Report Customer Check or Draft Rejected by Bank

This document explains how you report a customer check or draft that remains unpaid. This is usually done because the payment document has been rejected by the bank due to non-sufficient funds.

Outcome

The outcome depends on which process method is selected for the FAM function:

Method 1: The draft or check is reversed to status 'Drafts/Checks not remitted'. The remittance status is set to 11.
Method 2: All invoices allocated to the check or draft are reopened. The remittance status is set to 60.
Method 3: The original invoice is not reopened. Instead, a new invoice is created. The remittance status is set to 60.

Use the result to:

Collect the payment by using a different payment method or remitting the draft again to the bank for collection on the due date
Include the original invoice in the customer debt or customer credit management routine
Reconsider the credit worthiness of the payer and the company's credit policy.

Accounts receivable and the general ledger are updated. Which account entries are created depend on the method used and whether the payment document was reconciled before reported as rejected.

For drafts remitted to be discounted, the draft accounting method for risk cancellation selected on 'Settings – General Ledger' (CRS750/F) also affects the result.

Value type 50 for unpaid checks and drafts is updated in 'Accounts Receivable. Display Balances' (ARS225).

If cash register for payment receipts is used, the cash register status for the payment receipt document is set to 10-'Not remitted' if process method 1 is used. Otherwise, the cash register status is set to 60-'Document rejected'. See Cash Register for Customer Payment Receipts for a detailed description.

Before you start

FAM function AR85 for reporting rejected checks or drafts must be defined in 'FAM Function. Open' (CRS405). The connected detail records control using the 'Processing rejected check/draft' field on (CRS406/E) how a rejected payment document should be processed – see Outcome. (Note that the 'Payment term' and 'Payment method' fields are only relevant when method 3 is selected.) The detail records also control whether an accounting string for account supplementation for the debit transaction should be displayed when reporting.
Accounting rules for accounting event AR85 together with accounting rule AR80–303 must be defined in 'Accounting Rule. Set' (ARS340).
Number series type 85 under number series 2 for reporting rejected drafts must be defined in 'Number Series. Open' (CRS165) for processing method 3.The number of the new invoice created is retrieved from this number series.

Follow these steps

Start 'Draft/Check. Open Unpaid or Rejected' (ARS340/B).
Select option Open for a FAM function detail record matching the type of payment document.
On the F panel, specify the payer and press Enter to see a list of checks or drafts.
For more information on each payment document, select one of the display options and return by pressing F3.
Select option Open for the payment document to report as unpaid.
Note: If a draft is included in a bank confirmation proposal that is not yet reconciled in 'Bank Remitt. Reconcile Payt per Due Date' (ARS355), then you cannot select this draft on (ARS340/F).
On the G panel, specify the bank account, accounting date (proposed, but can be changed), and voucher text (optional).
Press Enter to create the voucher and to reopen the invoices that were paid with the rejected payment document.