Page 160 - Accounting Best Practices
P. 160
c07.qxd 7/31/03 1:47 PM Page 149
149
7–20 Add Receipt Signature to Invoice
is also contained in a credit report. A good example of how the ‘‘payment” infor-
mation can be included in the calculation of a credit level is to take the median
credit level other companies granted as a starting point and then subtract 5 per-
cent of this amount for every day that a customer pays its suppliers later than
standard payment terms. For example, if the median credit level is $10,000, and a
customer pays an average of 10 days late, 50 percent of the median credit level is
taken away, resulting in a credit level for the customer of $5,000. The exact sys-
tem a company uses will be highly dependent on its willingness to incur credit
losses and expend extra effort on collections. A company willing to obtain more
marginal sales will adopt the highest credit level shown in the credit report and
not discount the impact of late payments at all, whereas a risk-averse company
may be inclined to use the lowest reported credit level and further discount it
heavily for the impact of any late payments by the potential customer.
The range of standard procedures for granting credit levels is infinite. The
main point is to have one consistent basis for creating reasonable customer credit
levels, which gives the collections staff far less work to collect on sales that
exceed the ability of a customer to pay. The procedure presented in this section
involves using the information shown on a credit report, but other sources of
information can also be used.
Cost: Installation time:
7–20 ADD RECEIPT SIGNATURE TO INVOICE
There may be cases where customers demand proof of their receipt of a delivery
from the company before they will pay its invoice. Normally, this proof is gener-
ated internally by the customer through the use of a receiving log or the forward-
ing of bill of lading information to the accounting department. However, there are
cases where there is a paperwork disconnect between the customer’s accounting
and receiving functions, so that some company invoices are not paid for long
periods of time, while the customer scrambles to find evidence of receipt.
This problem can be reduced by using either FedEx or United Parcel Service
to make deliveries, since both organizations post receipt signatures on their Web
sites. One can then copy the signature images out of the Web sites and paste them
directly into an invoice, thereby providing proof of receipt to the customer on the
invoice. If necessary, the billing staff can also add the delivery reference number
used by either United Parcel Service or FedEx to the invoice. Either the customer
or the company can then go straight to the Web sites of either package delivery
company to obtain further evidence of the time and place of delivery of the pack-
age in question. This approach has the distinct advantage of consolidating both
the billing and receiving information for a delivery on one piece of paper. The
downside is that the invoice cannot be issued until the delivery has been received
by the customer, rather than being sent when the package leaves the company’s