Question: What are payment algorithms and how are they used?
Answer: Payment algorithms are used as a productivity tool to automatically apply a customer deposit based on expected payment logic used consistently by customers. They are typically used in conjunction with bank lockboxes, where the bank is supplying the payment ID, payment amount and the payment’s ABA routing number and bank account number (which is cross-referenced to a customer in Customer Bank Account Maintenance).
Note Payment algorithm use is recommended only for customers that have a relatively small number of open accounts receivable transactions at any time (e.g., less than 100), and have predictable payment patterns. It is highly recommended that you avoid using these on high-volume accounts receivable transaction accounts, such as mass merchants.
The first step is to decide which payment algorithms will be eligible to be used in Accounts Receivable Control Maintenance. Then, in Group Payment Rule Maintenance or Customer Payment Rule Maintenance, decide which payment algorithms will be used for which groups of customers, or specific customers.
Note You must select payment algorithms in the exact order that you want them to be processed. If you want the Single algorithm to be processed first, it must be selected first.
|
Payment Algorithm |
Description |
|
Single |
Single accounts receivable transaction. This compares the deposit amount with any single accounts receivable transaction by expected pay date, taking into consideration eligible cash discount. The software searches by expected date. |
|
Cumulative Balance - All |
The cumulative balance of all transaction reference types. This compares the deposit amount with the cumulative accounts receivable balance of all reference types by expected pay date, taking into consideration eligible cash discount. |
|
Cumulative Balance - Invoice |
The cumulative balance of invoice reference types. This compares the deposit amount with the cumulative accounts receivable balance of invoice reference types by expected pay date, taking into consideration eligible cash discount. |
|
Cumulative Balance - Invoice and Credit |
The cumulative balance of invoice and credit memo reference types. This compares the deposit amount with the cumulative accounts receivable balance of invoice and credit memo reference types by expected pay date, taking into consideration eligible cash discount. |
Note Payment algorithms ignore absorption business rules. For a payment algorithm to apply, it must find exact amounts.
The following table displays an example of payment algorithm calculations:
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Algorithm Values |
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|
Reference Number |
Reference Type |
Expected Pay Date |
Open Amount |
Eligible Cash Discount |
Net Open Amount |
Single |
Cumulative Balance - All |
Cumulative Balance - Invoice |
Cumulative Balance - Invoice and Credit |
|
NJ.1 |
Invoice |
12/25/2020 |
100 |
-2 |
98 |
98 |
98 |
98 |
98 |
|
NJ.2 |
Credit Memo |
12/26/2020 |
-40 |
|
-40 |
n/a |
58 |
98 |
58 |
|
CB.1 |
Chargeback |
12/27/2020 |
60 |
|
60 |
60 |
118 |
98 |
58 |
|
NS.1 |
Non-Sufficient Funds |
12/28/2020 |
60 |
|
60 |
n/a CB.1 same amt |
178 |
98 |
58 |
|
CB.2 |
Chargeback |
12/29/2020 |
20 |
|
20 |
20 |
198 |
98 |
58 |
|
NJ.3 |
Invoice |
12/30/2020 |
200 |
-4 |
196 |
196 |
394 |
294 |
254 |
|
NJ.4 |
Credit Memo |
12/31/2020 |
-40 |
|
-40 |
n/a |
354 |
294 |
214 |
|
NJ.5 |
Invoice |
01/01/2021 |
150 |
|
150 |
150 |
504 |
444 |
364 |
|
FC.1 |
Finance Charge |
01/02/2021 |
25 |
|
25 |
25 |
529 |
444 |
364 |
|
OA.1 |
On Account |
01/03/2021 |
-75 |
|
-75 |
n/a |
454 |
444 |
364 |
|
NJ.6 |
Invoice |
01/04/2021 |
220 |
-3 |
217 |
217 |
671 |
661 |
581 |
The following table provides several payment examples for the above algorithm calculations:
|
Deposit Amount |
Payment Algorithm Is Applied To |
|
$60.00 |
CB.1 (first Single it found) |
|
$198.00 |
NJ.1, NJ.2, CB.1, NS.1, CB.2 (first Cumulative Balance - All it found) |
|
$444.00 |
NJ.1, NJ.3, NJ.5 (first Cumulative Balance - Invoice it found) |