Collections

This utility can be used to enter an amount of money recovered from a customer through a collection process and to record the associated collection costs.
When a Collection Agency or an Attorney collects money from a customer to cover a charge that had previously been written off in Bad Debts, a statement is usually provided to indicate the amount collected, the collection costs, of the payment recovered.
By entering the collection information in this utility, the corresponding transactions are generated in preparation for posting to the customer's account and to the G/L using Post Collections.

The process flow is as follows:

1. Bad Debts - enter original write-off
   • Post Bad Debts
2. Collections - enter recovered amounts & costs
   • Post Collections
3. Customer Payments - cross apply write-off with recovered amount on account
   • Post Customer Payments

The prompts to enter the initial collection are:

CUSTOMER NUMBER

In ADD Mode enter the customer number to whom the collection applies or search for the customer number in the Document Customer Search window.

In CHANGE mode, window, to view customers with existing bad debts collection records.
Changes cannot be made to posted collection records.

COLLECTION DATE

Accept today's date or enter the date when the collection occurred.
This date will become the date the bad debt is recovered in the General Ledger and becomes effective on the customer's account.

COLLECTION INVOICE #

Accept the invoice number COLLECTN or type in the desired document number for the recovery.

BATCH

Leave this field blank to accept the Unassigned Batch, or type in your Batch Code, or select a Batch from the drop-down list.
Batch codes can be setup in A/R Invoice Batch Codes.

DIVISION

Leave this field blank for Head Office, or type in the division, or select one from the drop-down list.

When the G/L Divisional Posting feature is not activated, the Collection Debit to the 'A/R Control Account' defined in Default Accounts for this currency always posts to blank Head Office, and the recovered Credit distribution transactions for costs post to the selected Division.

RECOVERED ON WRITE-OFF INVOICE #

Window to select the posted Bad Debts record to which this collection applies.

BAD DEBT SEARCH

In the Bad Debt Search window the Bad Debts records previously entered and posted for this customer are listed with the customer number, name, date, write-off invoice number and amount of the written-off.
The list can be resorted by any column in ascending or descending order, by clicking on the column heading.
Columns can also be dragged and dropped to reposition them as required.
To select a Bad Debt record, double click on the record, or highlight the record and click the SELECT button.

Note: If the relevant Bad Debt record for the customer has not been written off yet, the collection cannot be recorded until a write-off record is entered in Bad Debts.

Old Debt Recovery:
If a Bad Debt record needs to be entered in order to accept a collection and that old debt that should not be posted again, enter the Bad Debts with no values in the Gross Write-Off Amount, Tax 1, Tax 2 and Finance Charges fields.
This records a Write-off Invoice for zero amount, against which any collections can be recorded.

Division Posting in the General Ledger:

The Activate G/L Posting By Division feature can be activated in the Support Application Parameters, so the Collections must be done by division and the division on the posted Collection transactions in the G/L and A/R transactions reflects the division of the recovered write-off.

When the Divisional Posting feature is activated, only Bad Debt write-offs for the Division selected for the Collection, are eligible to be recovered on this collection.
The DETAILS button is provided when a record is in focus to view the divisional breakdown of that Bad Debt, including any previously posted Collections and Expenses amounts.

If the Bad Debts write-off being recovered includes multiple invoices from different divisions, only the invoices from the selected division will be included in the Bad Debt Amount total allowed for recovery in this Collection, and separate Collection transactions need to be entered for each division recovered.

WRITE-OFF DATE

Accept the corresponding date displayed.
If a date does NOT appear, a Write-off Invoice # has not been selected from the window at the previous prompt to collect against.

USE EXCHANGE RATE FROM

This prompt is only triggered if the original Bad Debt record was posted for a currency that is different from the currency defined for the company in Company Information.
Select one of the following sources on which to calculate the exchange rate transactions for the collection that will be posted to the G/L:

• Click Bad Debt to use the exchange rate that applied to this Currency Code at the time the original write-off was posted in Post Bad Debts.
• Click Current to use the exchange rate currently defined for this Currency Code.

The exchange percent is based on the Net Amount Recovered for this customer's account, and transactions are generate to post the exchange difference to the Exchange Accrual account and the Bad Debts Expense account as defined for the currency in Default Accounts.

BAD DEBT AMOUNT

The original amount of the Bad Debt will display on the screen for information purposes.

GROSS AMOUNT COLLECTED

Enter the gross amount, before collection fees, taxes or commissions, or other charges are taken.
See the example below for a clarification.

TAX 1

This field can be used to generate a posting of part of the collection to taxes.

• Standard Taxes:
  The tax code for Tax 1 defaults from Customer Information and if the operator has role permission, the tax code can be over-typed for this invoice as required.
  A drop-down list is provided to view and select from valid tax codes.

  If your firm uses the Tax Activity Report to calculate BAS (Business Activity Statement) the standard Taxes written-off and collected in the Bad Debts and Collections are always included in the Tax Activity Report.

• Enhanced Taxing:
  Select a tax code from the drop-down list.
  Operator role permission to change the Tax Code is not respected on this field with Enhanced taxing as there is no default for the customer.

RECOVERED

Accept the tax portion calculated using the tax percent of the gross collected amount, or over-type it as required.
This amount will be debited against the G/L account for this tax defined in Tax Codes.

TAX 2

This field can be used to generate a second tax posting from the collected amount using the same rules outlined for Tax1.
If required enter a tax code for the collection or select one from the window, or enter NTX if no second tax applies.

RECOVERED

Accept the tax portion calculated using the tax percent of the gross collected amount, or over-type it as required.
This amount will be debited against the G/L account for this tax code.

LESS COLLECTION FEE

Enter the total amount of collection fees charged to your firm. Include commissions, bank charges, check certification charges, and any other non legal fees. This amount will be subtracted from the Gross Amount Collected or Recovered.
It will be expensed to the G/L Account selected for Collection Fees in G/L Default Accounts.

LESS LEGAL FEES

Enter any legal fees or court costs charged to your firm, in collecting this account. This amount will be subtracted from the Gross Amount Recovered. It will be expensed to the G/L Account selected for Legal Fees in G/L Default Accounts.

LESS TAX 1 CHARGED

Enter the amount of GST charged to your firm for this collection.
For the United States, leave this field blank.
The GST charged will be recorded in the G/L Account selected for GST PAID ON PURCHASES in the G/L Default Accounts (the account for GST Input Tax Credits).

NET AMOUNT RECOVERED

This must equal the payment received for the collection.
If it does not, check the above four fields to determine which amount is incorrect and make the appropriate adjustment.

EXCLUDE FROM COMMISSION REPORT

Window to view and maintain a list of invoices for this customer that should be excluded from the commission reports as outlined in Invoices to Exclude from Commission Reports.
This list can be modified as required.

COLLECTION NOTES

Enter any notes about this collection payment.
Up to three lines may be used (70 characters per line).
These notes do not print out, but may be useful if Accounts Receivable needs to be reviewed at a later date.

Finished?

Click the ACCEPT button at the bottom of the screen to accept the Collections record or click CANCEL to abort.

Post Collections:
Post the Collection transactions to the customer's account and to the G/L using Post Collections.

Collection Example:
Ace Contracting had $673.30 written off as a Bad Debt.
The collection agency was able to collect a partial amount of the account. They collected $300.00, but charged your firm $100.00 commission plus $7.00 GST.
They sent a check for $193.00 ($300.00 - $100.00 - $7.00).

Original Bad Debt Amount       $673.30 Ace Contracting won't pay

Gross Collection               $300.00 By Collection Agency
Less Collection Fees           $100.00 Commissions, Bank Charges, etc.

Less Legal Fees                    .00 Lawyer fees, Court Costs
Less GST Charged on Recovery      7.00 Not Applicable in the U.S.
                            ----------
Net Check Amount               $193.00 Collection Agency issues your firm
                                       the net amount recovered



Balance of Bad Debt            $673.30 Original Bad Debt Amount
                               $300.00 Less any Collections
                            ----------
                               $373.30 Amount still owed by Customer
 

ACTIONS:
Additional actions provided by buttons on the Collections screen include:

• Print a Collection Report:
  Click the REPORT button to generate a list of bad debts records by date as outlined in Bad Debt Collection Report.