This is done using Define a Rec/Pay Event.

  • Entity Chart Of Account Name = STAR, unless you are using a custom chart of accounts

  • Rec Pay Category = Income

  • Rec/Pay Event Name = INT ON CASH, STIF INCOME, or something similar to indicate its purpose

    • This is used to categorize the type of income when posting the Miscellaneous Income transaction

    • This will populate the GL_ACCOUNT field in the CASH_ACTIVITY table, which will be used to suppress the cash flow from the performance calculation

  • Customized Ledger Account: if you are processing ledger activity, choose the appropriate accounts to fit your accounting needs; otherwise you can select any valid accounts

Post Interest

This is done using Post Miscellaneous Income (pre-V17) or Add Misc. Income - Position Level (V17 and above).

  • Select your entity

  • Set Income Date = date of the interest on cash

  • Currency Code = currency of the cash balance

  • Rec/Pay Event Name = name used when setting up the Rec/Pay Event

  • Local Net Amount = value of the interest to be posted

  • Reference details about the custodian can be added for reporting under the Bank account information section

    • Custodian Bank Name and Code are maintained using Code Values under the the CUSTODIAN BANK Code

    • Custody Bank Acct Num and Subacct are maintained for each Custodian Bank Code using the Bank Account Relationship screens

Cash Settlement

These transactions can be settled via the global Contract Cash settlements process or by using Run Multiple Settlements.

Valuation

Interest on cash is recorded directly against the cash balance, therefore it will be captured in the market value of the cash.

Performance

To ensure an accurate contribution to return (CTR), you must exclude the cash flows related to these miscellaneous income transactions from your performance reports. Excluding these flows results in a performance return on the cash balance record that then rolls up to the CTR.

Excluding the flows is accomplished by adding conditional logic your Cash Adjustment Fields to only include records where GL_ACCOUNT != Rec/ Pay Event Name defined above. An example is provided below. Updating the six fields listed below will allow performance to calculate an accurate return. However, you will need to make this same change to all the flow fields used in your performance calculations to ensure all your returns (income, local, etc.) are correct

  • Gross Total Flows

  • Gross Negative Flows

  • Gross Positive Flows

  • Net Total Flows

  • Net Negative Flows

  • Net Positive Flows

After making these changes, you can run performance and verify the results, as shown in this example:

Automation

Message Center can be used to send in the miscellaneous income transactions. Refer to Supported Generic Interfaces V17 for more information.