Set up and manage collection letters
Managing and collecting for overdue transactions is a necessary function in many organizations. In Finance, most collections functionality is centralized in the Collections page and on the following related list pages.
- Collections
- Collection cases
- Collection activities
Occasionally, one person handles a company's collections for all customers. In other situations, a team of collection agents might work together to manage collections.
If your business needs require it, you can set up collection agents. Each collection agent can have one or more customer pools (a query that contains a set of customers) assigned.
For example, a customer pool might consist of customers US-001 to US-019, and several collection agents can be assigned to the pool. This enables each collection agent in the customer pool to view customer US-001 to US-019.
Set up collection letters
When a customer does not pay an invoice, a company, depending on its company policy, usually sends a collection letter. Additionally, the company can collect a fee to charge on each collection letter, with the fee added to the customer's collection letter balance.
- A choice exists in the kind of collection letter that is usually sent, depending on how late the customer is in payments.
- A collection letter has a standard layout that can be modified only by a developer. However, there is an option to set up specific notes to print on a collection letter in a specific sequence.
Whether the preference is for only one collection letter procedure for all customers or several different collection procedures, Finance can handle both. Decide which steps to include for each collection procedure, for example, whether a fee is charged to the customer, how many days of grace are allowed, and the minimum amount due for each collection letter. Ensure that you specify the rules for interest calculation and posting.
If you go to Credit and collections > Collection letter > Set up collection letter sequence, you can see a page that looks something like this.
Collection letter sequences
Collection letters work sequentially. This means collection letter 2 (two) cannot print for a customer unless collection letter 1 (one) has already printed.
Additionally, the selection in the parameters determines which letter is sent to the customer. This does not mean that all the predefined collection letters must be used. For example, a collection letter sequence could have one of the following structures:
- Sequence 1:
- Collection letter1
- Collection letter2
- Collection
- Sequence 2:
- Collection letter1
- Collection letter2
- Collection letter3
- Collection letter4
- Collection
- Sequence 3:
- Collection letter1
- Collection letter2
- Sequence 4:
- Collection letter1
- Collection
To be able to use collection letter sequences, you must attach the collection letter sequence to a customer posting profile in Posting profiles in the Collection letter sequence field.
Finance creates the first collection letter according to the due date on the invoice, the value that you enter for the grace period in the Days field, and information that you enter in this line.
Collection letter note
You can print, post, or cancel the collection letter jobs in the Collection letter note page. If a specific collection letter does not have to post, cancel the letter by highlighting the line and pressing the Cancel button. You can cancel a group of letters by pressing the Cancel button and entering selection criteria. Additionally, you can add fees, change wording, and so on, before posting. Once the letter posts, no changes are allowed.
It is not unusual to wait to post the collection letter fees until the customer has paid the fee. In most cases, the customer does not pay the fee at all.
Therefore, the collection letter remains in this page and eventually is canceled after the invoice is paid. The collection letter (with a fee attached) should be posted only if the customer pays the fee.
Control collection letters at the customer level
You can also set up collection letters at the customer level so that the collection letter code for each transaction is tracked, but the collection letter processing will be based on a single collection letter level that is stored for the customer. The single collection letter will contain all transactions that are overdue for the customer.
Because the grace days are now tracked on the customer level, the next collection letter will not be sent until the number of grace days has passed for the next collection letter in the sequence, even though transactions become overdue after the last collection letter was sent. This option reduces the number of collection letters you will send for each customer.
Ignore payments and credit memos when calculating the collection letter code
If you include payments and credit memos in the transactions that will be included in the collection letters, you might have payments or credit memos that will trigger a collection letter. You can control how payments and credit memos control the collection letter code by changing the value of the Ignore payments and credit memos when calculating the collection letter code parameter.
To ignore payments and credit memos when calculating the collection letter code, do the following:
- Go to Accounts receivable > Setup > Accounts receivable parameters and select the Collections tab.
- Change the value of Ignore payments and credit memos when calculating the collection letter code to Yes.