Commercial settlement

A Commercial Settlement works out the final value of one leg: the bill-of-lading quantity at the contract's base price, the quality adjustment from the surveyor's result, the laytime result, freight, insurance, dead freight, charges, tax and any early-payment discount. It checks the total against the credit, freezes when the cargo is rejectable, and makes the draft sales or purchase invoice and the payment entry in PALBONSphere.

To open the list: Trading › Settlement › Commercial Settlement.

1. Prerequisites

• The leg's signed contract with its price formula.
• The bill of lading quantity (from the voyage).
• The leg's surveyor's Certificate of Sampling and Analysis recorded as a trade document with its results.
• The leg's laytime calculation, if laytime is settled on the invoice.
• For invoicing: the company's accounts set up, and an exchange rate for the invoice date (see First-time setup).

2. Create the settlement

New:

1. Title (for example Purchase settlement T.0101), Trade, Leg, Contract, Letter of Credit. The counterparty kind follows the leg; choose the Counterparty.
2. Invoice No. and Invoice Date (the supplier's invoice on the purchase leg; your invoice number on the sale leg).
3. Price Build-up:
   • Currency, B/L Quantity;
   • Base Price and Price Formula: taken from the contract when empty;
   • Analysis Certificate: the leg's certificate; Actual Value is read from it (the formula's parameter, for example GCV (ARB), is matched even when the certificate writes Gross Calorific Value), or type it.
4. Save. The app works out the Adjusted Price and the Rejection Limit status (see Price formulas).

3. The build-up

Lines lists each component; Totals shows the result:

Component	Amount
Base Value	B/L quantity × base price
Quality Adjustment	B/L quantity × (adjusted price − base price)
Despatch (+) / Demurrage (−)	From the laytime calculation (the agreed amount if any)
Freight, Insurance, Other Charges, Tax	As entered
Dead freight	Deducted
Early Payment Discount	Deducted (below)
Total	The sum

LC Maximum (with tolerance) comes from the credit, and Within the LC is ticked when the total fits. A total above it warns: the bank will refuse the excess.

Example, purchase leg: 76,230 MT × 51.72 = 3,942,615.60. GCV 4,036 against 4,200 gives 49.70 per MT, a quality adjustment of −153,984.60. Despatch +20,983.63. Total USD 3,809,614.63, within the credit's maximum of USD 4,266,900.

4. Other components

• Laytime Calculation: choose it and Despatch (+) / Demurrage (−) fills: despatch is added, demurrage deducted, as the purchase credit's 46A asks the invoice to show.
• Freight Adjustment, Insurance, Other Charges, Tax: CIF and CFR sales, insurance premiums, port or storage charges, tax.
• Dead freight (deducted): space booked but not used, deducted on the invoice.
• Early Payment Discounts and Pay Early On: with a discount matrix, paying before the presentation's due date gives a discount of amount × band rate × days early ÷ 360 (or 365).

5. Rejection limits

When the actual value is beyond the contract's rejection limit, Rejection Limit shows Rejectable:

• the app warns that the buyer may reject the cargo;
• a critical Trade Alert (Rejection Limit) is raised once for the risk desk;
• the settlement is frozen: it cannot be approved, invoiced or paid (… is beyond the contract's rejection limit: the settlement is frozen until the buyer's waiver is recorded).

If the buyer accepts the cargo anyway, tick Rejection limit waived by the buyer and write the Waiver note. The settlement can then go ahead. Close to Limit is only a warning.

6. Approval

Step	Action	Who
Draft	Submit for Approval	Trade Finance Executive, Trader
Pending Approval	Approve (total up to 10 million) / Approve Large Settlement (above 10 million), not the requester	Trade Finance Manager
Pending Approval	Return	Trade Finance Manager
Approved	Mark Invoiced	Trade Finance Executive, Trade Finance Manager
Invoiced	Record Payment	Trade Finance Manager, Treasury Manager
Draft	Cancel	Trade Finance Manager

7. Invoice and payment

1. Actions › Make the invoice creates, once:
   • a draft Sales Invoice to the buyer (sale leg), or a draft Purchase Invoice from the supplier (purchase leg, with the supplier's invoice number and date);
   • the commodity at the adjusted price, each addition (despatch, freight, insurance, other) as a service line, and the deductions (demurrage, dead freight, early-payment discount) as the invoice discount, so its grand total is the settlement total to the cent;
   • in the trade currency at the day's exchange rate, to a receivable or payable account in that currency;
   • with tax applied by the site's tax rules (in India, PALBON Comply's GST on the party's GSTIN and place of supply).
2. An accountant reviews and submits the invoice in PALBONSphere. Nothing is posted to the ledger behind anyone's back.
3. Actions › Record the payment creates a draft Payment Entry against the submitted invoice, for the amount paid (or the invoice amount), with the credit's number as its reference. It needs the invoice submitted first (… is not submitted yet: an accountant submits it, then the payment can be recorded). Fill Paid and Paid On on the settlement.
4. The settlement keeps the links: Sales invoice or Purchase invoice, and Payment entry.
5. Click Mark Invoiced and, after payment, Record Payment.

8. The trade's realised result

Every settlement save updates the trade: Sale Settled and Purchase Settled (the settlement totals) and Realised Margin = sale settled − purchase settled − bank charges and fees.

Example: sale settled USD 3,984,542.10, purchase settled USD 3,809,614.63: gross margin USD 174,927.47. Less bank charges of USD 6,850: realised margin USD 168,077.47. Most of it comes from the two surveyors' different GCV results, not from the 0.67 per MT contract spread.

Print › Settlement Invoice prints the settlement as an invoice: the quality specification table, the price adjustment worked out, the amount in words and the bank details. Trading › Reports › Outstanding Settlements lists the settlements not yet paid.