Reminder letters and penalty interest processing

Requirement

Some customers must be reminded to pay outstanding invoices. The penalty interest procedure is not required, but if a company wants to charge interest, it must be done legally.

In this country, an unlimited number of reminder letters can be sent to the customer. Then, if the outstanding invoices are still not paid, they are handed over for legal collection. Penalty interest invoices are sent on open invoices.

The penalty interest can be up to 8% above the official bank interest. Penalty interest can be charged only if the customer has been informed of these terms in advance, that is, if the terms have been printed on an invoice or a reminder. An administrative fee of a reasonable amount can be added.

M3 solution

The credit management process that is supported by M3 consists of these main activities:

  1. An itemized monthly statement is sent to the Accounts Payable department for each customer with unpaid invoices. The statement includes a summary of the total debt that is split into aging buckets.
  2. The statement is followed by one or several reminder letters. These are only sent to customers with unpaid overdue invoices, according to their payment terms.
  3. Then, if still not paid, the total debt owed by a customer is represented by several individual invoices and handed over for legal collection.

    A penalty interest invoice can also be used as part of the collection process. In this case, the invoice or the reminder letter must indicate that interest is calculated from the due date until the payment date.

Configuration guidelines

Program ID Program name Description or comment
CRS165 Number Series. Open

For dunning letters, create a record for the number series type 50 with the number series 1.

For collections, create a record for the number series type 50 with the number series 4.

If interest invoicing is to be used, create a record for the number series type 51 with the number series 1.
CRS465 Payment Reminder Rule. Open Connection with Customer Master.
ARS007 Interest ID. Open Connection with Customer Master.
ARS010 Payment Reminder Rule. Enter Text
ARS080 Interest Invoicing Rule. Enter Text
ARS085 Collection. Enter Text
CRS610/K Customer. Open

To include the customer in the payment reminder routine, select the Pmt remind rule check box, and select the relevant payment reminder rule.

If the customer is to be included within the collection routine, select the Collection check box.
Note:  If penalty interest invoicing is valid for the customer, select the Interest rule field and select the applicable interest rule. The interest rules are created in ‘Interest Invoicing Rule. Open’ (CRS460), and the text is specified in ‘Interest Invoicing Rule. Enter Text’ (ARS080).
ARS150 Payment Reminder. Open M3 Proposal with edit and then update.
ARS160 Interest Invoice. Open M3 Proposal with edit and then update.
ARS170 Collection. Open Assignment M3 Proposal with edit and then update.