This lesson describes how 21st Century Accounting derives
the numbers in the aging buckets on the Aged Receivables,
Customer Activity, and Customer Analysis reports and on Statements.
The document also explains how the minimum payment amount is
calculated on the customer's statement.
| Reports |
Calculations Described |
Aged Receivables
Customer Activity
Customer Analysis |
numbers in aging buckets |
| Statements |
numbers in aging buckets
minimum payment amount |
The description uses the "default" aging buckets:
Current, 1-30 days, 31-90 days, 91-120 days, 120+ days
Note that in 21st Century Accounting you can change the number of days in each bucket and specify the "aging date" when you run each of the reports.
Follow the Billing Cycle Checklist
The actual balance details that print on statements depend on the customer type and the order in which procedures are carried out and statements are printed during the billing cycle. The standard ordering of operations for a billing cycle is:
- Enter transactions (charges, receipts, and adjustments) for all customers in billing cycle
- Apply finance charges, where applicable
- Apply recurring charges, where applicable
- Print statements
- Age/close the billing cycle
The location of the buttons on the Billing Cycle Checklist window promotes the recommended order of procedures in the Receivables business cycle.
Assign Customer Types in Configure/Customers
The customer type determines how a customer's balance is aged. In 21st Century Accounting, customers may be one of four types:
- Open item
- Balance forward
- Revolving
- Fixed payment
Open item
For open item customers, calculation of the aging buckets is very straightforward. Each transaction for a customer remains identified by a specific invoice and has a due date based on the customer's payment terms. Payments received and entered in the Deposits command are applied explicitly or implicitly to specific invoices. The difference between the transaction's due date and the aging date determines to which aging bucket the balance still due is added. There is no minimum payment calculation for open item customers. The system assumes that the total balance due is the minimum payment.
Balance Forward
Balance forward, revolving, and fixed payment customer types are in fact all variations of balance forward customers. The system ages the balance due and calculates the minimum payment due slightly differently for each of the balance forward types.
Regular Balance Forward
For a regular balance forward customer (not a revolving or fixed payment customer), the minimum payment is the entire balance. When the customer's billing cycle is aged/closed, all "current" transactions get summed into a single number that has a due date of the aging date plus the number of days specified in the customer's payment terms. Therefore, for a customer with payment terms of 10 days, a statement printed eleven days after the billing cycle was aged/closed would show the former "current" balance in the 1-30 day past due column. As time goes by and that balance remains unpaid, it will show up in later and later aging buckets. Payments received are automatically applied to the oldest transactions for that customer.
Revolving Balance Forward
For revolving customers, the minimum payment calculation is more complicated. Conceptually, there are two payment amounts to be considered:
- The required payment due on the remaining customer balance
The required payment on the customer balance is the greater of:
the customer's total balance due multiplied by customer's revolving payment rate (set in Configure/Customer)
or
the customer's minimum revolving payment (set in Configure/Customer)
- The minimum payment printed on the statement
To calculate the minimum payment that shows on the statement,
the statement report adds the total amount of past due minimum payments
and finance charges to the required payment. The required payment amount
is calculated and aged each time the billing cycle is aged/closed.
The total customer balance - sum (past due payments and past due finance charges)
becomes the new "current" balance for the customer account.
Fixed Payment Balance Forward
For fixed payment customers, the minimum payment calculation is similar to that for revolving customers. Conceptually, there are two payment amounts to be considered:
- The required payment due on the remaining customer balance
The required payment on the customer balance is the lesser of:
the customer's total balance due
or
the customer's minimum fixed payment (set in Configure/Customer)
- The minimum payment printed on the statement.
To calculate the minimum payment that shows on the statement,
the statement report adds the total amount of past due minimum payments
and finance charges to the required payment. The required payment amount
is calculated and aged each time the billing cycle is aged/closed.
The total customer balance - sum (past due payments and past due finance charges)
becomes the new "current" balance for the customer account.
Summary: How Age/close billing cycle affects customer types
| Customer payment type |
Age/close cycle |
| Open item |
Aging has no effect on the past-dueness of invoices -- their age is always calculated based on the due date of the invoice and the aging date on the statement or aging report. |
| Regular balance forward |
All outstanding transactions are lumped into a single number when the billing cycle is aged/closed, with the due date for the entire amount being the aging/closing date of the cycle plus the number of days specified in the customer's payment terms. That amount ages in successive runs of the aging report, statements, and the billing cycle age/close procedure. |
| Revolving and fixed payment balance forward |
A required payment is calculated based on the customer's total balance. That required payment is given a due date of the aging/closing date of the billing cycle plus the number of days specified in the customer's payment terms. The total customer balance, less all past due required payments and finance charges, remains "current" on the aging report and statements. Only required payment and finance charge amounts get progressively older on subsequent aging reports and statements. The only difference between revolving charge and fixed payment customers is in how the required payment amount is calculated. |
Sample statements without finance charges
In each of the examples below, the customer starts with a $1,000 purchase due on 1/02/05, is assessed no finance charges, is billed at the end of each month, and makes no payments through the March billing cycle. For the revolving and fixed payment customer examples, the minimum payment for the customer is set to $100 and the revolving pmt rate is set to .01 (1%). The example shows the aging bucket values and minimum payment amounts that would print at the bottom of the statement.
For a regular balance forward customer:
01/31/05 statement:
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 1,000.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
02/28/05 statement:
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 0.00 |
1,000.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
03/31/05 statement:
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 0.00 |
0.00 |
1,000.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
For a revolving customer:
01/31/05 statement:
| Minimum Payment: 100.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 1,000.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
02/28/05 statement:
| Minimum Payment: 200.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 900.00 |
100.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
03/31/05 statement:
| Minimum Payment: 300.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 800.00 |
100.00 |
100.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
For a fixed payment customer:
01/31/05 statement:
| Minimum Payment: 100.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 1,000.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
02/28/05 statement:
| Minimum Payment: 200.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 900.00 |
100.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |
03/31/05 statement:
| Minimum Payment: 300.00 |
| Current |
30 Days |
60 Days |
90 Days |
120 Days |
120+ Days |
Amount due |
| 800.00 |
100.00 |
100.00 |
0.00 |
0.00 |
0.00 |
1,000.00 |