When to Use Mid-Month Billings - CMW software



The New Approach – Customer Payment Problems

Author: Steve L. Seawall, CPA Copyright 2016 Custom Micro Works All rights reserved

Revised 5/30/2016

Contact Technical Support Immediately!

The first sign of a possible customer payment problem should trigger a single thought – Contact Technical Support. NEVER attempt to correct a problem on your own UNLESS you are very experienced and have "successfully" corrected such problems previously.

Why? The New Approach is designed to be used with ease, efficiency, and accuracy. Quite the opposite, the underlying data integrity protection features are specifically designed to detect possible problems and detect them early. But when you attempt to make corrections, experience shows that, more often than not, the problem only gets worse.

What is the Customer Payment Problem?

Immediate attention should be on determining what the problem is. If necessary, Technical Support can often times help you determine what the problem is, what caused it, and how to fix it with a phone call.

The proper procedures to fix the customer payment problem depend on the problem itself and how early it was caught.

Problem 1 – Customer Payment Rejected by Bank (e.g., Insufficient Funds)

• Do not alter any customer payment records in AR! The best approach to this problem is to focus entirely on BA and Banking.

• Notify Customer. Notify the customer of the bank's action and the amount the customer must pay to remedy the problem.

• BA Cash Receipt Adjustment. Enter a Negative cash receipt adjustment in BA for the total amount removed from the bank account by the bank. Preferably use the General Fund and Miscellaneous receipt code.

• Banking Withdrawal Adjustment. Enter a banking withdrawal transaction for the total amount removed from the bank account by the bank.

• CAUTION: Subsequent Payment By Customer. The subsequent payment by the customer should be treated NOT as a new "customer payment", but as if it is a non-customer payment cash receipt. The cash receipt should be credited to the General Fund and Miscellaneous receipt code. This reverses the earlier negative cash receipt adjustment, thereby maintaining the overall integrity of the accounting data for financial reporting purposes.

Problem 2 – Customer Payment Credited to Wrong Customer Account

Note: There are numerous procedures in place to prevent this from happening. Therefore, client counseling should be considered.

• Step 1 – Delete the Original Customer Payment (AR/Customer Payments).

Original Customer Payment Not Posted to BA. If the payment has not been posted to Budgetary Accounting the deletion process will do the following:

Original Payment Record(s) Deleted. The original payment record will be deleted as if it was never entered in the first place (this includes the accounts receivable payment allocation records).

Overpayment Deposit Reversed. If the original customer payment resulted in an overpayment deposit, the deposit will be reversed automatically. Also, a related cash receipt adjustment will be created automatically to reverse the original cash receipt entry in BA.

Original Customer Payment Posted to BA. If the payment has been posted to Budgetary Accounting the deletion process will do the following:

Original Payment Record Deleted. The original payment record will be deleted as if it was never entered in the first place.

Accounts Receivable Records Reversed. The accounts receivable payment allocation records created by the original payment will be reversed.

Posted Cash Receipts in BA Reversed. The original cash receipts posted to BA will be reversed, not with negative cash receipt entries, but rather with negative cash receipt adjustments.

Overpayment Deposit Reversed. If the original customer payment resulted in an overpayment deposit, the deposit will be reversed automatically. Also, a related cash receipt adjustment will be created automatically to reverse the original cash receipt entry in BA.

• Step 2 – Enter New Customer Payment to Replace Deleted Customer Payment. Enter a new customer payment as it should have been entered originally using AR/Customer Payments.

Important: Do not use the OTC cash receipt procedure for this step because OTC is reserved for new cash coming in. In this transaction, the cash receipt is presumed to have already been receipted using OTC, and already deposited.

Add Customer Payment. Select AR/Customer Payments and Click on Add. Enter the new customer payment using the correct customer account number and the same date and amount as the record deleted in Step 1.

By making this entry directly in AR rather than going through the OTC process, the computer will sense that the entry is a possible corrective re-entry of a deleted customer payment.

The following "question" messages will direct you on what to do:

First Question Message: "If this is a re-entry of a previously deleted customer payment, it should be posted as a cash receipt adjustment, not a cash receipt to be deposited. Do you want to continue?"

If you are confused at this point you can exit and there will be no updates. This gives you an opportunity to contact technical support for assistance if necessary.

Second Question Message: "Do you want to post this payment automatically as a cash receipt adjustment?" If you answer No, the customer payment entry will follow otherwise normal procedures as if the entry came from the OTC procedure.

Problem 3 – OTC Customer Payment Entry Exceeds Actual Amount Collected By $10

In this case, the customer was given credit for paying more than was actually paid due to a clerical entry error.

Note: There are numerous procedures in place to prevent this from happening. Therefore, client counseling should be considered.

Original Customer Payment Not Posted to BA. If the payment has not been posted to Budgetary Accounting the AR Customer Payment can be deleted. The deletion process will do the following:

Original Payment Record(s) Deleted. The original payment record will be deleted as if it was never entered in the first place (this includes the accounts receivable payment allocation records).

Overpayment Deposit Reversed. If the original customer payment resulted in an overpayment deposit, the deposit will be reversed automatically. Also, a related cash receipt adjustment will be created automatically to reverse the original cash receipt entry in BA.

Original Customer Payment Posted to BA. If the payment has been posted to Budgetary Accounting the deletion process is NOT recommended.

Because this problem affects the customer’s unpaid balance, the related AR records should be corrected. Also, because the payment was posted, Budgetary Accounting records must be corrected.

Generally the steps below are designed to leave the original entries intact for auditing purposes. Instead, adjusting entries will be made to correct the original entries.

• Step 1. Make a note of the customer’s name and account number, the payment date, and the payment amount.

• Step 2. Enter (Add) a billing adjustment (debit adjustment) to the customer’s account using AR/Billing Adjustments/Add.

The date would be the same date as the customer payment.

The amount would be the amount of the “overpayment” error (e.g., $10).

Click on OK.

Note: The effect of this billing adjustment is to reverse (or cancel out) the overpayment amount so that the customer’s next billing does not show a carryover balance credit.

• Step 3. Enter a cash receipt adjustment for negative $10 using BA/Cash Receipt Adjustments.

Click on Add and enter the cash receipt adjustment information.

Enter the customer payment date as the date of the adjustment and enter negative $10 for the amount.

Enter the appropriate fund (e.g., Water Fund) and receipt code (e.g., Charges for Services).

As a comment, you can enter “Correction of error in customer payment entry”.

Click on OK.

• Step 4. If the cash receipts deposit into the bank account (per NA Banking records) included the overstated customer payment amount, you should enter a negative deposit to reverse the amount of the overstatement using Banking/Deposits and Withdrawals.

The negative bank deposit should have the same date as the related deposit that includes the overstatement amount it is reversing.

The negative deposit amount should be $10, the amount of the overstatement.

Note: This step likely will require an investigation into the actual amount deposited into the bank account and the related cash receipt deposit reflected in the computer records.

• Step 5. Prepare a Memo to File that briefly explains what you have done.

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