Do you have slow paying customer

Do you have a slow paying customer?

It seems that when the general economy is soft, the aging of overdue Accounts Receivable invoices gets bigger. Many companies do not write into their standard sales contracts that overdue invoices will be charged a late fee or service charge. As a standard feature of the Solomon AR module, there is the ability to generate finance charges (i.e. interest on overdue documents) and notify customers via invoice statements. Creating a service, or finance, charge is a great way to help your company get its bills paid on time.

But before going any further with this training session, let’s examine some of the excuses Solomon customers tell me as to why they don’t generate finance charges:

Excuses

Comments

1) My companies never generate finance charges, because last time we created finance charges, my customers ignored the late charges and cleaning up my AR detail was very time consuming and awkward task.

2) Bank interest charges are at all-time lows. Why upset our customers with finance charges?

1) Solomon IV v5.0 has a great feature called Small Balance and Credit write off (screen 08.450), which greatly speeds clean up of small debit and small credit balances, including unpaid finance charges. This new capability greatly simplifies and speeds up issues regarding adjustment entries and write-offs. (See below for more details). Most people do not realize how easy it is to use this new feature in Solomon.

2) Low bank interest rates are a cyclical event. We will likely see interest rates go up, which makes its more expensive to let customers use your company as their bank by deliberately stretching their payments of your AR invoices. The squeaky wheel often gets oiled first, so implement practices which encourage your customers to pay you first!!

The not so widely used tool for writing off small debit or small credit amounts in Solomon AR is called: Small Balance/ Credit write off screen. In this screen, the write-off process creates either a credit or a debit memo and automatically applies it to the original document.

Doing the adjustments the “old fashioned way” would require you to create in the Invoice and Adjustment screen (08.010) the debit or credit adjustment, and then go the Payment application screen (08.030) and link / apply the offsetting two documents together. The old fashioned way is much slower than the method I am going to show you.

Open up the Small Balance / Credit Write off screen as a menu choice under Accounts Receivable/ Screens. This is what is displayed:

This screen is logically divided into two sections: Upper vs. Lower grid sections. In the upper section, you need to use the combo arrow head in the type field to select either small balance or credit balances to be targeted. Next, you need to complete the field: Write Off Limit as to the threshold amount for which you are searching. Complete the fields in the upper section as to Period to post adjustment to, and which account is going to contra offset the AR adjustments. Optionally, you can restrict the selected documents to a specific customer or specific company ID. To find the candidate documents for write off, click on the button called: Find Documents. After entering the desired criteria, you must click on the Find Document button towards the middle of the screen.

The bottom section with the grid will next be populated with target documents to be written off.

Each line represents a possible write off document which has an open balance below the write off limit. By toggling the selected Flag on vs. Off, you can create a subset of targeted write off documents.

If you either scroll to the far right or hit F4 to switch to form view on any line, you see this display:

The field called Type will indicate if this line is related to an invoice, debit memo, or finance charge, which is a great way to identify any unwanted finance charges. In addition, you have control over which account is used as the write off account by line item, by clicking the button near the bottom called Multiple Account Distribution. This form is now displayed:

In the Multiple Account Distribution Form, you can change the three values for account number, sub account number and write off amount. Also, you can enter multiple lines of distribution as shown above, but the total distribution amount must equal the total document write off amount.

To begin the process, click on the button on the bottom right corner called Begin Processing. Solomon does its magic; which basically is creating an adjustment type document for the designated positive or negative amounts, and automatically links the adjustment to the desired document. This is all done in one step.

You have a great tool for quick and easy clean up for small balance write offs. Why not use this in conjunction with Finance Charges, and with a statement to assist, it will motivate your customers to pay you first!! We will examine the steps to create finance charges and also print statements or invoices for finance charges in another ezine. If you need help, contact your dealer for more information or see the help text in Solomon.