It is a set of operations necessary to cancel an obligation contracted. This implies a decrease in availabilities and therefore there will also be a decrease in debts.
A payment originates from the existence of an obligation to a third party.
payments-and-collectionsThis obligation can be represented in either an account payable or in a document, and produces the outflow of assets, either money or a check.
Another interpretation of Payments, is given to the transfer of a document (promissory note), that is, the client signs a document which is endorsed, being used to settle a debt benefiting the company in favor of the creditor. In this way a debt is canceled, but it must be taken into account that there remains a payment responsibility in the event that the obligation is not canceled on the day of maturity.
The documentation of an existing debt can also be considered as PAYMENT. This is a current account debt, which is paid by issuing a Note whose beneficiary is the creditor. This payment is not final, since the debt continues to exist, then it is continued in a similar way to the payment of a check.
The payment covers all the operations that arise from when the obligation needs to be paid, until the securities that pay off the debt are delivered to the creditor and proof of the payment is obtained.
Different forms of payment
The payment operation can take various forms, this will depend on the debt that is canceled, the amount thereof, the creditor, the residence, among other things.
- Payment to suppliers.Payment to supplier collectors.Payment at the provider's offices.Payment in Banks.Payment through Banks.Payment in cash for minor expenses.Payment of wages and salaries.
- Payment to providers by correspondence: It is the most common case, in this the debt that was contracted with the provider is canceled by sending a check by correspondence to the provider's address. Proof of payment is obtained when the provider sends the corresponding receipt.Payment to provider's collectors: This method of payment has the same operation as payment to providers by mail, with the difference that the check is not sent to the provider, but it is held at the company until the supplier shows up to withdraw it. This case arises when the provider is managed through home debt collectors. In this case the receipt is made and delivered at the time of payment.Payment at the provider's offices:In this case, the check is taken directly to the provider's offices and the receipt is obtained at the time the payment is made. Payment in Banks: Payment must be made directly at the banking institution. This will be in charge of crediting these amounts to the creditor (they receive the payment). Payment through Banks: In this form of payment a banking institution also intervenes, but in this case it is the debtor who orders the payment to the bank, that is, that the debtor makes the decision to make the payment through the banking institution, which cancels the debt by means of Payment Orders, which will be delivered to each creditor (generally by correspondence). In order to make this form of payment, the debtor must have a current account at the Bank, to which he will add a list of the payments to be made.Through which the total amount of the payments made by the institution on behalf of the client will be debited.
Another type of payment that is made through banks is the one used to pay off debts that were contracted through import operations, using a documentary credit.
- Cash payment of minor expenses: To make these payments a Fixed Fund is used, from which the money necessary to carry out minor expenses is extracted, then presenting the necessary vouchers for the justification of said expenses. You can also withdraw money against vouchers, this is applied when the exact amount to be spent is not known, with the obligation to account for the money withdrawn immediately after spending. The Fixed Fund must always be kept in the same amount, including money, proof of expenses and vouchers.
Periodically, the amount necessary to replace the missing money from the Fixed Fund is withdrawn from the bank by check. This amount must coincide with the settlement of vouchers presented by the person responsible for the custody of the Fixed Fund.
- Payment of wages and salaries: This form of Payment is also usually made in cash, which is drawn from the bank in an amount necessary to pay the payroll. This method of payment for being cash requires very specific controls and procedures.
Internal control of payments
Control in this operation, together with that of Collection, is based on the management and custody of funds.
The asset that offers the most difficulties is cash, since it is difficult to identify it, so its control is more susceptible to errors. Also due to its liquidity and the volume it represents in the company, there are greater chances that fraud will occur in its environment. For this reason, internal control measures must be sharpened, in order to minimize errors and avoid fraud.
The internal control rules are classified into those of a general nature and the custody of funds, and the rules on the basic operation of payments.
These are sets of regulations that aim to ensure that the money in the company is void and that a strict control is established over the funds, both those that must remain in business and those that are deposited in banks.
General internal control standards
- Separation of functions between the management of funds and the registration of operations: This aims to separate those who are in charge of managing assets from the registration of assets from the operations they carry out. This causes there to be a control by opposition between whoever performs the operation and who accounts for it. In this way, the manager of the funds should not have access to Current Accounts, Accounts Payable or Accounting. Concentration of responsibilities for the custody of funds: The monetary values of a company should be under the control of a single person in charge. If this does not happen, control of the funds would be practically impossible. The custody of the funds must depend on the Treasurer, although this responsibility may also involve other people. This will be responsible for the delivery of funds to ATMs,In order for them to carry out their functions, they must be perfectly documented, so that the Treasurer can maintain control over his subordinates. Separation of the funds coming from Collections with those destined to payments: To ensure that the control of Payments is effective, you must to make an effective separation between the funds coming from the Collections from those destined for Payments. The amounts obtained through the Collection must be deposited in full in a bank, and the Payments must be made by issuing checks against those bank balances, the money must not be withdrawn directly from Collections before being deposited. In the event that a cash payment is required, the Fixed Fund must be used, and if it is insufficient, it must be withdrawn in necessary money from the bank, by means of a check.
There should be no continuous movement in the Fixed Fund box, since in this way it is impossible to maintain control of it.
- Rotation of personnel involved in the management of funds: This control standard is intended to prevent a single person from fulfilling the same function within the operation, mainly in the management of funds. If this cannot be avoided, the operation could be exposed to errors and / or fraud.
What this rule seeks through the rotation of personnel is that whoever replaces another employee may reveal an error or fraud carried out in that function.
In order to carry out this rotation, the personnel who are affected have a time of absence from the activity, so that during this period fraud or error may be exposed.
- General accounting of operations related to the movement of funds:
Accounting is an information system, it is also an efficient control method. This allows to verify through the registrations, the consistency of the operations carried out by different sectors of the company. It is beneficial in terms of movement of funds.
The systems must be structured in such a way that if an asset movement occurs, it can be rescued and recorded by accounting.
It should be noted that all accounting records must be based on vouchers that appeal the operations that have been carried out.
- Surprise arches: It consists of the count of the values that are maintained by any person responsible for the custody of funds. The purpose of this rule is to verify the coincidence between the existence of availabilities that should exist, according to the accounting records and those with basic vouchers, together with the existence of truly existing funds. It must be carried out surprisingly, otherwise it would be giving the person in charge the possibility of covering the difference produced in the values before the count is made.
In the event that the warning occurs, the standard would not allow the detection of errors or fraud in the holding and movement of funds, that is, it would not be fulfilling its purpose.
The tonnage must obviously be done by people outside the one who is involved in the management and movement of the funds.
- Reconciliation of the bank statement: Adopting as a rule of internal control of Collections, that all collections are deposited in an integral and daily way in a bank account and as a rule of internal control of Payments, that the expenses are made in checks and not in cash, it turns out that all the movement of the company's funds will go through the bank. In this way, there is a powerful auxiliary who collaborates with the control of these operations apart from those carried out by the company, through the records carried out by the Bank.
To close the cycle of control related to the movement of funds, it is necessary to reconcile the accounting records of the company with those made by the bank.
The purpose of the reconciliation is to justify the registrations made in the company with respect to the movement of funds and to discover possible errors of imputation by the bank. For this, both registrations face each other and the differences are justified
To be effective, it must be carried out by personnel who are not involved in the management of funds or in the registration of these operations, given that these are precisely the functions that the conciliation tries to control.
Specific internal control
Among the internal control rules applicable to payments, the following stand out:
- Payment in checks: It is the basic form that governs the payments of the company. It would almost be said to be a general principle. This implies that all payments (except for minor expenses) must be made by writing a check drawn on a bank balance.
This rule reduces the existence of cash in the company, thus reducing the risk inherent in the custody of funds and enabling better control. It also means that all payment operations must go through a bank and thus be recorded in the bank's accounting. This allows the reconciliation to have full control over all operations related to the movement of funds.
Payment in checks, in turn, implies other internal control rules, such as the number of signatures that the check must carry, the way in which it must be issued, the precautions to take when it is released, etc.
- Form of check issuance: Depending on the way in which the check is issued, its circulation will be carried out by a greater or lesser risk. In principle, the check can be issued to the bearer, to order or not to order.
The holder of a bearer check is the one who owns it. So that anyone who could get hold of the check could cash it in the drawn bank, deposit it in any bank account, or transmit it to a new holder by simple delivery. A check thus issued may not reach the creditor and unduly benefit whoever seizes it. Consequently, by internal control standard, the issuance of bearer checks should be avoided.
The beneficiary of a check to order is the person whose name appears on the front or who has received it by endorsement.
In endorsement of the check it can be blank, that is, the simple signature of the person who transfers it without indicating who the new holder is. In this case, whoever seizes an order check that has a blank endorsement, can circulate it perfectly, since it is presumed that this endorsement was made to transfer the check to the person who now owns it. In the event that a check to order is not endorsed, or that it has a full endorsement –which indicates who the new beneficiary is-, whoever seizes that check can place any signature, as if it were the endorsement of the holder of the check and make it circulate without major inconveniences. This is possible because the bank, when paying the check, only controls the signature of the drawer and that of the last endorser, since it does not know the signature of the first beneficiary and the endorsers.
intermediate - they do not have the signature registered in the bank. To avoid these inconveniences, a check can be issued to order but crossed to deposit in the account. That is to say, on the front of the check place two parallel bars and inside them a legend that says "only to deposit in the account to whose order it was issued". In this case, due to the fact that the bars are parallel, the check cannot be paid directly by the bank drawn, but must be deposited in some bank, and by the legend that appears between the bars, it is only admitted that the deposit is made in the account of the first beneficiary. In other words, whoever seizes a check under these conditions can do nothing with it, or at most deposit it in the account of the creditor to whom the payment was made.
The no-order check belongs to the person to whom the non-order was issued or who received it by transfer. In this case the transfer cannot be made by endorsement, but must be made by civil assignment. This implies that when the transfer is made, the notary will have to verify the identity of the transferor and assignee of the check and register it in the transfer certificate, a copy of which is attached to the check. In other words, this type of check virtually eliminates any possibility of improper seizure of the value. Furthermore, if the check is only to be cashed by the beneficiary, that is, to prevent any transfer, it can be crossed with the legend "Only to be deposited in the account to which no order was issued."
In summary, to avoid risks in the issuance and circulation of the checks that are drawn to make Payments, they should be issued to the order or not to the order of the creditor, but both cases must be crossed to be deposited in the account.
Furthermore, in order to expressly reflect the debt that is intended to be paid and thus avoid any subsequent claim by the creditor, it is recommended that the check be imputed; This is accomplished by writing on the back, what is the debt that you want to pay with the check and signing that inscription who issues the check. The fact of allocating the check is of particular importance when it is sent by mail or when for other reasons the evidential receipt of the Payment is not obtained at the time the check is delivered to the creditor. A check to deposit in the account has the same value as a receipt from the creditor, since it shows that the creditor received the check and deposited it in his account - it is not possible to deposit it in another - and that he was aware of what he was charging, for the imputation made on the back of the check.
- Payment covered with all the basic and voiding receipts of the same:
At the time of signing the check, the presentation of the basic vouchers that demonstrate the need to make the Payment to a supplier must be required, the person who signs the check, at least the Supplier's Invoice, must be presented the Remittance made up of Reception, the Purchase Order that indicates that these are merchandise required in due course with Purchases and the Supplier's Quotation that shows that the amount that was opportunely quoted and on which the Purchase was approved is being paid.
These vouchers must be checked by the person who is going to sign the check. To avoid that these vouchers are presented again later to justify another Payment, it is necessary to intervene with a stamp that visibly says the word "Paid" and also reserve a space to write down the date and number of the check with which the Payment was made.
- Check with two signatures: This form of internal control indicates that checks must be signed by at least two company officials. With this, there is a reciprocal control between both signatories and errors in Payments can be more easily discovered. In addition, the risk that a company attorney can dispose of all the funds deposited in banks is avoided.
The second firm must carry out the same control with respect to the basic vouchers that the first signatory made, since the second firm would not add any control if it only referred to the firm that was already controlled by the first signatory.
Both signatories should stamp the basic vouchers that have been voided with the stamp of "Paid" and the stub of the check that remains attached to the checkbook.
If the first signature were from the Treasury, it could be admitted that the control over the basic vouchers that cover the Payment was only carried out by the second signature, the first signature being limited to controlling the Payment Order that arrives.
A common practice that invalidates this internal control is the tendency to leave a blank check with a signature. In this case it is as if the signer were one. Those who use this practice allege the difficulties that may arise when one of the signatories is not in the company and a Payment must be made. However, this problem can be solved if more than two officials register their signature when opening the account at the bank, indicating that the checks may be signed jointly by two, among any of the persons who have the registered signature. Furthermore, even hierarchies of firms can be established. For example, three managers from the management level and three people from the supervisory level register the firm in the bank.and indicate to the bank that the check paid must have at least two signatures and that at least one of them must be from Management.
- Control of voided checks: In order to close the control regarding the handling of checks, it must be adopted as an internal control rule that the checks that are voided remain adhered to the checkbook, or at least that the check is destroyed. angle where its numbering appears and that portion of the voided check adheres to the heel of the checkbook.
In this way, with the simple observation of the checkbook you can have an overview of the use or destination of the checks that made it up.
- Existence of a fixed fund: For those Payments that due to their amount or characteristics cannot be made a check, given the need for it to be in cash, the existence of a fixed fund must be provided. The petty cash or fixed fund must be held by a responsible person.
The amount up to which the expenses are compensable by the fund should be set, he said, so that if that figure is exceeded the Payment must be made by check. It is also necessary to determine who are the officials who can authorize disbursements that can be compensated by the fixed fund.
It is also necessary to stipulate what is the frequency for the replacement of the fixed fund. In some cases the replenishment is done in fixed periods –once a week, for example- while in other companies the temperament is adopted that the replenishment is made when the fixed fund fell below a certain level. Whatever the case may be, the replacement must be made by issuing a check, upon presentation of all the vouchers that demonstrate the expenditures incurred.
- Settlement and Payment of wages and salaries: The basic rules of internal control to be borne in mind in the settlement and Payment of wages and wages require that there be a separation of functions between who controls attendance, who prepares the settlement of assets and who performs the pay. It is convenient as a control measure, if a cost system is used, that the total hours worked be verified, with the allocation that the Cost sector has made for the different production orders.
In the event that the settlement includes additional hours, their authorization must be carried out by the officials with powers to approve the performance of overtime.
The money to withdraw from the bank to make the Payment must be the one necessary to pay the liquid amounts of the payroll. The check for the extraction of funds must be signed by the authorized officials before the bank and the signature will be placed, upon presentation of the basic vouchers that support the Payment to be made, The payment to the worker will be made, after signing the corresponding receipt.
Payment Circuit
The figure shows the sequence of operations of an Accounts Payable procedure. It is described in phases, so that a more exhaustive analysis of the operations contained therein is allowed.
Phase 1: Review of supplier invoice
The circuit begins with the receipt of the supplier's invoice, which must be entered in a file to maintain control over it and avoid loss, delay or other inconveniences. If the design of the system foresees it, your data will be entered into the magnetic support in order to dispose of it when required to continue with the steps of the circuit.
In this phase, a formal control of the invoice is carried out: it consists of reviewing whether it complies with the formalities required by the tax law, avoiding sanctions that could imply the acceptance of processing documentation that does not comply with legal and regulatory requirements (format, numbering, printed inscriptions, billing category, etc.).
Phase 2: Payment authorization
Once the first formal review has been approved, in phase 2 the content of the supplier's invoice (which the supplier intends to collect) is verified with the content of the rest of the documentation associated with the transaction under analysis.
To do this, proceed to assemble the payment file; that is, to group the documentation that originated the purchase transaction, which is made up of the following elements:
- Invoice of the supplier (original). Purchase Order. Remittance of the supplier, made up of the receptionist. Part of Reception, issued by the receptionist. Quality Control Report, when necessary.
The in-depth review, necessary to authorize payment, includes the following control steps (data matching in all the documents in which they appear):
- Verify that the company name printed on the invoice corresponds to the supplier to whom the purchase was assigned.
-Verify that the invoiced products, and their quantity, are those indicated in the respective Purchase Order.
- Check that the invoiced products were received without objection (as indicated in the Remittance issued and in the Reception Part).
- Check that the invoiced prices correspond to those agreed in the quotation presented by the supplier and ratified in the Purchase Order. Verify that the agreed discounts are applied.
- Verify the accuracy of the arithmetic calculations contained in the invoice, including the application of taxes and their respective aliquots.
- Record the result of the quality control inspection (when the items purchased so require).
If the review has successfully passed all the requirements indicated, you will be able to authorize the payment. This decision is concretized with the issuance of an instrument called Payment Order. This document acts as a cover that precedes the Payment File, of which reference was made previously. The Payment Order is a numbered document based on uninterrupted sequential numbering. It will contain the indication of the beneficiary of the payment (supplier), the date of issue and date of payment and the accounting imputation; It will be signed by the issuer, which is responsible for the Accounts Payable sector.
The complete documentation (the file) will be sent to the Treasury sector (with authorization) to make the payment effective.
Phase 3: Payment Operation
On the basis of the documentation received (Payment File accompanied by the Payment Order), the Treasury reviews the file and issues the check (on the expected due date), observing the internal control regulations in force. Register, on the Payment Order, the bank and check number applied. Sign the check (first sign of two) and cancel the documentation (stamp "paid"), in order to avoid repetition of the payment circuit using the same documentation again, which could cause another check to be issued for the same payment.
It is advisable for the check to carry a second signature, in addition to that of the treasurer, so that security is strengthened when company funds are available.
Phase 4: Accounting registration
The accounting registrations that must be made as a result of the payment operations are indicated below:
- The supplier's account is debited (the liability that had been created due to the receipt of the merchandise is canceled).
- The subaccounts of the bank to which the checks were written are credited.
- Simultaneously, operations are recorded in the respective accounts of the General Major.
Phase 5: Verification of supplier receipt
It is advisable to require the supplier to deliver an official receipt at the time of payment. Although the precaution was taken to draw the paycheck with the clause "not to order", and to cross it in order to ensure that it is only cashed by the beneficiary to the depositary in his own bank account (without being able to endorse it), the existence of an official receipt strengthens control measures (streamlines a potential test process in case you have to justify an eventual debt claim: the receipt indicates that items have been canceled). The official receipt must be incorporated into the Payment File for close the circuit documentation.
- Collections
Concept
The basic collection operation can be conceptualized as the set of operations necessary to transform a receivable asset - documented or not - (Credits) into a liquid asset (Availabilities). It begins with the existence of a right represented in an account or a receivable, and results in the entry of money or some representative amount of money - check or money order.
The documentation of a credit that already exists is also interpreted as Collection. It is a current account credit that is canceled by the debtor through a promissory note. Although the collection is not definitive here, since there is still a loan and the money has not yet been received, the characteristics of the management undertaken are of similar importance to those required to achieve the collection in money.
Finally, the discount of a document could also be accepted as a basic Collection operation. Despite the fact that it has different characteristics from that of a basic collection operation, the result it produces - transformation of a loan into availabilities - allows it to be treated as a collection, instead of considering it as a secondary (financial) basic operation.
The basic operation of Collection covers all the operations that are understood from the moment it is detected that a credit is in a condition to be collected, until the values resulting from the Collection are entered and accounted for in the company.
Different forms of collections
The Collection can take various forms depending on the type of company in question, the characteristics of the debtors, the filing of the amounts to be collected, the volume of operations, etc. It is probable that in a company more than one type of Collection may be applied to achieve the cancellation of credits.
- Collection by collectors: in this case, company personnel go out to collect directly at the debtor's domicile. There the money, checks or promissory notes signed by the debtor are received. Other variants of this type of Collection are derived: Collection by distributors: in some cases, given the characteristic of the product that is marketed, the Collection is carried out by the same distributor that delivers the merchandise sold. It is usually used by companies dedicated to the sale of food products. Collection by agency: in this case the debtor is also visited at his home. The difference is that the Collection is carried out by a company specially dedicated to provide this service and that it was hired for that purpose. It is not really a widely used form, reserving its use, generally,in the case of credits of difficult realization. Collection by correspondence: the debtor sends by correspondence the amount of his obligation. Normally, the debtor sends a check in a way that eliminates any risk of loss or subtraction of the value. Cash Collection: in this case it is the client who goes to the company to make the payment of their debt. This form is usually used in retail stores that sell their merchandise on credit, generally cancellable after a certain number of installments. Collection by bank deposit: in some cases, the debtor makes his payment by depositing the amount due in the bank current account of the creditor. Generally, in these cases, a special deposit slip model is used that has one more copy than usual. That other copy remains with the bank,who sends it to his client to let him know of the Collection that has been carried out. Collection of documents through a bank: among the services offered by banks is the Collection of Documents. In these cases the documents to be collected are delivered to the bank. This sends the due notice to the debtor so that he can make the payment directly at the bank. When the debtor pays, the bank credits the amount received in his client's account and notifies the client of the success of the collection management. If the document is not canceled when it expires, the bank can take charge of the protest thereof. Export Collection: When the debtor resides abroad, the Collection is normally carried out through banking institutions that allow the operation to be completed.The credit is produced on the creditor's current account and the bank notifies him of the Collection made.
General internal control standards
This type of internal control is similar to the general Payment control already detailed on page number 2.
Specific internal control
Among the rules of the Collection, the following are distinguished:
- Use of pre-numbered receipts: to enable strict control over Collection, the forms used as receipts must be bound in checkbooks and pre-numbered for printing. A copy of each extended receipt must be attached to the checkbook as well as those that were canceled. In addition, the personnel that issues the receipts must be instructed so that the use is correlative, that is, without leaving blank receipts to use later. Basically, what should be verified is that a copy of every receipt issued is sent to the company. For them, the checkbook can be checked when it is finished, observing if all the receipts have a copy attached, add the amount of the copies and control the total with the Collections rendered, by who used the checkbook,on the days covered by the use of the same. Another form of control is to observe daily if the copies of the receipts that are rendered have correlative numbering. The receipts must be signed by the person who made the collection. To close the control, the forms must be guarded by a responsible official (Chief of Collections) and delivered to those who will use them, under a signed receipt and when they show that the checkbook they are using is about to be completed.under signed receipt and when they show that the checkbook they have in use is about to end.under signed receipt and when they show that the checkbook they have in use is about to end.
- Immediate settlement of the collection: this rule ensures that when a Collection is carried out outside the company, the funds obtained reach the Company's Treasury or the Bank as soon as possible. This implies that if the Collection is by collectors, the surrender must be daily. In the event that the collectors move to the interior, it is required that they make daily deposits or transfers from the interior banks. By concentrating the funds collected as soon as possible, the availabilities belonging to the company are controlled, in addition to allowing these values to be used temporarily for purposes other than those of the exploitation. Control of the values received by correspondence: The danger of this type of Collection is that at the time the values are received, no receipt is issued to cover the Income.For this reason, it is convenient that the values do not arrive directly at the Bank without any type of receipt. It is convenient that the correspondence is opened directly by the Secretariat and that a spreadsheet with the details of the received values is prepared there. Granting of discounts for prompt payment: These should not be authorized by the person who carries out the Collection. This rule aims to avoid the possible fraud that would be committed by those who collect an amount, and enter a lower one, justifying the difference as a discount granted. that has the legend "Only to be deposited in the account of XX". In this way, no one will be able to appropriate the check, since it can only be deposited in the company account.Check to be deposited later: It is a common practice for checks to be delivered, the deposit of which must be postponed and which are generally issued in advance. It is a rule of internal control not to accept post-dated checks, since if between the date of receipt of the value and the one that appears on it the death, bankruptcy or other type of debarment of the drawer occurs, the possibilities of making effective the collection.Transfer of money or securities: Every time cash or securities are transferred internally, it must be done in such a way that the transfer is documented so that it is known who is responsible for the custody of them.The transfer documentation implies a release for the person who gives the money and a responsibility for the person who receives it by signing the receipt of the securities. For this reason, it is recommended that the securities go through the fewest number of hands possible.Custody of documents to be collected: It is recommended that the documents to be collected are not held by the person who collects or receives the funds, since it is possible to withdraw funds from the Collection and replace these amounts with a document. For this reason, it is recommended that these documents remain in the hands of people who do not have access to the availability. Full and immediate deposit of the collection: It is sought that the total deposit of the Collection is made daily and at the same time issue a check, to extract the necessary funds from the bank.In this way, an efficient control is made possible by verifying that the Collection of each day has reached the Banking Institution.
Collection Circuit
The figure shows the sequence of operations of a Collection procedure. It is described in phases, so that this allows a more exhaustive analysis of the operations contained therein.
Phase 1: Identification of collection opportunities
The Collection arises from a previous Sales operation, which, in turn, originated a Billing process. This means that at the time of collection, computer records are already available with stored information (expiration date) that will allow identifying, at the corresponding time, the different opportunities in which collection efforts should be initiated.
Therefore, a computer program will periodically scan the Debits to Clients file pending cancellation (usually Invoices and Debit Notes) and will detect which are in a collection situation. A similar situation will arise if they keep records of Documents to Collect.
Phase 2: Preparation of collection management
Collection management (when carried out through collectors) must be structured according to the geographical distribution of the debtors, so that each collector will be responsible for their assigned area.
Therefore, a computer process will process the information stored in files and will issue (daily) lists ordered by area, which contain the identification of the vouchers, the collection of which will be ordered by each collector. The detail of these lists will include the Invoice number, Debit or Note Note, date of issue and maturity, net amount (indication of discount, if applicable), company name or name of the debtor, payment address and a space intended for record the management result (“not collected” or, otherwise, receipt number, type of collection of net amount and discount).
In the case of collections by correspondence -when clients cancel their debts by sending checks by mail- certain precautions must be taken for control reasons. First, the correspondence must be received and handled by a sector outside the Treasury. This is because a third party, unrelated to the movement of funds, serves as an element of control over the values received and the timing of their receipt. In this case, the receiver will cover a form specially designed to record the values received by correspondence. Then, the checks will be sent to the Treasury to continue with the collection circuit.
Phase 3: Collection management
If the Collection is carried out through home bill collectors, they will deliver receipts that may be provisional, if the company rules determine it, until the checks are credited to your account. Otherwise, the receipt will be final (official receipt), but it is advisable to record it by means of an explanatory legend certifying the documents to which that receipt refers. After verifying the bank accreditation of the respective checks received, they will be canceled.
Whatever the result of the collection management, the collector will register it in the list that was given to it for the procedure, with the detail of the check number, bank, amount and receipt number, if it was successful in its management..
Phase 4: Surrender of collection
Collectors must make the daily surrender of the function they have fulfilled. This means communicating to the Treasury what values, from which you planned to collect, were received, and in what form: by check or promissory note, and also which could not be collected (and the cause of it).
It is convenient to design a special form for this surrender, which could be incorporated into the computer system that administers this procedure, and present on screen the structure of the information scheme required by the surrender phase.
It is essential to highlight that all the information entered in the “surrender screen” must be endorsed by the correlative information contained in the receipts (the copy of which will form part of the surrender) and in the values received.
The documentation thus prepared and the values will be controlled by the Treasury (recipient of these elements), which must approve the surrender process, if it agrees. In the Treasury, a summary of the values received will be incorporated in the daily cash register, which will also include, if this occurs, the values received by correspondence.
For its part, the Collections sector must update its records in order to repeat, the next day, a new cycle of the procedure, with its documentation and its information circuit refined. Within this phase, it remains to carry out at the banking institution -by the Treasury sector- the deposit of the checks received, both from the collectors and those sent by correspondence. Collections received must be deposited in full and without delay. This means that these funds (or part of them) should not be taken to make payments. These will be carried out through the fixed fund (if the outlay is of little significance) or by means of own checks, if its importance requires it.
Phase 5: Control and registration of collection
The Accounting sector will be responsible for controlling the consistency of all the information generated from the management of Collection. After verification, you can make the respective entries in the general accounting and in the Income and Expenditure Subdiary. The information to which we refer (basis of control) is as follows:
The consistency check consists of the following verifications:
- Credits to customer accounts, in cancellation of invoices (or other debits) owed by them, must coincide with the sum of the amounts registered in the collection lists of collectors and with the list of values received by correspondence.
- In case of discounts for prompt payment, the total amounts of canceled invoices must be reconciled with the actual amounts collected in relation to those invoices.
- The sum of the lists indicated in the first point must agree with the total amount of receipts issued and with the sum of the amounts on the deposit slips.
Authors:
House, Alejandro
Solís, Gisela
Portas, Nayla
National Technological University
- Bibliography
- Description of the typical operations of a company. Alberto Díaz, Editorial Club de Estudio. Information Systems for Business Management. Procedures, security and Alberto Lardents, Editorial Prentice Hall.
