Chapter 5 - Process Payments from Customers

Question 1

What 3 financial documents are sent to the buyer when a business makes a sale on CREDIT terms?

Answer 1

1. ) Invoice
2. ) Credit Note
3. ) Customer Statement

Question 2

What is a remittance advice?

Answer 2

An advice which can be posted, faxed or emailed.

It states that a certain amount of money has been sent to a CREDIT customer in settlement of an account

Question 3

What 2 reasons are why remittance advices are used?

Answer 3

• To advise the sending of a payment direct to the seller’s bank account by BACS and Faster Payment
• To accompany a cheque

Question 4

When checking an electronic remittance advice, what things must be checked?

Answer 4

The SALES DOCUMENTATION and the SALES LEDGER of the customer making payment. This is to ensure there are no errors.

Question 5

When checking a remittance advice with a cheque, what 4 things must be checked?

Answer 5

• Is the cheque signed?
• Is the name after the word PAY correct?
• Is the cheque to date?
• If the amount in words AND figures are the SAME

Question 6

What is a discrepancy?

Answer 6

An illogical or surprising lack of compatibility or similarity between two or more facts.

Question 6

What is a discrepancy?

Answer 6

An illogical or surprising lack of compatibility or similarity between two or more facts.

Question 7

What 3 discrepancies can occur?

How do they occur?

Answer 7

• Underpayment. Not enough money has been received.
• Overpayment. Too much money has been received/
• Mistake in deducting Prompt Payment Discount

Question 8

What are the 2 reasons why a CREDIT customer may do an underpayment?

Answer 8

• The customer has made a genuine mistake with the figures.

- The customer has not paid all the due invoices because there is a dispute over one of them.

Question 9

How do you resolve these 2 reasons for UNDERPAYMENTS?

Answer 9

1. ) The seller should CONTACT the customer, either by TELEPHONE or EMAIL, and explain the problem. The customer will then resolve the problem.
2. ) The seller should CONTACT the customer and attempt to RESOLVE the problem. The matter may be REFERRED to a LINE MANAGER.

Question 10

What are the 2 reasons why a credit customer may make an OVERPAYMENT?

Answer 10

1. ) The customer has made a genuine mistake with the figures.
2. ) The customer has IGNORED a CREDIT NOTE or has paid an invoice TWICE in error.

Question 11

What do you resolve the 2 reasons for an OVERPAYMENT by a credit customer?

Answer 11

1. ) The seller should contact the customer and explain the situation. The ideal solution is for the seller to KEEP the money. The customer may WANT the money, resulting in a ADJUSTING payment.
2. ) The seller should CONTACT the customer and explain the situation. The ideal solution is for the seller to RETAIN the EXTRA money.

Question 12

What is Prompt Payment Discount (PPD)?

Answer 12

An ‘early payment discount’ where a seller allows a customer to DEDUCT a PERCENTAGE discount from the invoice total if there is payment WITHIN a SPECIFIED period of time e.g. 7 Days.