Managing customer debts

Outcome

• Statements of accounts, payment advices, payment reminders, debt collection assignments, and interest invoices are created from proposals based on user-defined selection criteria and texts.
• Customer debts are monitored and allowance is made for doubtful accounts and stated customer losses. Past due customer invoices are re-posted on a separate account for doubtful debts.
• For information on documents printed, see the Related topics section.

Use this process to minimize the company's customer losses.

Before you start

Before you can start, you must meet these prerequisites:

• You must set up the financial system as described in Enabling Financial Management.
• You must define payment methods in 'Payment Method. Open' (CRS076) together with payment types for selection purposes.
• Record a customer or payer in 'Customer. Open' (CRS610).
• There must be invoice records for the customer in accounts receivable.

Starting conditions specific to certain processes are listed in the respective subordinate process document.

Follow these steps

Collecting customer debts involves these sub-processes:

1. Creating a Statement of Account

   Create an "open item" statement of account to assist the payer in reconciling account ledgers in 'AR Statement of Account. Open' (ARS140) or 'AR Statement of Account. Open' (ARS640).

2. Creating Payment Advice

   Create a list of open invoice records that are soon due for a payer in 'Payment Advice. Open' (ARS180).

3. Managing customer debts by reminders

   Use this process to manage both written and verbal payment reminders for past due customer invoices. For written reminders, use 'Payment Reminder. Open' (ARS650). For verbal reminders, automatically select invoices matching your criteria in 'Credit Monitoring. Create Transactions' (RMS410). Review and process the selected invoices in 'Credit Monitoring. Process' (RMS420), and 'Payer. Connect Tickler Note' (RMS440).

4. Creating Debt Collection Assignment

   Create a collection assignment consisting of past due customer invoices in 'Collection. Open Assignment' (ARS170). The assignment is sent to a collection agency for payment recovery.

5. Charging interest

   Bill a payer interest for late payments, calculated from the due date or the invoice date, in 'Interest Invoice. Open' (ARS660).

All these sub-processes are created in a similar way: A proposal is created, verified, and adjusted according to user-defined selection criteria. In some cases, specific rules and standard texts can be used to simplify the selection and to further tailor the contents of the proposal. The proposal is then used as a basis when generating the final document.

For legal purposes, post doubtful customer invoice records to a predefined general ledger account in 'Customer Invoice. Process Doubtful' (ARS360)

Managing allowance for doubtful customer debts

Valuate doubtful accounts to depreciate for both doubtful accounts and for stated customer losses in 'Doubtful Account. Create Allowance' (ARS130).