Cash Receipts (AR105)

Process Group/Policy Details

• Subject:  Accounts Receivable

• Process Group: Cash Receipts

• Title of Policy: AR_Cash Receipts

• Effective Date: 07/01/2014

• Approved/Revision Date: 07/01/2014

• Approved by: State Controller

Process Group Description:

Cash Receipts

• The Cash Receipt process group includes the instructions for the CR transaction. A CR allows a department to enter accounting events that record all monies collected, including collections against outstanding receivables, customer accounts, and cash basis collections with no transaction or customer account reference. The CR supports cash collection for all customer types (invoice, statement, and both), miscellaneous customers, and summary receivables.

• Additionally, the following types of receipts can be handled by a CR transaction:

  • •  Checks

    •  Currency

    •  Electronic funds transfer

    •  Any type of electronic payment

    •  Credit card payments

• The CR process group includes the procedures for Treasury’s final approval on all CR transactions hitting State’s operating cash account, as well as processing of NSF fees for both State and department operating cash accounts.

• Based on Fiscal Rule 6-7, a state agency or institution of higher education that receives a check that is returned for insufficient funds shall assess a reasonable fee against the person who issued the check. The fee assessed shall be at least equal to the additional bank charges incurred by the state and may include up to an additional 25% of the additional bank charges to cover the state’s administrative costs.

Rationale or background to policy:

• CORE provides a variety of functionality related to the types of CR transactions that may be processed. In order to ensure that the functionality is properly and consistently applied, policy is required.

Policy Statement:

AR.PO.03 AR_Cash Receipts

• Departments shall record a CR transactions anytime cash is received by the State, whether the original deposit is in the State’s operating account or in a Department’s external bank account. CR transactions will workflow to Treasury for final approval if they have a net effect on the state’s operating account. All other CR’s will have final approval at the department level. CR1 transactions will only be used for interfaced CR’s. All other manually entered CR’s will be done using a regular CR transaction. When cash is swept from a department’s external bank account to the State’s operating account, departments shall use a JV1CASH transaction. If a department does not recognize revenue at the time of a cash receipt, the undistributed account should be used. A department will clear the undistributed account by using a CR transaction and a specified event type.

Procedures:

AR.PR.03.1 AR_ Process a Cash Receipt Customer Previously Billed

• When recording a CR that references a receivable, the CR can either liquidate the receivable, if payment is made in full by the customer, or the CR can apply a partial payment towards the receivable.

  • • CR that liquidates a receivable - To initiate a CR transaction that will liquidate an RE transaction, the RE transaction gets copied forward with a CR as the target transaction type. Most of the fields in the CR transaction will already be populated with the information from the RE transaction. Information that departments will need to complete on the newly created CR includes the bank account of the department processing the cash receipt, the payment type (e.g. cash, check, etc.), the deposit ticket, and deposit date. If the customer makes payment via check or EFT, then the check or EFT number must be included in the vendor section of the CR transaction. When a full liquidation is recorded against an RE, the associated RE transaction will be updated to show that $0.00 is outstanding and will show both the closed and liquidated amount along with the closed date.

    • CR with a partial payment – The CR transaction will be created in the transaction catalog. The copy forward option of the RE is not used for a partial payment. Again, as with the liquidating CR, the bank account of the Department processing the cash receipt, the payment type (e.g. cash, check, etc.), and the deposit ticket and deposit date are completed. Under the vendor section, the line amount is entered, and the proper fields are entered whether referencing a customer account, an RE transaction, or a transaction line within an RE transaction (see below regarding the referencing of lines, transactions, or customers).

• As mentioned in the partial payment process above, if a customer has been previously billed and has an open receivable, there are three different levels at which a payment can be applied. The level at which the payment will be applied depends on the information that is completed on the reference information tab within the vendor section of the CR.

  • • Receivable line – When referencing a specific receivable line, the user must enter the Ref Doc Code, Ref Doc Dept, Ref Doc ID, Ref Vendor Line, and Ref Accounting Line fields.

    • Receivable without a line reference – When referencing a receivable without a line reference, the user must enter the Ref Doc Code, Ref Doc Dept, and Ref Doc ID fields.

    • Customer account – When referencing a customer account, a user must enter the Customer Code, Billing Profile, AR Dept and AR Unit fields.

• Additionally, when recording a CR, the department has the option of specifying the order of the customer’s payment to principal, interest, late fees, etc. To specify the payment order, the department will need to populate the payment order tab within the vendor section of the CR transaction. If no payment order is specified, CORE will apply the payment first to interest, then late fees, admin fees, NSF fees, and lastly to principal.

AR.PR.03.2 AR_Process Stand Alone Cash Receipt

• There may be instances in which a department needs to record a cash receipt that is not associated with a corresponding receivable or customer account. This can be done in two ways as described below.

  • • Record a stand-alone CR using a miscellaneous customer code. When a CR is recorded this way, a department has the option of including the actual customer’s name and/or address in the vendor section of the CR, but this information is not required. This allows the department to show customer information for a one-time customer without adding that customer to the VCUST table. The result is that the customer’s information will only be included in that individual CR transaction.

    • Record a stand-alone CR without a customer entry. Departments wishing to transaction money being deposited without tying the deposit to a specific customer or receivable may use this process. Departments will use the miscellaneous customer code in the CR vendor section, and will not populate any other customer specific fields within that section of the CR.

• If a department is unsure of where the receipt should be applied, the CR may be recorded to an undistributed receipts account number 2510. This CR transaction will be routed to Treasury for approval if this entry is being posted to the State’s operating account. When the department subsequently determines the correct fund and account to receive the receipt, a separate CR will be recorded using event type AR53. It is important to remember that departments should clear any balances in clearing accounts prior to Period 12 close. Please note that CR transactions to clear the undistributed receipts account will not be routed to Treasury for final approval, as there will be zero net effect on cash related to this type of transaction.

AR.PR.03.3 AR_Treasury Approval of CR transactions

• After the CR transaction has been processed and approved at the department level, the CR will be directed to the Department of Treasury, if applicable, through the workflow process. All CR’s that hit the 11XX accounts and have a net effect on cash are CR’s that will be sent via workflow to Treasury and will receive final approval from Treasury. The following process applies to CR’s that receive final approval from Treasury:

  • • Manual CR’s for cash and checks being physically dropped off at the cashier’s office: In the header section of the transaction, under the General Information tab, ensure that the transaction description field contains a contact name and phone number so Treasury knows who to contact if there are problems with the CR. The Bank Deposit Date field should be populated as the date that the cash and/or checks are physically dropped off at Treasury. Because the payment type is a required field in the header section of the CR, if a department has both cash and checks to deposit with Treasury, two separate CR’s will need to be prepared. Additionally, when recording checks, because the check number field is required, each check will have a separate line on the CR transaction.

    • Manual CR’s initiated based on EFT deposits into the State’s bank account: In the header section of the transaction, under the General Information tab, ensure that the transactiondescription field contains a contact name and phone number so Treasury knows who to contact if there are problems with the CR. Additionally, if the CR is for one deposit in the bank account, populate the Bank Deposit Date field. If the CR is for more than one deposit in the bank account, under the Extended Description tab, include the date of deposits and dollar amounts of each deposit included on the CR-transaction.

    • Electronically interfaced CR’s: All electronically interface CR transactions will first be routed to the department for review and approval before being routed to Treasury for final approval. The department approving the CR should ensure that the transaction description field contains a contact name and phone number so Treasury knows who to contact if there are problems with the CR. Additionally, if the CR is for one deposit in the bank account, populate the Bank Deposit Date field. If the CR is for more than one deposit in the bank account, under the Extended Description tab, include the date of deposits and dollar amounts of each deposit included on the CR-transaction. Same as Manual CR transactions.

AR.PR.03.4 AR_Sweeps to the Operating Account

• There are three ways that a sweep can be initiated to the State’s operating account. Treasury or the bank can initiate the sweep, the Department can initiate the sweep, or the sweep can be performed electronically through an interfaced transaction. A CR transaction is used to record the sweep of funds to the State’s operating account. This transaction allows the reclassification of cash from the department’s 10XX account into the State’s 1100 account, using the AR51 event type. For Departments that have Treasury withdraw (via a manual ACH), the department’s bank routing number and the account number should be included in the extended description field within the transaction as well as the wording “ACH DEBIT”. The bank deposit date field in the header of the CR transaction should be the date of when the ACH transfer is being performed.

AR.PR.03.5 AR_Process Customer Credit Balances

• In instances of customer overpayments, or where the receivable balance that should be adjusted, based on the payment received, is unknown, a department may record the overpayment or unidentified payment as a credit balance. The receivables module in CORE is configured so that customer overpayments (i.e. customer credit balances) will not be automatically netted against open collections or receivables within the same customer account (customer account is the CACT table, which is customer code + billing profile code. See more regarding the CACT at AR.PR.01.3). In addition, a customer credit balance will also not be automatically refunded to the customer. Therefore, customer credit balances will either need to be manually directed towards an open receivable, or manually refunded using a GAX transaction (for more information on GAX transactions, see AP.PR.01.010).

• This decision for manual refunds versus automatic refunds is based on C.R.S 24-30-203(1), which states that “In all cases not otherwise provided for by specific statute, whenever any money not owed or belonging to the state of Colorado is collected or received by the state of Colorado through mistake either of law or of fact...the controller is authorized to draw a warrant to refund such money to the person from whom it was collected or received....No refund made under the authority of this section shall be made unless a claim therefor is filed within one year after such money is collected or received by the state of Colorado.”

AR.PR.03.6 AR_Process NSF Charges

• When a check is returned from the bank due to insufficient funds, the CR transaction should be modified to reverse the receipt that was recorded, and to add additional NSF charges. Note that when modifying the CR to record NSF activity, the NSF fee amount field will show as $0.00 until the transaction is saved or validated. Upon saving or validating the transaction, the system will refer to the BPRO to obtain the NSF fee amount. A department does have the option to change the amount once it is inferred, or can enter an amount before it is inferred. Additionally, after the CR modification is submitted, the associated RE header amount will show the original amount owed by the customer and will show that an additional amount is owed based on the amount of the NSF fee.

• Because CORE is configured to automatically populate the NSF amount field based on th customer’s billing profile configuration (for more information on the billing profile configuration, see AR.PR.01.1), departments that accept payments via check shall include NSF amounts during the configuration of their billing profiles. Whether an NSF is processed by Treasury or at the department level, the billing profile set-up will apply.

• When the NSF Check is identified by Treasury (because the original CR hit an 11XX cash account), the Treasury will initiate and approve a new CR transaction crediting cash 11XX and debiting 2520 (NSF Returned Checks) of the agency’s General Fund. The Treasury will then inform the department of the NSF activity by email. The department will then research and determine the original CR transaction and will initiate and approve the modification to the original CR transaction clearing the entry to balance sheet account 2520.

AR.PR.03.7 AR_Process Cash Receipt Modification

• There may be instances in which the original cash receipt will need to be modified based on changes in circumstances surrounding that receipt. The following list includes common types of modifications that may be necessary and a brief description about the modification. All modifications to a CR transaction require an adjustment reason code. For more information related to adjustment reasons, see AR.PR.02.7. If an adjustment reason of OTHER is selected from the list, an explanation of the adjustment must be included in the extended description field within the accounting section of the CR transaction.

• Reclassify unearned revenue as earned revenue: A cash receipt amount may be reclassified from unearned revenue to earned revenue. This is done by decreasing or reducing the amount on the unearned revenue line in the accounting section of the CR modification transaction and then adding a new accounting line for the same amount, with a new event type to reclassify the revenue as earned. The adjustment reason of RECLASS should be selected for this type of modification.

• Increase or decrease a collection amount: If the dollar amount recorded on the original CR transaction needs to be adjusted, the accounting line amount in the CR modification should be either increased or decreased, depending on the nature of the adjustment. The appropriate adjustment reason should be selected from the reason list (this reason may vary depending on the reason for the change in dollar amount).

• Change accounting distribution: One or more chart of accounts elements may need to be adjusted on the CR transaction. For accounting lines specifying a line type of principal, the system will warn the user to make potential modifications on the existing interest and late fee lines to match the change to the principal line. To adjust the chart of account elements, a department should make the necessary modifications in the Accounting section of the CR modification transaction, depending on the nature of the adjustment. The appropriate adjustment reason should be selected from the reason list (this reason may vary depending on the reason for the change in coding).