'Format Payment Files' completes in error when document sequencing is enabled

We enabled document sequencing at ledger level as below and did not enable enforcing for AP or AR as we wanted to generate document numbers only for specific transaction types in AR, and we do not want to generate for AP

After that when payment process request is submitted, at the time of payment file formatting stage, the formatting fails as below and it has error message as below.

We checked with SR analyst and we did not get expected response. But question is, when document sequencing is not enforced in AP, why payment formatting fails with this above error ? The moment, we change the ledger options sequencing by as No sequencing, this works as expected. Has anyone faced this before? Are there any additional configs to check ?