Managing Order Terms and Customer Credit
Terms in DEACOM define the conditions under which a seller completes a sale. Typically, these Payment Terms specify the period of time a buyer has to pay off the amount due. Examples include cash on delivery or a deferred payment period of 30 days or more. Payment Terms may also include incentives or discounts if amounts are paid in full before the payment due date, such as "2% 10, NET 30". This payment term provides for a 2% discount off the total order amount if payment in full is received within 10 days. Otherwise, the total order amount is due in 30 days. Payment Terms can be added to Vendor and Bill-to Company records as defaults when entering Purchase Orders and Sales Orders. Users with the security permissions "Sales orders -- change terms" and "Purchase orders -- change terms" set to Yes can select different Terms, if necessary.
Credit Limits and Credit Holds are used to perform credit checks during certain steps of the Sales process. Credit checks, which can be done at the Billing Group, Bill-to, and/or Ship-to Company level, ensure that Customers have the means necessary to pay for their orders by prohibiting future orders from being finalized (i.e. placing the orders or customers on credit hold) until the Customer’s credit is less than their Credit Limit. Basically, Credit Limits and Credit Holds allow Deacom users to manage their customers purchasing power. This optional feature is very useful for customers with a history of making late payments and/or those who accumulate a large open balance.
Configuration
Billing Groups, Bill-to Companies, Ship-to Companies, and Vendors need to be established in order to use Credit Limits. Specific Customers also need to be previously created if certain Terms are to be used for those, and only those, companies. For more information on Billing Groups, refer to the Billing Groups page or the Using Billing Groups page. Bill-to and Ship-to Companies are maintained in Customers. Vendor records are maintained in Purchasing > Vendors.
Process
Setting up system options and defaults
What system options need to be configured?
Establishing when credit checks will be performed - There are three options: during order entry, during order shipment, or both. Navigate to Accounting Options > Accounts Receivable tab. Select the “Use Credit Limits for Order Entry” check box to activate credit checks during Order Entry. Select the “Use Credit Limits When Shipping” check box to activate credit checks during Order Shipment. Additionally, the “Include Non-Shipped Orders in Credit Check” flag can be checked to add non-shipped orders to unpaid receivables and compare to the Credit Limit when performing the Sales Order entry credit check. If not checked, the system compares only unpaid receivables against the Credit Limit.
Establishing credit approval days - Deacom contains an option to allow credit approval for orders for a specified number of days. This option is controlled by the "Accept Order Days" field in Accounting Options > Accounts Receivable tab and is used in conjunction with the "Use Credit Limits for Order Entry" and "Use Credit Limits When Shipping" flags discussed previously. The feature is useful for situations in which a user attempting to ship an order will not be given access to override a credit hold but may need a certain number of days to ship orders on credit hold.
- Note: If companies do not wish to use the Credit Approval Days feature, they may set the "Accept Order Days" value to 0.
Default Credit Limit and Credit Check Days - In Accounting Options > Accounts Receivable tab, a value may be entered in the "Default Credit Limit" and "Credit Check Days" fields. If these options are used, the values in these fields will populate for any new customer added to the system. The information can then be over-written at the customer level, with proper security.
What is the credit check hierarchy?
As indicated previously, credit checks, based on both Credit Limit and unpaid overdue invoices, can occur at the Bill-to Company level, the Ship-to Company level, the Billing Group level, or all three for any specific Customer. If credit checking is enabled for all three levels, orders will be subject to credit hold if the credit check fails at any level. The four fields that affect the credit check are: Credit Limit, Never Exceed Limit, Past Due Days, and Never Exceed Days. The order in which the system checks Credit Limits is:
- Billing Group.
- Bill-to Company.
- Ship-to Company.
Understanding the fields that affect credit checks
What do the Credit Limit and Never Exceed Limit represent?
- The Credit Limit is compared to the sum of unpaid invoices, un-shipped Sales Orders, and the current order. If the sum is greater than the Credit Limit, it will be placed on credit hold; however users with security to do so (exceed credit limit) may override the regular Credit Limit and approve orders up to the Never Exceed limit if it is greater than Credit Limit. The "Prompt For Credit Override User" field in Accounting > Options also affects how the override process works in Deacom.
- If the Never Exceed Limit is greater than the Credit Limit and the sum of unpaid invoices, un-shipped Sales Orders, and the current order is greater than the Never Exceed Limit, then the order must be placed on credit hold. If the Never Exceed Limit is zero, it is disabled. There is no security to allow users to override the Never Exceed Limit.
- If both the Never Exceed Limit and Credit Limit are zero, then the customer has no credit and all orders will be placed on Credit Hold unless prepaid.
What do the Past Due Days and Never Exceed Days represent?
- During the second part of the Credit Check, individual unpaid invoices are compared to the Past Due Days. If any invoice is overdue by more than the Past Due Days, it will be suggested that the order be placed on Credit Hold. The same override rules apply as indicated above for Credit Limit (Never Exceed days must be greater than Past Due Days).
- If the Never Exceed Days is greater than the Past Due Days, and an unpaid invoice is overdue by more than the Never Exceed Days, then the order must be placed on Credit Hold. If the Never Exceed Days is zero, the Never Exceed Days function is disabled.
- If both the Never Exceed Days and Past Due Days are zero, then any overdue invoice will cause new orders to go on Credit Hold.
Do a customer's Payment Terms affect credit checks?
No. The only effect of Payment Terms is to determine the number of days that an existing unpaid invoice is overdue, to calculate the number of days overdue for comparison to the Past Due Days and Never Exceed Days.
What happens if a credit check fails?
If a Credit Check fails, the Credit Check form is displayed to alert the user to the reason that the Credit Check failed and provide functions for either placing the order on Credit Hold - saving the new order as a Credit Hold order - or overriding the Credit Check (if allowed by security) and saving the new order as a Sales Order. The right side of the Credit Check form shows the comparison of the Credit Limit to outstanding receivables, open orders, and the current order, with the resulting amount over the Credit Limit (positive number) or under the Credit Limit (negative number). The left side of the Credit Check form shows all unpaid invoices that are overdue by more than the Past Due Days.
Managing Payment Terms and Types
How are Terms added and assigned?
Adding or modifying Terms is easily done by navigating to Accounting > Maintenance > Terms. Click "New" to create a new record or select an existing record and click "Modify". For information on the fields and choices available, refer to the Terms Encyclopedia page. Once created, Terms may then be assigned to Customers and Vendors. For Customers, make a selection in the "Terms" field of the Credit tab on the desired record. If a Term has the "Add to Bill-to/Ship-to only" flag checked, navigate to Sales > Customers, select the desired company and click "Modify", then on the Authorized Terms tab, assign the Term.
- Note: During Sales Order entry, Authorized Terms show up in the "Terms" pick list once the Bill-to is selected. For Vendors, make selection in the "Terms" field of the Order Defaults tab on the desired record. Refer to the Managing Contact Records and Managing Vendors Best Practice pages for more information on record maintenance.
With proper security, users also have the option to select a Term other than the default when entering new orders. For Sales Orders, follow the Process steps outlined in Entering Sales Orders then change the selection in the "Terms" field of the General tab on the order header. For Purchase Orders, follow the Process steps outlined in Entering Purchase Orders then change the selection in the "Terms" field of the General tab on the order header.
How are Payment Types added and assigned?
Adding or modifying Payment Types is completed by navigating to Accounting > Maintenance > Payment Types. Click "New" to create a new record or select an existing record and click "Modify". For information on the fields and choices available, refer to the Payment Types Encyclopedia page. A name must be assigned to the record, along with proper POS accounts, if the Point Of Sale application will be used with this Payment Type. If the Payment Type is for credit cards, a "Credit Card Mask" must be specified (to set the pattern of digits for the number of the credit card being used when adding stored card numbers to Bill-to Companies or entering one-time card numbers against sales transactions) and the "Credit Card" flag must be checked. Once all fields and flags are set, the record must be saved and then it may be used throughout the system.
Managing customer credit
How is customer credit managed?
Establish which customer records will be checked: Billing Groups, Bill-to Companies, Ship-to Companies, or all three. If assigning to the Billing Group, modify the desired record and check the box for “Use Billing Group Credit Limit”. Enter a number in the "Never Exceed Days" and "Never Exceed Limits" fields. If assigning to the Bill-to or Ship-to Company, modify the desired record and check the box for “Use Bill-To Credit Limit” or “Use Ship-to Credit Limit”, respectively. When selected, the user will be able to access these related credit fields: Past Due Days, Never Exceed Days, Credit Limit, Never Exceed Limit. For a description of each of these fields, refer to the Customers Encyclopedia page.
What is the basic collections process?
Collection of past due accounts can be managed using the Bill-To Company record and via the "Receivables Detail" and "Collections" reports in Accounting Reporting.
- To manage credit for Bill-To accounts, navigate to the record's Credit tab, where a quick view of the customer's credit and aging is available, and enter a "Next Action Date" and "Next Action". When a customer is placed on or taken off of credit hold, the "Credit Notes" text is automatically updated, but notes may be manually updated based on conversations had with the customer, etc. When notes are manually added, the system automatically populates the name of the users entering the notes as well as the date and time.
- To view collections information on a per order basis, use the Accounting Reporting "Receivables Detail" report, which includes the past due days, age, invoice amount and balance, Sales Rep for the order, and contact information. The "History" and "Edit Data" buttons available on this report provides an AR aging summary for the order selected and the ability to specify a "Collection Date" for the date payment is to be received, respectively.
- Note: A "Collection Date" must be specified for an order to display on the "Collections" report.
- To generate a list of part due invoices with a "Collection Date" specified, use the Accounting Reporting "Collections" report. As with the "Receivables Detail" report, the "History" and "Edit Data" buttons are available to this report. "History" may be used to view a customer aging summary, last payment date and amount, and average days to pay and "Edit Data" may be used to modify the "Collection Date".
How are companies manually placed on credit hold?
To manually place a Billing Group on Credit Hold, modify the Billing Group and click the "Credit Hold" button. This will place the Billing Group on hold and populate the "Credit Hold Applied" and "Credit Notes" fields. For Bill-to or Ship-to Companies, modify the record and click the "Credit Hold" button on the Credit tab. This will place the Ship-to Company on hold and populate the "Credit Hold Applied" and "Credit Notes" fields.
Using the Credit Report in DEACOM
The Credit report, available via Sales > Order Reporting, returns all un-shipped orders that failed the credit check. The "Sales -- Credit Report" security setting controls access to both see the report in the pick list selection and run the report. The report gathering logic is: any Sales Orders that failed the Credit Check, Credit Hold Orders that still fail, and Credit Hold Orders that no longer fail. The Business Case for the Credit report is that it is useful in situations where customers want to see the credit status before processing orders via the Shipping Sales Orders transaction where performing the credit check at time of shipment is not timely to rectify credit issues.
FAQ & Diagnostic Tips
How do I get the name of Terms to appear on reports?
The terms name field is called "te_name". Modify your report to include this variable. If you print the report to Variable Display, you will see what fields are available to the report.
How can a User be permitted to override the Credit Check?
With the security setting “Sales Orders -- exceed credit limit” set to "Yes". Note: The "Prompt For Credit Override User" field in Accounting > Options also affects how the override process works in Deacom.
Do all types of Sales Orders get credit checked?
No, credit checking is performed for only two of the many Sales Order types: Sales Order and Drop Ship Order. The other Sales Order types (Complaint, Quote, SO Engineering, etc.) either cannot be shipped if a company is on credit hold or do not impact Accounts Receivable (Inter-Company Transfer).
Will users be prompted if attempting to enter an order for a customer on credit hold?
Yes, users will be prompted that a customer (Bill-to/Ship-to) is on credit hold if the order type is a shippable type (Sales Order, Inter-Company Transfer, Cross Facility)
How do I see a customer's starting balance, all orders, invoices, and payments?
Generate an Accounting Reporting "AR Ledger" report.
How do I run an aging report by order by days past due?
Generate an Accounting Reporting "Receivables Detail" report.
Can I view credit information for multiple Bill-To Companies at the same time?
Yes, the Credit Details report, accessed via Accounting Reporting or Sales > Customers, can be used to display the information from the Credit tab for the selected Bill-To Companies.
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