How is Funding Treated?
Sometimes the Pay As Paid principles need to be broken to allow a payment to be made before the funds have been received from the other party. For example, a client may desperately need the funds from a claim and a decision has been made to pay the claim before the funds have been received from the underwriter. This is referred to as 'pure funding' and when this does occur the system assigns the Allocation Code for the Funding allocation code to identify this.
In Financials terms this occurs when an operator selects a transaction with a Withheld allocation marker for payment and overrides the withhold status.
In addition, the Funding status is set when Link Reference 1 (the billing link) is broken on a set of transactions.
Funding typically requires additional levels of authorization.
Example Funding Processing Stages
These processing stages use a claim as an example where the client is being paid before the funds are received from the underwriter. The same processing stages apply in reverse to if an underwriter is paid in advance for a premium.
Stage 1: Post the Claim
The transactions required to record the claim are posted to Financials using Ledger Import (LIM) in the normal way and the credit transactions are withheld.
| Tx Ref | Account | Amount | Intra-Tx Link (Link Ref 2) | Allocation Marker | Allocation Code set for Allocation Action |
| ABC | Client | 100 CR | 1 | Withheld | Import |
| ABC | Underwriter | 90 DR | 1 | Not Allocated | Releasing Collectable |
| ABC | Commission | 10 DR | 1 | Not Allocated | Releasing Collectable |
Stage 2: The Client Payment is Generated in Advance
A) Funding takes place when a payment is generated for the client using Payment Run (PYR). The withheld allocation marker is overridden to produce payment and authorization is required to do this.
The payment transaction is automatically matched against the claim transaction being paid.
Specific Pay as Paid Processing: The Allocation codes for the allocation actions of Payment and Funding are set.
| Tx Ref | Account | Amount | Intra-Tx Link (Link Ref 2) | Allocation Marker | Allocation Code set for Allocation Action |
| PAY1 | Client | 100 DR | 1 | Paid | Payment/Funding |
| PAY1 | Bank | 100 CR | Paid | Payment |
B) The Funding allocation code is automatically set on the corresponding debit transaction to indicate that funding has taken place and it is marked as Collectable. The linked transaction is indicated by the intra-transaction link referenced.
Specific Pay as Paid Processing: The Allocation codes for the allocation actions of Releasing Collectable and Funding are set.
| Tx Ref | Account | Amount | Intra-Tx Link (Link Ref 2) | Allocation Marker | Allocation Code set for Allocation Action |
| ABC | Underwriter | 90 CR | 1 | Not Allocated | Releasing Collectable/ Funding |