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31 March 2022
By: Arjen van Santen

How to stay in control of customer balances (Part 1)

Stay in control of your customer invoices

Microsoft Dynamics 365 F&O provides several tools “out of the box” to manage the whole “Credit and collections” process. In this three-part blog series, I will highlight a number of components to come up with a “best practice” that can be used to stay in control of your outstanding customer invoices.

To get a good grip on your open customer transactions (Customer balances), start with capturing the right data in the Customer master. For this, you first need to do some basic setup settings, of which the most important ones are:


1. Customer group (mandatory in D365)

Grouping your customers correctly is essential for proper reporting and is the key to good accounts receivable management. How you should group depends partly on:


  • Do you have an intercompany relationship? (In that case, a separate customer group is needed, or at least strongly advised.)
  • Are you part of a group/collaboration (e.g., a franchise organization or a holding)? (This can also be a reason for a separate group if you have a special contract about payment terms, consolidation, etc.)
  • Furthermore, you can also group all third-party customers based on various shared characteristics, e.g., the payment term or the sales tax group.


2. Terms of payment

This setup is essential for determining the Due Date of the invoice, but also for possible discounts related to payment behavior. Try to set up a company standard for this. This keeps everything clear and prevents errors when creating transactions, although D365 does support any variant that you may agree upon with the customer.


3. Methods of payment

My advice is to set up a minimum of one Method of Payment. For example, “Invoice” for invoices paid by bank transfer. When you have B2B/B2C direct debit customers or use payment providers for web shop sales, you need to set up more Methods of Payment.

When creating Customer master:


  • Main address information. Full postal address details are needed for different Purposes or combinations of Purposes.
  • Contact information. Here, you can set up (primary) contact information for different Purposes. By using the Advanced option, you can add “Email account” for Invoice. This is for sending invoices as email attachments.
  • Collections contact (Credit and collections). Here, you can set up a contact person/department with an email address for sending Collection letters directly out of Dynamics 365. Don’t forget to register phone numbers. Personal contact can result in better payment behavior of the customer.
  • Employee responsible (Sales demographics). This is the internal responsible person for this customer account. This information can be important for internal reporting and external communication to the customer in case of late payments of the invoices. When sending reminders by email, the responsible person can also automatically be sent a duplicate reminder.
  • Primary contact (Sales demographics). This is the external responsible person for this account, in most cases the purchase responsible from the customer.
  • Other defaults: Terms of payment, Sales tax group, Tax exempt number and Currency. After using the right information in the Customer master combined with the right information from Free text invoice or from Invoicing sales orders, the posted invoices will generate a usable Open Customer transaction.

If the right information is registered in the Customer master, invoices and reminders will always be sent to the correct person. This will help with the on-time payment of customers!

Many customers think they can save money by paying late, but in my opinion, you can save more by making a good trade agreement and paying on time, with the right (cash) discount agreements. Of course, this is currently very relevant in connection with the low interest rates, and even negative interest on high bank account balances.


Now, you are ready to process the Customer payments. Hopefully, most of the invoices will be paid on time by the customer. If they don’t pay on time, we must start the Collections process!

In the next blog of this series, I’ll look deeper into the Collections process.