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R9 - Understanding Accounts Receivable

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What does this section cover?

What are Accounts Receivable?

Accounts Receivable is a ledger of all customer financial transactions itemised as debits and credits. A running balance is maintained with individual transactions analysed as settled or not. The account has a status reflecting its operational condition, such as active, suspended or termed.

Accounts Receivable Glossary

Accounts Receivable BalanceThe aggregated amount of posted debits and credits allocated against the Accounts Receivable, as of a specific date.
Accounts Receivable Outstanding AmountThe total outstanding amount which is owned by the customer, as of a specific date, which is the aggregated amount of posted debits which are not paid and are past their due date.
Customer Accounts Receivable

Accounts of this type are used by all Accounts Receivable owned by customers. This type is the default Accounts Receivable type in CRM.COM

System Accounts Receivable

Accounts of this type are used by the system as sub ledgers keeping transactions that should be processed through a specific business flow, for example transactions that were posted against an invalid Accounts Receivable. All system Accounts Receivable are owned by the organisation.

Account Bill Balance Brought forward
AVAILABLE FROM CRM.COM R9.0.0 

The account outstanding amount as of date that the bill is created. This amount excludes the bill amount.


Access Tokens		Access tokens are used to identify a customer, user or application that can access CRM.COM and authenticate them while accessing the system. Access tokens can be created automatically by the system or manually through the UI or the Web API.

Accounts Receivable Key Processes and Concepts

Processes / ConceptDescription
Accounts Receivable Functionality
  • Keep Financial Transactions and provide the current financial status of a customer. Any CRM.COM entities that are billable, i.e., Jobs and Subscriptions used to provide either goods or services to the customer must be related with a customer Accounts Receivable which will in turn be billed accordingly.
  • Used as an identification medium within the system and while a Contact Information may be related with more than one Accounts Receivable, any other related modules can only be related with a single entity.
    i.e.,
    A subscription can be related with only 1 Accounts Receivable
    A contact information can be related with multiple Accounts Receivable
Accounts Receivable & Contact Information Life Cycle State

The relation between an Accounts Receivable and a Contact Information determines the Life Cycle State of a Contact Information.
If an Accounts Receivable is related with a Contact Information then the Life Cycle State of the Contact Information is set to Financial, which denotes a customer.
If a Contact Information is not related to an Accounts Receivable then the Life Cycle State of the Contact Information is set to Marketing

Allocation Process & Allocation Principles

The allocation process is used to allocate credit transactions against debit transactions to settle them.
The allocation process is an automated process triggered every time a financial transaction becomes 'Posted'.
Within CRM.COM, you have the option to select between one of 2 main allocation process principles, that will be applied to all financial transactions within the system;

  • FIFO: Where a credit is allocated against the oldest available (non-allocated) debit automatically
  • FIFO & Against Item: Where a credit is allocated first against a designated debit and any remaining amount is allocated FIFO.
     

Deallocation
Automatic deallocation is supported by both principles.

  • FIFO: Deallocation kicks in, every time a Payment or Invoice gets cancelled, thus the already allocated Payment or Credit (in case of Invoice Cancellation) or Invoice (in case of Payment Cancellation) are deallocated, and FIFO will be reapplied.
  • FIFO & Against Item: Deallocation works in the same way as in the FIFO principle but, additional cases will cause deallocation.

    When a new Payment or Credit Note is created and specific Invoices are set as the intended Invoices. In case that these invoices are already allocated (using the FIFO principle) then, the current allocation will be cancelled and allocation with the new intended invoices will occur.
    When a new Payment or Credit Note is created and specific Invoices are set as the intended Invoices. In case that these invoices are already allocated (using the FIFO & Against Item principle) then, the current allocation will remain as is and the credit transaction (even if it has intended invoices) will be allocated using FIFO.
Credit RatingCredit Rating on an Accounts Receivable indicates its Credit Risk level.
Based on the Credit Rating of your customer you can regulate the maximum balance that an Accounts Receivable can ever reach by defining different Credit Limit per Credit Rating; i.e. You can maximize the Credit Limit for a well respected customer or reduce the Credit Limit of a customer who is not trustworthy
Accounts Receivable Billing AddressIf the customer decides to receive his bills by Post then a Billing Address is required. While in CRM.COM we keep a addresses both on the Contact as well as Subscriptions and Jobs, the address which will be used for sending the bills, is the address that is defined on the account.
CRM.COM however allows you to set it up in any way that it will match the business requirement/. You have the option to set it as mandatory, not mandatory, or not mandatory based on specific conditions such as subscription type or job type and billing term.
Setting and searching for accounts using the Account Name

Accounts Receivable has a unique name which is created either manually by the user or automatically by the system. (According how you set it up in Accounts Receivable Definition

UP TO CRM.COM R8 Accounts Receivable Number is the account information displayed across CRM.COM whenever referring to an accounts receivable in Summary and Data Entry screens.

 
AVAILABLE FROM CRM.COM R9 Accounts Receivable Name is the account information displayed across CRM.COM whenever referring to an accounts receivable in Summary and Data Entry screens.

 

Accounts Receivable Network Characteristics

Network Characteristics define the level of access for each record. i.e., whether it will be available for selection, viewing, editing etc.

EntityNetwork Characteristics
Accounts Receivable
Accounts Receivable Presentment Preferences
Accounts Receivable Payment Preferences
Accounts Receivable Classifications

 

Accounts Receivable Related Modules

Interaction EntityHow
BillsAccounts Receivable is the master entity
Financial TransactionsAccounts Receivable is the master entity
Rated Billing ItemsAccounts Receivable is the master entity
Reward ParticipantsAccounts Receivable is the master entity
Award Reward TransactionsAccounts Receivable is the master entity
Spend Reward TransactionsAccounts Receivable is the master entity
WalletsAccounts Receivable is the master entity
SubscriptionsRequired to create a new record
JobsRequired to create a new record
Installed ItemsBought Installed Items belong to an Accounts Receivable
Access TokensIdentifies the Accounts Receivable

 

 

Accounts Receivable - Business Examples

The following section provides business examples to help you understand how CRM.COM Accounts Receivable module is used.

Using System Accounts

Suspense Account

Business Requirement

Company ZX allows its customers to settle their debt via Direct Debit payments.
A file with all Direct Debit payments is received once a week from the bank.

  • File provides both the account and the bill, for which the payment is made against
    • If the bill number is not available but the account number is, the payment will be allocated on the account using FIFO. 
    • If the bill number is available, the payment will be allocated on the specific bill of the account. 
    • If neither the bill number nor the account number is recognized then the payment will be placed in Company's ZX system account for investigation and further manual processing

CRM.COM Solution

Payments of unidentified accounts should be moved to the company's Suspense account

  • Configuration
  • Other
    • Direct Debit File import:
      • The import of the file should include logic, to move unidentified account/bill payments to the company's suspense account.
  • Process
    • Daily process for Back Office personnel
      • Via Financial Transaction page find all Payments in the Suspense account. 
      • Access the data entry page of each Payment and use action MOVE PAYMENT to move the payment to the correct customer account.

 

More Information on System accounts can be found at:Creating and Using System Accounts

Billing Accounts Receivable

Billing Individual Accounts Receivable

Business Requirement

Company ZX provides the option to its customers to either buy or rent the equipment required when signing up to a subscription.
Customers have the option to get the bill at the end of the month along with their recurring subscription fee, but in many occasions they would like to have the invoice at the time of the purchase. The invoice will include both the monthly fee and the physical goods that have been bought.

CRM.COM Solution

  • Setup
    • Each customer of Company ZX should have an Accounts Receivable.
    • Subscribed channels added on a Subscription
    • Any equipment bought by the customer would be added on a Job
    • Job and Subscription would be linked with the customer's account

  • Process
    • Issuing a Bill
      • Agent should access customer's Accounts Receivable data entry page
      • Action: BILL ACCOUNT
        • If the customer has been billed till the 1st of the next month then the agent will set the following information
        • Bill As Of Date = 1st of the following month (equal to the Last date that he is already billed for)
        • Execute Up to Step = Formatting
        • Submit the action
      • The bill created will include:
        • Monthly subscription fee (Via Subscription billing)
        • Physical Goods (Via Job Billing)
      • The agent can directly send the bill to the customer by using COMMUNICATE BILL action via the Bill screen

More Information on Billing Accounts Receivable can be found at: Billing Accounts Receivable

Calculating Accounts Receivable Balance & Outstanding Amount

Balance and Outstanding Amount

Business Scenario

Company ZX has issued 2 Invoices for Mr. Black.

  • 1st invoice was issued and posted in April with due date 15 May. 
  • 2nd invoice was issued and posted in May with due date 15 June. 
  • Mr Black made a payment on the 1st of June covering the amount of the 1st invoice 
  • Mr Black requested an overview of his account.

CRM.COM Calculations

Account Overview

  • Balance = (1st Invoice + 2nd Invoice) - (1st payment)
    • (100 + 200 ) - 100 = 200
  • Outstanding Amount= Max(((1st Invoice + 2nd Invoice) - (1st payment)),0)
    • Max ((100 + 200 ) - 100),0) = 200


Business Scenario

Company ZX has issued 2 Invoices for Mr. Jones.

  • 1st invoice was issued and posted in April with due date 15 May. 
  • 2nd invoice was issued and posted in May with due date 15 June. 
  • Mr Jones made a payment on the 1st of June covering the amount of both invoices via Direct Debit,
  • His wife also paid both invoices, using cash
  • Mr Jones requested an overview of his account
     

CRM.COM Calculations

Account Overview

  • Balance = (1st Invoice + 2nd Invoice) - (DD payment+Cash Payment)
    • (100 + 200 ) - (300+300) = -300
  • Outstanding Amount= Max(((1st Invoice + 2nd Invoice) - (1st payment)),0)
    • Max (((100 + 200 ) - (300+300)),0) =0

More Information on Accounts Receivable figure calculations can be found at: Calculating Balances for Accounts Receivable


Using Credit Rating

Company ZX Credit Rate: Using Credit Limit and Credit Period

Business Requirement

Company ZX assigns a Credit Rating to each of its customers, based on evaluations made by Q Rating Agency. There are 3 different Credit Rating:

  • A: high certainty of meeting the debt obligations
  • B: slight issues with debt obligations
  • C: most probably be unable to meet his/her debt obligations. 

If a customer has Credit Rating: "C" then the process followed to activate the account differs to a customer with Credit Rating: "A".
Check the example below on Suspending and Reactivating Accounts Receivable

In addition any invoices issued are always due on the 15th of the next month, but agents have the flexibility to bring the Due Date of invoices on specific accounts any date between the 1st and 15th of the next month.

CRM.COM Solution

  • Configuration:
    • Accounts Receivable Definition
      • Credit Ratings:
        • There will be 3 available Credit Ratings with the respective amounts
          • A: Unlimited
          • B: 500
          • C: 0
      • Credit Rating Rules: 
        • Due Date:15th of the next month
        • Proximity Range will be defined as - 14.
  • Process
    • On creating new accounts:
      • User will select the Credit Rating applicable to the customer
      • Set the proximity range accordingly. i.e If the due date should be set to the 5th of the upcoming month then the Proximity will be set to -10

More Information on Credit Rating can be found at:Setting and Updating Credit Terms for Accounts Receivable

Suspending & Reactivating Accounts Receivable

Company ZX Low Credit Rating customers Process

Business Requirement

Company ZX assigns a Credit Rating to each of its customers, based on evaluations made by Q Rating Agency. There are 3 different Credit Rating:

  • A: no likelihood of not meeting the debt obligations
  • B: slight issues with debt obligations
  • C: most probably be unable to meet his/her debt obligations. 

If the account has Credit Rating:"C" then the customer is not allowed to have a new subscription created for him till a down-payment is made of 500 Euros. Once the payment is made in the account then the customer is allowed to proceed with a new Subscription.

CRM.COM Solution

  • Configuration:
    • Accounts Receivable Definition
      • Credit Ratings:
        • There will be 3 available Credit Ratings with the respective amounts
          • A: Unlimited
          • B: 500
          • C: 0
      • Credit Rating Rules: 
        • Due Date:15th of the next month
        • Proximity Range will be defined as - 14.
  • Process
    • Creating new accounts:
      • A new account will be created once Credit Rating stats are provided by Q Rating Agency.
      • Customers with Low credit rating will have an account created with Credit Rating C and therefore a maximum amount set to 0
      • User should directly Suspend the account; using action "Suspend Account" from the data entry page
      • When the customer makes payment of 500 euro
        • BackOffice user will update the account to Active by using action: "Reactivate Account" from the data entry page.
        • Backoffice user will proceed with creating a new Subscription and linking it to the account
      • Note that Subscriptions cannot be created for accounts that are Suspended. Therefore even if a call centre agent tries to create a subscription for the customer he will not be allowed to do so.

 

More Information on Suspending and Reactivating can be found at: Suspending and Reactivating Accounts Receivable

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