Write off bank fees associated with direct deposits?

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Posted on by Dale Coulthard

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Roughly 40-50% of our organization’s invoices are settled by our customers via direct deposit methods (like wire or ACH transfers). During the movement of monies, banks take their fees out of the originating wire amount. By the time the funds are credited to our bank account, fees anywhere from $10 to $50 could be deducted. Our bank shows our account credited for the net amount. So, if we invoiced a customer $1,000, after wire/bank fees, the amount we receive into our bank account could be only $950 which is what is credited to our account and what appears on our bank statement. We want to reflect that the $50 is a bank fee and not leave the $50 at the A/R level.

When I posted this issue on Microsoft Connect, the person who responded stated that I should enter a bank level transaction for the fee. This does not work, because (1) the amount credited to our bank account is the net value, not two separate transactions, and (2) by using this idea, (i) reconciling the bank account would be difficult because the bank only reflects the net amount, so trying to identify the gross amount and bank fee that ties to the single amount on the bank statement would be difficult, and (ii) trying to trace the gross paid amount at the customer level back to actual cash amount credited to our bank account would be difficult.

At the Apply Sales Documents window, there currently is no field for bank fees nor is a field present at the Customer Account Maintenance level. Our organization decided to utilize the write off field for these bank fees, but by using this field (in the Apply Sales Document window), we can no longer use the write off field for its original purpose. Am I performing the cash receipts process incorrectly or does GP currently not handle the real world activities for cash settlements via direct deposit methods? This issue also exists for our foreign currency bank accounts. Given this occurs for almost all companies related to direct deposit style payments, I am hoping that either (1) GP handles this fee, and I am not performing the cash receipt process/function in GP correctly or (2) Microsoft’s GP 2010 will resolve this issue.

Thank you for your input.

Best regards,

Dale

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Victoria Yudin 22,766 on at

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Re: Re: Re: Re: Re: Re: Re: Re: Write off bank fees associated with direct deposits?

Realistically, this is not 'broken', and there are workarounds, so this would be considered a new feature, not a 'fix'. I would not expect anything from Microsoft on this until the next version of GP at the earliest, since GP 2010 just came out in May, you're probably talking about 2-3 years at least. I am not speaking for Microsoft, as I am not an employee, nor do I have any inside knowledge, just based on my experience of working with GP for almost 20 years now.

To address your other point, yes, you do lose the drillback from the Cash GL distribution to the AR subledger with this method. Depending on specifically what you need for your audit process, you could possibly address that with some or all of the options below:

a) putting the cash receipt number in one of the fields on the Bank Transaction

b) creating custom reports

c) adding an Extender window on the Bank Transaction to track the needed data

d) customization

For example, if you're using the drillback functionality to determine what invoices were paid and are doing this on a recurring basis, that's a great candidate for a custom report that will eliminate having to do this manually.

Also, not sure what you mean by drillback from the customer to the bank level - I don't believe this is possible out-of-the-box, unless I am misunderstanding what you mean.
Dale Coulthard 3,055 on at

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Re: Re: Re: Re: Re: Re: Re: Write off bank fees associated with direct deposits?

Thanks. I like the idea, but I not expect it will work for us based on how our audit/process work. Since I need the ability to drill down from the g/l level back to the customer level for one of the audit procedures and vice versa (going from the customer to the bank level), this process will take additional time during the audit (which already takes away from our time for normal business activities) to determine the actual customer who settled that cash amount as well as which invoice(s) paid, and it really doesn't resolve the write off vs bank fee issue that I would like Microsoft to fix at the apply level. I will give it more thought though since my first thoughts on new ideas are not always the best!
Victoria Yudin 22,766 on at

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Re: Re: Re: Re: Re: Re: Write off bank fees associated with direct deposits?

Dale, as far as GP is concerned, there is no difference in functionality available when receiving a check, cash or credit card payment from a customer. All the same options you have for discounts, writeoffs, etc. are still there. The key to what I am suggesting is that using a credit card allows you to put the amount received from the customer into a GL account instead of directly into a Checkbook. That's what gives you the ability to enter a separate bank fee associated with the transaction before entering the Bank Deposit and what allows you to keep both AR and Bank Rec 'clean' and accurate.

So in your example, if the invoice is $1000 and the customer gets a 1% discount, then the cash receipt you would enter is actually $990. The entire invoice is applied and a discount of $10 is entered as part of the cash receipt. Then you have $990 sitting in the Cash Receipt Suspense account from my earlier example. The Receipt in Bank Transactions would be for $940, with $940 debit to Cash, $50 Debit to Bank Fees and $990 credit to Cash Receipt Suspense .

As far as reporting, there should be no lost functionality either. And yes, you should be able to pull queries by credit card ID, at least in SmartList. Of course, if you have custom reports or SmartList favorites saved that are looking at receipts of type Cash, you would need to change them. If you are doing custom reporting, you might find this helpful: http://victoriayudin.com/gp-tables/rm-tables/.
Dale Coulthard 3,055 on at

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Re: Re: Re: Re: Re: Write off bank fees associated with direct deposits?

Thanks for the idea. Curious though, how to perform the above if the following has occurred: The customer was invoiced $1,000, they are entitled to a 1% early pay discount (assume they met it on settlement date), and the bank deducted $50 for fees. I assume this cannot run through credit card due to the early pay discount?

Also, using the credit card process, do you loose ability for queries or can you run a query spefic to that credit card id?

Thanks.
Victoria Yudin 22,766 on at

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Re: Re: Re: Re: Write off bank fees associated with direct deposits?

I agree with Frank, I do not like the idea of not showing the actual amount the customer paid - if you ever really do have writeoffs or discounts, you lose the ability to report on this accurately.

What I would suggest is using the credit card functionality in GP for this. Even though you are receiving cash, create a credit card for this with the Charge Card option and associate it with a new GL account set up specifically for this (let's call this account Cash Receipts Suspense). Here is how it would work with the following example: You have a customer invoice for $1000, the customer pays $1000, you receive $950 and $50 are bank fees.

1. Enter Cash Receipt for $1000, payment type is credit card. This will debit Cash Receipts Suspense for $1000 and credit AR for $1000. It will also accurately show that the customer paid $1000 and that the invoice is paid in full.

2. Enter Bank Transaction of type Receipt for $950. Debit Cash for $950, credit Cash Receipts Suspense for $1000 and debit Bank Fees for $50.

3. Enter Bank Deposit for the $950 receipt in step 2.

The only extra step here when compared to a 'regular' cash receipt is step 2 and it's a very quick entry.
Stefanie Christiana 75 on at

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Re: Re: Re: Write off bank fees associated with direct deposits?

I was just thinking the same thing. In fact, I cam to search if anyone posted a good procedure for cash deposits from retail stores. The stores collect cash in the form of two currencies (local and USD), local currency debit cards which get netted with a 1% fee, USD credit cards that have various fees netted, and USD cash. The USD cash and credit cards also have a 2% currency gain since our retail uses a slightly different exchange rate than our internal.

The one post that mentioned negotiating wtih bank might work sometimes with US banks. I've had clients in the past who were lucky enough to have it done this way where the bank showed $1000 deposit then $25 credit card fee. Ours are net and the banks won't really negotiate on those things. We can't even get them to do online credit card processing! We're still on the old dial up terminals.

Anyway, we are considering using Sales Order Processing to enter the daily summary from each store. We would enter an inventory (Misc Charges type) item for sales so the sales account would default. We would then enter an item for Currency gain. I wanted to then enter cash receipts for each type of type of deposit (KYD cash, USD cash, KYD debit, USD cc). However, the Amount Received window on a SOP transaction will only let you enter in the currency on the main transaction. You can view in funtional currency if you choose but it will still be entered in whatever the originating is, convert to functional, then convert to checkbook currency. Plus it's a bit weird looking because it looks like USD (not our functional) in the Amount Received window.

The debit cards can easily be netted because it's always a 1% fee and we could use the write off amount. Since we code things by store, we'll have to do a customer for each sales so we can default the write-off account from there. The credit card deposits would be entered later after we know the fees. After all that, bank deposits would have to be done for each type.

All that seems like WAY too much trouble so I'm bank to just doing bank transactions. The first one would be all the GL coding except using an Undeposited Funds for the other banks. We'd still have to do a bank transaction for each type but that's way less work. I wish there was just an Enter Store Sales window! :)
Dale Coulthard 3,055 on at

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Re: Re: Write off bank fees associated with direct deposits?

Thanks for the response. At least I know that I am using GP in the most efficient way now. Maybe one day GP will mirror real world for this activity.

Best regards,

Dale
Dale Coulthard 3,055 on at

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Re: Re: Re: Write off bank fees associated with direct deposits?

Thanks for the input. The issue isn't with the bank from my perspective, but to discuss you suggestion further, my bank is the one receiving the amount after other banks have taken their fees. Some of those banks sending the monies/details do put the information you describe in the wire details while some do not. Those banks that do provide the originating amount and the fees withheld are reported by my bank, but most do not (ie, banks do provide as much details to their customer as they receive). Also, wires from overseas (and in some cases, even domestic wires) can route through several banks with each having their own reporting, so the originating bank may actually provide all the details, but they may send the funds to a 2nd bank and the 2nd bank sends the money to our bank. The 2nd bank may not have their reporting setup to submit the originating and bank fee details, so those are dropped. Wire transactions have to contain certain details. Originating value and bank fees are not required by the banking industry; therefore, some banks do not provide it in their records submission. The reporting side by the bank is not the issue though. GP has some great features and I was hoping that GP handles this since it is common in business/banking, but it appears that the way I currently handle the fees has to continue. From my perspective, GP really needs a field for bank fees as this is common business practice.

As far as customization, I don't understand this idea. At the subledger level (customer account), I have to post the value the bank credited to our account so (1) that anyone can verify the cash received ties to the bank statement and (2) performing the bank recon is straight forward. If I do not write off (or use the terms taken field) at the time I apply, then I would have to enter a sales transactions in the form of a credit memo and use the Misc field and code it to bank fees. This is a much longer process and causes a lot of questions by the auditors (due to the volume of credit memos that this would generate). The only way I could have a need to enter a bank fee at the bank reconciliation level is if I entered the originating wire value at the customer level and allow that to hit the bank subledger, then I would have a need to enter a bank fee at the bank level to reconcile. This would cause a lot of problems though. First, anyone trying to trace the cash receipts at the customer level to the bank statement could not, because the customer level would be posted with the originating value and not the amount the bank credited to our account, so the two would not tie. This would cause audit issues. Second, trying to trace from the bank level down to the customer level would also be difficult since the two would not tie and cause audit issues. GP does not have the ability to 'tag' two bank transactions to one customer level posting (which to me would be more difficult than establishing a new field for bank fees). Third, trying to reconcile the bank account would be time consuming due to trying to identify the originating value and bank fee that ties back to the net value on the bank statement (the bank fee is not consistent, so if you have numerous wires on the same day, it would be difficult to know which bank fee applies to which originating currency. Fourth, for those the reconcile their banks accounts through GP's reconciliation, the idea would cause a lot of errors and the company would probably have to move to manually reconciling again since there would be so many errors/mismatches.

Best regards,

Dale
Frank Hamelly | MVP... 4,029 Super User 2024 Season 2 on at

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Re: Re: Write off bank fees associated with direct deposits?

This probably doesn't help you but if it were my money, I'd be negotiating with the bank to change its reporting format for me so I could see what the customer sent vs. what ultimately was credited to my account. From a pure accounting perspective, using the Terms Taken or Writeoffs is technically incorrect because your customers are paying the invoice in full. It's your bank's reporting format that is causing you headaches.

Now, assuming you can't get the bank to cooperate, you might want to consider a customization that would allow you to enter the bank fees while performing the bank rec, post those fees to a bank fees account and store the data in a table for inquiry/reference purposes.
Richard Whaley 25,195 on at

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Re: Write off bank fees associated with direct deposits?

I'm not disagreeing with you but working with what we have.....

Most people consider the bank fees a WriteOff amount or Terms Taken. Set the GL accounts for the fields you decide to use to the Bank Fees expense account for general work.

Let's say you decide to use the Write Off field for this. On occassion, you need to actually write off amounts to bad debt. When that happens, change the distributions prior to saving the transaction. If you have many writeoffs, change the default accounts, perform the write offs and change them back.

Awkard, not automatic, but it is what we have and it works WELL!

Sorry, plan to do this through v2010 as well.