Bank Guarantee or Letter of Guarantee functionality in Ax 2012 R2

Hi All,

One of the very good features introduced in AX 2012 R2 is Letter of Guarantee or Bank Guarantee. 

Organizations which are into PROJECT EXECUTION, usually gives performance Bank Guarantee (PBG or BG) to their customers.  BG is for total value of contract and it is given to the customers upon receiving certain percentage of advance from them.

BG can be cancelled upon successful completion of the project or its value can be decreased after achieving a certain milestone or it can be liquidated by the customer if the project is not completed.

Let us dive into BG configuration…

STEP 1: Request letter of guarantee from Projects module

 >>In project details form, Select Bank document Type as Letter of guarantee & Click Letter of Guarantee on Action Pane

>>Letter of Guarantee form > click ‘Request’, to request letter of guarantee for the specific project

>> Select type, value, expiration date of letter of guarantee.

>>Letter of Guarantee form with status as requested

   

STEP2: Submit letter of Guarantee request to Bank from Bank Management Module

>> Cash and bank Mgmt > Common > Letter of guarantee

>> Click submit to bank

>>Select Bank Account, Facility Type & Facility Agreement

STEP 4: Receive Letter of Guarantee

>> Status is changed to ‘Submitted to bank’

>>Click ‘Receive from Bank’ when letter of guarantee is received from bank

>> Margins & expenses are calculated based on the Facility agreement setup or fixed amounts can be given here

STEP 5: Give Letter of Guarantee to beneficiary

>>Projects Module >> Project Details >> Letter of Guarantee

>>Status is changed to ‘Received from Bank’                                  

>>Go to Cash & Bank Mgmt Module>>Letter of guarantee >> Give to Beneficiary

>> Status is changed to ‘Request give to beneficiary’

>>Click ‘Give to beneficiary’ to give it to your customer

STEP 6: Decrease Letter of Guarantee

>> We can Increase value or Decrease Value or Extend or Cancel or Liquidate letter of guarantee

>> Status is ‘Given to beneficiary’

>> Let us assume, we have completed 50% of work and according to our agreement we can reduce the bank guarantee to 50% of its original value

>>Projects >> Project Details >> Letter of Guarantee >> Decrease Value

>>Cash & Bank Mgmt Module >> letter of Guarantee>> Decrease value

>> Status is changed to request decrease value

>> Fill in the amount that needs to be deducted from the original Letter of guarantee

>> Status had changed to ‘Request Decrease’

>> Status changed to ‘value decreased’

>> We can see the reduced value in value field

>>Projects>>Project details>>Letter of Guarantee

>>We can see the new value for letter of guarantee

STEP 7: Cancel Bank of Gurantee

>> We have completed the project, and we would like to cancel the letter of guarantee

>> Projects>Project details>Letter of Guarantee>Cancel

>> Give Cancellation Reason

>> Status is changed to ‘Request Cancel’

Hope above information is helpful,, 

 :) :)

Thanks
Sathish Reddy