We have introduced a few recent changes to assist with customer credit and I will discuss them and techniques for managing customer credit in this article.

Billing Review

The Noviship system records transactions for each billable event.  Transactions are automatically created when these events occur:

• Shipments are submitted to carriers
• Shipments are (re-)assigned to customers
• Corrections are Approved
• Pending Shipments are Approved
• Billable Pickups are Booked

There are also Manual Transactions that are entered by administrators directly into a customer account.

Transactions accumulate on customer accounts but only qualify for billing when they are reconciled.  Shipment transactions are considered reconciled when the shipment is marked reconciled and is not in a pending state.  This happens automatically during EDI reconciliation.  Non-Shipment transactions are always considered reconciled.

When an invoice is posted for a customer, reconciled un-posted transactions are posted to the invoice.  This leads to a number of balances that we record :-

• The Transactional Balance is the sum of all transactions on an account.  This is a good indicator of activity but not credit in itself because some of those transactions will never be reconciled.  For example, if a customer submits a shipment to a carrier but it is never picked up it will never appear on a carrier bill.
• The Unreconciled Balance is the sum of all unreconciled transactions within the last 30 days.  We presume that if a carrier hasn’t billed a shipment in 30 days that it probably won’t be billed.  Therefore this is a useful way to monitor what we expect to bill the customer in the near future.  It is also the best way to control short-term credit.
• The Invoice Balance is the sum of all posted, unpaid invoices.  This is a good measure of the effective credit for a customer because it takes into account pre-payment and post-payment methods.
• The Posting Balance (displayed as the Invoice column in the customer list) shows what will appear on the invoice if it is immediately posted.
• We have introduced a new balance called Estimated Debt which is the sum of the Unreconciled Balance, Invoice Balance and Posting Balance.  This represents what we believe the customer owes at any instance.

Setting Limits

In the customer properties page you can an Unreconciled Shipment Credit Limit  and a general Credit Limit.  The Unreconciled Shipment Credit Limit puts a cap on the Unreconciled Balance while the general Credit Limit puts a cap on the Estimated Debt.  Setting these to zero implies that there is no limit.  Setting them to “1” is approximate to having a zero limit.

If a customer attempts to submit a shipment which would bring either of these balances over the given limits, the shipment will be refused indicating they would exceed their credit limits.

You can set either or both of these but they server slightly different purposes.  Capping the Unreconciled Balance can prevent customers from shipping high numbers or values of shipments quickly without any checks while still granting them a much higher long-term credit through the general Credit limit.

Post-Payment

Generally you will be invoicing your customer and receiving payment at a later date.  When you receive a payment you should use the Pay Invoice button on the Invoicing page.  See Invoice Payments for more information.  If you do not indicate that the payment has been received then the system will not be able to properly measure credit.  In a Post-Payment model your invoices will generally be greater than a zero amount.

Pre-Payment

In cases where you do not wish to extend credit to a customer you can use a pre-payment model.  You exercise this by setting the general Credit Limit to “1” or some small number.  Do not use zero as this indicates that the credit system is not being used.  Do not set the unreconciled limit to “1” as this will effectively disable all shipping.

When you receive a pre-payment from a customer you will need to enter this as a Manual Transaction.  You should use the Adjustment category (not Bill Payment) and the amount should be negative and tax-free.  Because the transaction is an Adjustment it does not need to be reconciled.  This means it contributes to the Posting Balance.

 

Ensure that Enable Credit Notes is un-checked.  Credit Notes are a means to issue negative invoices but that does not work with the pre-payment model.

When Credit Notes are disabled if you post a negative invoice (which would usually be the case) a Credit-Carry Forward transaction is created to raise the invoice amount to zero and a reverse is created on posting for the next invoice.  The customer’s pre-payment is therefore reduced with each invoice.