Page 160 - Accounting Best Practices
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                                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
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