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BAA 3 AIS Skills 1 Credit Control

Credit control helps you to manage your business in terms of cash flow, avoidance of late payments
and possible bad debts. Sage allows you to manage all aspects of your debtors and creditors in
terms of credit control. However, Sage will only provide information you need to act on it (and
set up credit terms and reports, etc properly).

Reports

Credit control reports aid a company in monitoring, managing and correcting issues that arise with
the credit control processes and protocols. These reports may be used to review the current
situation of the company finances and identify areas where the company needs to readdress to
realign the credit control management processes and protocols.
1.1 Aged debtors
The aged debt function can be accessed through the customer module and/or the individual
customer accounts. The initial screen asks the user to specify the aged report date (the date the
report is to be aged against) and the date to include payments up to (payments after this date will be
excluded enabling retrospective ageing. Once these dates are set the aged balances show on the
screen grouped by age for each customer (>30 days, 30-59 days etc) where the aged periods are set
by the company in the customer defaults setting. The screens allow for drill down into the actual
details of each transaction to view the various aspects of what actually happened to cause the aged
debt.
In the customer module go to the reports tab and select the Aged Debtors Analysis Detailed
Report. Work through the normal report criteria process setting the specific details you need for
this report. Other reports of interest for credit control purposes are the customer invoice reports
category.
1.2 Retrospective reporting
This is useful when printing month end (and year-end) reports. This allows the reports to be viewed
or printed as if it were the exact date needed, where future payments after the date of the report are
excluded. In essence the report runs as if you had never received or paid the money. Where
offered, tick the exclude later payments box and ensure the program date / report date is set
appropriately.

Preventive measures

A companys credit control policy would probably include:


The ageing of customer transactions (section 1.1 and 1.2)
Establishing formal credit terms with customers
Statements and letters to communicate and manage with customers
Setting up the mechanisms to warn when credit terms are not followed
Threats of penalties to be applied if customers abuse the credit control terms
2.1 Formal credit terms
The credit terms are communicated with the customers whether on an individual basis (credit
control tab of each customer record) or as a generic business partner category (configuration section
and terms tab). Any communication with a customer about these trading terms can be saved to the
individual customer record in the memo tab.
2.2 Customer statements
Sending statements to customers is a good way to keep them informed of their balances and acts as
a reminder of what they owe the company. In order to send the statements simply go to the
customer module, highlight the relevant customers, and click on the statement tab. If you wish to
send the statements just to specific customers then you will need to do a search to filter the
customers that owe you a specific amount of money or for a specific length of time. Once the filter
is set simply select the type of statement that you wish to send to the customers and print the results
from the system. Each statement print off will show the outstanding invoices etc on the account so
that there is no ambiguity between the company and the customer.
2.3 Customer account status
Sage will issue a warning if an account is about to exceed its credit terms, and blocked account can
avoid a possible bad debt from getting worse. The customer accounts also have a facility to reflect
the last credit check dates.

Detection measures

Sage can assist in the detection of late payers or bad debts. For example, on the customer listing,
those customers in excess of their credit limits are shown in red. As with prevention above, reports
can be generated to identify slow or late payers.

Remedial measures

These measures are used when the credit control terms have been abused by the customers and now
the company needs to act to minimise the effects of this abuse.
4.1 Letters to customers
If the gentle reminder with the account statement did not propel the customers to pay their debts
then the company must begin sending letters. There are three types of letters in built in Sage to
send to customers or if you are asked to compose your own letter for the company then simply use
the MS word mail merge process that you learned in Year One.
In the customer module, select the customers you wish to write to, and click on the letters tab.
Choose the type of letter you wish to send to the customers (this may be all customers or you may
have completed a search to filter only those customers that have owed the company money for a
period of time or at a particular balance). The letters vary in phrasing starting with the gentle
reminder letter and possibly resulting in the legal letter. Each letter will specify what the customer
owes, for how long and the dates of each individual transaction on the account that remains
outstanding. As you create the letters for the customers the system will ask if you wish to save the
communications. When you say Yes then the letters are saved to the communications tab in each
of the customer accounts.
4.2 MS Word Integration
This is exactly like the mail merge process you learned in Year One where you need to manually
create the following components:
Create new mail merge template in Word (generic letter to customers which will need
different phrasing depending on whether it is chase letter 1,2 or 3)
Saving this generic letter for the merger
Running the mail merge to merge the fields into the generic letter
Create a blank letter on your pen and save it as template letter
File send contents to MS word open document
Choose the fields that you wish to merge into the generic letter and add any text as
appropriate (insert merge field in the mailings tab)
Save the letter as template letter to your pen (file-save)
Go to Sage file send contents to ms word run mail merge
Select the template file and this should bring in the information from the customer database
in Sage into the template letter. Save this as the merged letters.
Any adjustments to the customer database will not feed through to the already created
letters. If you change the data in the database then redo the mail merge process.

4.3 Customer account status


When you send the customers legal letters you will have to change their account status in the credit
control tab. This may be done by clicking into the customer record and changing the field in the
credit control tab. Once saved this will update the record.
4.4 Accounts on-hold
As previously stated in these notes once an account status is changed to any option that places the
account on hold then no further transactions can be processed to that account when using the
invoicing module. However the same is not true if transactions are processed through the
customer module.
4.5 Manage Credit Control
A company may also decide to charge its customers for any calls, emails, faxes, letters etc that it has
to administer in order to chase the debt of the customer before sending it to legal proceedings. This
can be recorded on the customer account using the chase debt facility in the customer module. This
is accessed through the communications tab of the customer record where you click on the new
button on the bottom left hand side. This will allow you to specify what type of contact you wish to
place on the customer account (letter/fax/meeting etc) and how much you want to charge the
customer for the contact. Click on save and generate to update the account/record and generate the
letter to the customer.
4.6 Interest charges
Companies have the legal right to charge interest on overdue accounts and late payments. There are
three steps to follow when charging this interest:
1. Set up the interest rates in the configuration section in the terms tab this may have
numerous dates for the various interest rates. The base rate is the rate available in the
general market at that time and the additional rate is the extra interest rate the company is
charging for the customers abuse of their credit control terms and policies.
2. Enable interest to be charged to the customer accounts this is enabled in the credit control
tab of the customer record where you tick the box at the bottom of the page on the left hand
side.
3. Then do the search for the customers that have overdue balances/exceeded their credit limit
(whatever filter is appropriate for the process). Highlight these customers and click on the
charges button in the customer module. Follow the wizard through the process and then
check the financials to ensure the transactions have been processed to the correct accounts.

Processing disputed items

Invoices with customers (and often with suppliers) may be under dispute for reasons such as issues
with the amounts charged, alleged non-delivery of products, poor quality products, wrong quantities
etc. Customers may be reluctant to pay for these invoices until the issue(s) has been resolved and as
such these invoices should be flagged on the system as being in dispute to prevent receipts or
payments being inadvertently allocated to them. The reasons for disputes with trading partners are
set in the configuration section in the dispute reasons tab.
In the customer module click on the dispute tab at the top of the screen. Select the account and then
the invoice that you wish to put in dispute. Highlight the invoice and click on the dispute button
and select the reason for the dispute. A lower case d appears beside the invoice on the dispute
screen and then simply click save. To remove the dispute reason from the invoice simply highlight
the invoice and re-click the dispute button.
Once an account has a disputed item attached to it if you select the account for customer receipts in
the bank module an internal warning screen will appear telling you that the selected account has
outstanding items which have been marked as disputed. This is only a warning screen and DOES
NOT STOP transactions form being completed on this account or even against the invoice in
dispute. It simply puts the responsibility on the end user if they ignore the warning screen
(accountability and control elements of any AIS system).

Bad debts

Some of the options in terms of bad debts in Sage are:


Write off full accounts non selective
Write off transactions - selective
Write off transactions below a certain value housekeeping in Sage
Write off small overpayments housekeeping in Sage
6.1 Dealing with bad debt write-off
This facility is available in the customer module in the task area. Click on the customer write
off/refund task option and follow the wizard through the process. The wizard will follow whatever
filter you apply to the write off (transactions/account/balance) and guide you through the write off
process for the selected customer (s). The most important element of the write off is the date used
to process the bad debt in the system.
6.2 Reclaiming bad debt VAT
The date of write off is important as the company will not be allowed to reclaim the VAT on the bad
debt until exactly six months after the date of write off. The company has collected the VAT on the
sale from the customer for the revenue commissioners but when the customer defaulted on the
payment of their account/transactions the company still recorded that they had collected the money
from the customer for the VAT return. This needs to be adjusted in the system and for the VAT
return process in Sage.
This transaction requires a journal entry where the bad debt account and the sales tax control
account are adjusted for the amount of the VAT on the original transaction. The sales tax control
account needs to be debited with the relevant amount and the bad debt account credited with the
relevant amount. Check the original transaction on the financials screen to see how much VAT was
on the original transaction.

Write off/refund wizard

This option is available in the customer module. This is a wizard routine where the package does
the work for the user. The wizard is used for:
Invoice refunds refunding the money paid on an invoice
Cheque returns bounced cheques where the invoice is reinstated as outstanding.
Refund of credit notes credit note was issued and allocated but the money is refunded
instead of the actual credit note. The invoice is reinstated as outstanding
Payment on account refund removes overpayments on an account.
Follow the wizard through each guided procedure double checking the details per screen to ensure
correct data postings and thereby prevent the need for future error corrections.

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