CHAPTER 6: COLLECTIONS
A possible drawback to promissory notes is the legal requirements to create the document. Regulations and requirements regarding promissory notes differ from country to country and there may be local restrictions. PAYMENT PLANS A payment plan can be less formal and less structured than a promissory note. Payment plans may or may not be in writing, although verbal agreements are much weaker than written agreements under the law. In all cases, discussions with a customer concerning payment plans and their terms should be documented and retained in the customer’s file, including the outstanding balance, agreed-upon payment amounts, and agreed-upon payment dates. In addition, the account should be monitored closely to verify the customer’s adherence to the plan. In the event of the customer’s noncompliance with the terms of the plan, the customer should be contacted immediately, and the appropriate action should be taken. Like promissory notes, regulations and requirements regarding payment plans differ from country to country and from state to state, and a qualified attorney should be consulted prior to implementing the use of payment plans.
Payment plan best practice is as follows: Secure the customer’s signature on the payment plan document; and
Include more frequent payments (weekly or semi-monthly instead of monthly or quarterly). A shorter payment plan enables you to monitor compliance by way a series of smaller payments.
Julie Roberts, ARM, Manager of Revenue Accounting for Ingram Barge Company, says, “Our credit group will work with a customer to get them on a payment plan, if needed. But they do stay in constant contact to make sure the payments are agreed upon. They may also review their payment terms and may update those to cash in advance/cash before delivery until they can meet regular payment criteria.” FRAUD: OLD CREDIT BALANCES When a customer has old credit balances as a result of duplicate payments, which is a weakness in the B2B AP process, there is a high probability that the customer is not looking for these old credit balances. They probably don’t know they exist. This situation is ripe for a fraudster to step in and change the customer’s account address, then request to have the credit balance reimbursed. The result is that the funds go to a fraudster. The company also has a legal responsibility to ensure that the rightful owner—their customer—receives these payments. Otherwise, the company must follow the unclaimed property law and escheat the money to the appropriate state. In this light, maintenance of the customer master file should be restricted, and access limited. Customer maintenance should only change a customer address with proper documentation and validation. All changes to the customer master file should be audited for compliance. Proper segregation of duties – preventing those who can issue reimbursements from having access to change the CMF – can also help prevent this type of fraud.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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