This post discusses some other components of the tolerance configuration that need to be taken into consideration and supplements my other blog post Managing Payment Differences with Tolerances for Lockbox Cash Application
There are a few other components of customer tolerances that should be taken into consideration that will impact cash application. Refer to Figure 1.
Grace days:
The value entered in this field is is added to the payment term baseline date, extending the terms for your customers.
Payment Terms for Residual Items:
When a residual item is created, short or overpayment, you define the payment term that is set up on the new residual document.
- Assign the payment term from the original invoice
- Assign the specified payment term for all residual items
Cash discount
The lockbox program looks at the baseline date, payment term and payment date to calculate if the customer is eligible for a cash discount. You have the option to control
- If the system should calculate a partial or full discount on short payments?
- How much can the cash discount be adjusted by?
Figure 1 Additional Key Customer Tolerance Components
Additional Tolerances
In addition to customer tolerances, there are tolerances on general ledger accounts as well as the users themselves.
User tolerances control how much the users can:
- post per document
- post per open item
- grant additional cash discount
- write off differences
User tolerances work in conjunction with the customer tolerances and the tighter of the two tolerances “win”. Figure 2 shows both tolerance screens. The customer tolerance is defined per business partner. A supervisor may be eligible to write off large amounts, however, the customer tolerance may only allow a certain smaller amount.
Figure 2 User and Customer Tolerances
This information should help to reduce manual processing of payments and increases your cash application rate.
I hope you found this blog helpful, if so, please click on “Like” and follow me for more information on cash application and lockbox processing. Please feel free to leave a comment or question below.
To find out the latest information follow the following links:
