Contract DD Collection

Direct Debit Collection

1. Purpose

SOFT4Leasing Contract - Direct Debit Collection allows to build direct debit payments schedule and collect funds from Customers’ bank accounts. Also, it allows to show record dishonor when direct debit collection fails because of insufficient funds or any other reason.
Users can record payment arrangements and promises to pay next to scheduled direct debit instalment collections.
It is possible to create payment arrangement for early pay-out in case if direct debit is preferred payment method for a Contract.

2. Status Flow

Each DD Schedule record has the status assigned. The status can have one of the following values:

• Blank value.
• Cancelled.
• Processed.
• Exported.
• Posted.
• Paid.
• Dishonored.

Status flow defines the rules related to status changes.

Typically record status will follow the route 1,5,6,7

3. DD Schedule creation

DD Schedule can be created in 3 different ways:

1. Automatically on Contract activation.

• DD schedule lines with Type of Payment Arrangement.

On Financial Product Setup card are defined default rules for Downpayment, Upfront Fees, Deposit, First Installment Payments

These Rules are transferred to Schedule Card where can be changed

On Contract activation DD schedule lines with Type of Payment Arrangement will be created

DD schedule lines with Type of Scheduled Installment is created from instalment schedule if Leasing Contract Payment Method Code is flaged as Direct Debit.

All records created in this way have Type of Scheduled Instalment. Users can’t modify this type of records except Status change. In this way DD schedule always follows installment schedule.
If user creates new Leasing Contract Schedule version and confirms then DD schedule is refreshed from instalment schedule as well.

2. Manually by opening DD Schedule page and creating new record. Manually created records can’t have Scheduled Instalment type and user must select Payment Arrangement of Promise To Pay. Select Promise To Pay in case DD collection failed, Customer is contacted and agreed to try DD collection again. Select Payment Arrangement in case your customer wants to postpone some payments or pay all or part of future installments in one lump sum. Usually after payment arrangement creation user will change Status to Cancelled for DD Schedule records with Scheduled Instalment Type to void scheduled funds collection that are going to be collected by the payment arrangement.
   

3. DD Schedule can be created for Early Payout if Customer uses direct debit to pay instalments. System creates payment arrangement for a total early payout amount by selecting Create DD Collection action in Early Payout card.
   

4. DD Collection Run

Once DD Schedule entries are created leasing company needs to collect funds from Customers’ bank accounts. Use Cash Receipt Journal to run DD collection.

Follow this order to work efficiently:

1. Create journal lines by selecting Suggest Direct Debit Payments action. DD Schedule entries affected by this run will get Processed Status.
2. Review journal lines and select Export Direct Debit File action. It will create file ready for upload to leasing company’s bank. Related DD schedule entries will get Exported Status.
3. Post journal lines. Customer ledger entries are created and related DD Schedule entries will get Posted Status.

5. Dishonor process

Sometimes direct debit collection fails. There are number of reasons why it happens (insufficient funds, direct debit agreement cancelled or expired etc.) but system must know what payments failed and handle them correctly. The following actions are carried out:

• Existing related payment that failed is unapplied with instalment posted.
• Payment record with positive sign is posted and applied with payment that was posted on a previous DD collection run.
• Original DD collection run created customer ledger entry payment record is flagged as Dishonored.
• The Status for a related DD Schedule entry is changed to Dishonored as well.
• Next to dishonor posted additional customer ledger entry can be posted if dishonor fee applies. By default, fee applies for all dishonor unless journal line details are included in Bank Dishonour Fee Exclude Setup
  

Fee amount comes from Financial Product field Dishonor Fee. The amount is posted directly to G/L account which is selected as follows:

• Use Dunning Fee (PL) value from Leasing Posting Setup table if the entry for related Financial Product exists.
• Otherwise take Dishonor Balancing Account value from Leasing Setup table.