CHAPTER 5: CASH APPLICATION, DEDUCTIONS, AND DISPUTE MANAGEMENT
Every year, an officer of the company must complete a questionnaire sent by the credit-card processing company that will determine if the credit card data is secured. fines are charged on the credit-card processor’s invoice until the company is compliant. BUYER-INITIATED PAYMENT (BIP) Although buyer-initiated payment (BIP) is controlled by customers’ AP systems, it is a payment method that can benefit AR. BIP allows AP departments to initiate payments to vendors via a commercial card account. The benefits of BIP to an AP department are a simplification of disbursement and integration with approval systems. In addition, BIP works as a short-term loan system, which can free up cash. Suppliers (AR) get paid sooner but customers don’t pay their bank until the monthly statement is due. The benefits of BIP to AR can be a quicker turnaround of payment and a standardization of remittance information. BIP costs AR two or three percent, just like processing p-cards or credit cards; but again, the quicker turnaround in the payment of invoices with BIP might be compared to an early payment discount program in net effect—i.e., the interchange percent cost is worth it in order to receive quicker payment. For larger payments, AR may be able to get lower transaction fees from the bank. Customers send a payment instruction file from their ERP or accounting system to the BIP system. Once the merchant bank receives the payment file, they initiate payment via a credit card transaction via the buyer’s virtual payment account. Along with the payment, remittance data goes to the supplier and an electronic payment confirmation file goes back to the buyer. The confirmation file includes all the data from the invoice and is used to reconcile the payment against information inside the ERP system. EVALUATED RECEIPT SETTLEMENT Payments received as a result of the Evaluated Receipts Settlement (ERS) process, which was covered in Chapter 2: Understanding Your B2B Customer’s Procure to Pay Process (P2P), will not contain an invoice number. Since there is no invoice number, it does create a burden on cash application to post the payment properly. While designing the process with the supplier, both AP and AR must work together to decide what information will accompany the payment so that AR can properly post the payment to the customer’s account (this varies widely and is customer-specific). Many companies choose to use a packing slip number, and if the process is executed properly, the dollar amounts will match exactly. Cash application processors should be thoroughly trained on the process and change management, as this will require more due diligence on their part.
5.3 International Payments
When dealing with international customers, issues such as currency, foreign language, customs, laws, and regulations add complexity. Those involved with international payments must become educated so that compliant decisions are made and timely payments assured.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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