This post complements my prior blog post, Managing Payment Differences with Tolerances for Lockbox Cash Application, by addressing certain additional tolerance configuration elements that must be taken into account.
Other aspects of client tolerances that would affect cash application should also be taken into account. Think about Figure 1.
The value given here extends the terms for your clients by adding it to the payment term baseline date.
Payment Conditions for Remaining Items:
You specify the payment period that is set up on the new residual document when a residual item is produced, whether it is short or overpaid.
- Assign the original invoice’s payment schedule.
- Assign all remaining items the selected payment term.
The lockbox programme determines whether a consumer qualifies for a cash discount by taking into account the baseline date, payment term, and payment date. You can choose to exercise control.
- Should the system determine a partial or full discount for late payments?
- How much can be changed to the cash discount?
Additional Important Customer Tolerance Components, Figure 1
There are tolerances for general ledger accounts, users, and customers in addition to customer tolerances.
Users’ tolerance levels determine how much they can:
- Every document posted
- Post for each open item
- Give a bigger cash discount
- Delete differences
The tighter of the two tolerances “wins” when used in conjunction with customer tolerances and user tolerances. Both tolerance screens are depicted in Figure 2. Each business partner has a different definition of the consumer tolerance. Although a supervisor might be allowed to write off substantial sums, the customer’s tolerance might only permit a tiny amount.
Figure 2 User and Customer Tolerances
This knowledge should boost your cash application rate and decrease manual payment processing.
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