Home / News / How to stay in control of customer balances (Part 2)
19 May 2022
By: Arjen van Santen

How to stay in control of customer balances (Part 2)

Stay in control of your balances

Microsoft Dynamics D365 F&O provides several tools “out of the box” to manage the “Credit and collections” process. In the second blog from this three-part blog series, I will highlight several components to come up with a “best practice” that can be used to stay in control of your outstanding customer invoices.

After generating the Customer invoices, you now want to be in control of the outstanding balances. This is on the Customer level and on the Company level.

The following subjects will be highlighted in this blog:

 

  • Customer credit limits/Credit limit adjustments
  • Aging balances/Aging period definitions
  • Credit and collections parameters (credit for Credit limits/Collections for collection letters)
  • Accounts receivable parameters (Warehouse management > credit check by release warehouse)
  • Collection activities (Cases optional)
  • Collection status (Aged balances transactions)

 

Customer Credit limits

Customer credit limits can easily be added to the Customer master. If you allow manual editing on Credit limits, you can directly fill-in the limits on the Customer master. If you don’t allow manual editing, you can activate Credit limits on customers by using “Credit limit adjustments”. Credit limits are very useful if you work with a Trade Credit Insurance company. In that situation it’s important that you have the outstanding customer balances under control. Major financial risk can occur if the customer runs out of coverage!

Of course, Credit limits aren’t always linked to Credit insurance. You also can use it for example in combination with the company’s internal regulations about financial risks.

Update Credit limit by Credit limit adjustment

Aging balances/Aging period definitions

Using Aging balances is very helpful to stay in control of the outstanding Balances. It’s possible to make several Aging period definitions. For each situation you can make a different definition.

Examples:

 

  • 30-60-90-180 (for Auditor and calculating, based on Transaction date)
  • 14-28-42-56 (Collection letter periods, based on Due date)
  • Stop of coverage (Credit limits, based on days past Due date)

My best practice for this is to create an Aging period definition which is updated every day (by Batch job) after processing the Bank statements.

Useful list pages are by default available in the Manage customer credit and collection Workspace.

Credit and collections parameters

Setup: Credit (Tab). Used for getting system message if Credit limit is going to be exceeded.

Setup: Collections (Tab). Used for Collection letters.

Accounts receivable parameters

Setup: Warehouse management (Tab). Credit check before shipments are leaving the warehouse. This is to display an additional dialog box if you use the release to warehouse process on a sales order.

Collection activities (Cases also optional)

To organize your daily work for the Collections department, setting up the right “Activity types” can be useful. Depending on the daily collection process I should add some “Activity types” to the list. Examples:

 

  • Email to Employee responsible
  • Email to Customer contact
  • Phone call to AP Customer
  • Send Customer statement

Collection status

Path: Aged balances > Select Customer account > in “Open transactions”, select Voucher and click “Change status’’.

Status is changed and the Customer/Transaction is added to “Activities” in the Customer credit and collection Workspace.

In the next (last) blog of this series, I’ll look deeper into the communication (external & internal) about the outstanding Customer balances.