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CreditMngtDunning/Functional Documentation

Contents

Overview & Justification

Purpose

The individual steps of the dunning procedure are described here. This function is a requirement from HIS.

Scope

The dunning procedure comprises the followings steps:

New!!

The dunning procedure allows the end-user to assign a "Payment Priority"

Justification

According to law, pursuant to § 284 III Civil Code [BGB], the customer automatically goes into a state of arrears 30 days after receiving the invoice. The regulation may be non-mandatory (i.e. the parties to the contract can also modify it), however a shortening of the period – for example in the General terms and conditions of trade – is without a doubt only possible in commercial business.

Nevertheless, it is common practice to send a reminder (the initial reminder is usually called ‘payment reminder’) once the due date is reached.

New definitions and acronyms

Since 01.05.2000 when the law to accelerate payments which are due came into force, the statutory interest on arrears has been coupled to the base interest rate (=successor to the discount rate).

Since then, the statutory interest on arrears is principally 5 percentage points above the base interest rate; between business people it is 8 percentage points over the base interest rate.

The base interest rate can be adjusted twice per year (on 01.01. and on 01.07.) to the actual economic conditions. The current interest rate can be found on the pages of the Deutsche Bundesbank [German Central Bank]

The dunning fee is only applied to receivables which are subject to public law. The algorithm will be described further on. The dunning fee may only be applied once per dunning case.

Fines for late payments are applied only to receivables which are subject to public law, and depend on time of the default. The algorithm will be described further on.

Interest is charged for the duration of a granted deferral. It is calculated regardless of whether it is a receivable subject to private or a public law. The interest can only be determined at the end of the arranged deferral period based on the base interest rate.

The dunning level gives an indication of how many reminders were already issued.

Each business partner has a dunning key, which can be changed, however, when creating an outgoing invoice. So the decisive factor for the dunning run is the dunning key, which is found in the receivable.

The dunning key defines:

If no dunning proceedings are to take place, the dunning key is '00'.

Interest on arrears is applied in the case of receivables which are subject to private law.

§ 288 interest on arrears *)

(1) Interest is to be applied to money debts during the time in arrears. The interest rate on arrears is five percentage points above the base interest rate for the year.

(2) In case of legal transactions without involving a consumer, the interest rate for claims for payment is eight percentage points above the base interest rate.

(3) The creditor can demand higher interest rates for other legal reasons.

(4) The assertion of further claims cannot be excluded.

All calculations of fees are based on the actual outstanding amount and not on the original receivable amount.

Dunning costs include postage, telephone and paper costs

Design & Technical consideration

Design consideration

Technical constraints

Technical Requirements

Users & Business Process Description

User goals

Dunning data should be generated automatically as soon as the date due has passed and depending on the dunning key. Before the output of a dunning file, a manual way for changing or deleting individual records should be enabled. A report of the dunning data is subsequently written.

User Roles and Personas

The employees in accounts receivable manage the dunning key table and enter the dunning key for each receivable.

In accounts receivable, the dunning run is started manually, the dunning data is checked and further processed.

Business Process Diagram

Crdun Dunning Run.png

Business Scenario/s

Gathering Dunning Cases

1. An employee in accounts receivable opens the dunning run and fills the parameters in the start window.

He/she chooses the date which is to appear on the reminder, and the type of receivable. Then he/she enters a certain dunning key or a dunning level. Then he/she starts the dunning run.


2. Selection of receivables

The programme selects all receivables of the given type of receivable which have the given dunning key and determines the dunning cases based on the dunning date (dunning date <= dunning date of the receivable).

If the dunning date of the receivable is not a workday then the next possible workday is used.


The programme selects all receivables of the given type of receivable whose dunning level = the inputted dunning level - 1, and determines the dunning cases using the dunning date (dunning date <= dunning date of the receivable).


Dunning key '00' and '99' are disregarded!

Processing Dunning Cases

The accumulated dunning cases are made available in a list which can be processed by an employee in accounts receivable.

1. Dunning cases can be deleted.

2. Data can be processed.

The list is comprised of the following fields:

Calculate Fees

It is necessary to differentiate between 3 different kinds of receivable:


In the case of receivables subject to public or private law a summary of receivables per business partner should be strived for.


Calculation of receivables subject to public law


Two kinds of fees are applied to receivables subject to public law:

1. Dunning fees

2. Fines for late payment


Calculation of dunning fees

0.5% of the dunning amount (outstanding amount) whereby it is permitted to charge a minimum of 4.--€ and a maximum of 75.--€.

Dunning fees may only be applied once per dunning case.


Calculation of fines for late payments

In case fees or expenses (postage...) are not paid within one month (30 days) following the due date, for each commenced month of the default, a fine for late payment of 1% of the amount in arrears, rounded down to the full 50 €, is to be paid. Other fees and expenses (administrative fees, …), besides dunning fees, are regarded as paid.

A fine for late payment is applied beginning with a default of 6 days.

Dunning fees and fines for late payments must be declared separately on dunning letters and are posted separately as receivable.

E.g.: Receivable of 180.-- € thereof 115.--€ is still outstanding.

Due date 15.04.2009

Date of the dunning run 22.06.2009

Fine for late payment = 100.-- € (amount rounded down to the full 50 €)* 1% (fine for late payment) * 2 (number of months) = 2.--€

Dunning fees + fines for late payment may be charged.


Calculation for receivables subject to private law

Two kinds of fees are applied to receivables subject to private law.

1. Interest on arrears

2. Dunning costs

Calculation of interest on arrears

If fees or expenses are not paid within one month following the due date, interest is charged to the amount of 5% per year above the fixed base interest rate in the case of private persons, and 8% above the fixed base interest rate in the case of companies. (Whether or not it is a case of a business customer or a private customer can be determined from the business partner.)

The base interest rate is published by the Deutsche Bundesbank twice a year.

It is made known during the year on 1.1. and 1.7.


E.g.: Receivable of 180.-- € thereof 115.--€ is still outstanding.

Private receivable (travel costs)

Due date 15.04.2009

Date of the dunning run 22.06.2009

Base interest rate from 01.01.2009 to 30.06.2009 = 1.62%


Interest on arrears = outstanding amount * (base interest rate + 5%) / 360 (days in a year) * number of days past due date

Interest on arrears = 115.--€ * 6.62% / 360 * 67

Interest on arrears = 115.--€ * 0.0662 / 360 * 67 = 1.42 €


E.g.: Receivable of 180.-- € thereof 115.--€ is still outstanding.

Legal transaction receivable (companies)

Due date 15.04.2009

Date of the dunning run 22.06.2009

Base interest rate from 01.01.2009 to 30.06.2009 = 1.62%


Interest on arrears = outstanding amount * (base interest rate + 8%) / 360 (days in a year) * number of days past date due

Interest on arrears = 115.--€ * 9.62% / 360 * 67

Interest on arrears = 115.--€ * 0.0962 / 360 * 67 = 2.06 €


Should the dunning procedure continue on through several rates of the base interest default, the interest on arrears is calculated as follows:


E.g.: Receivable of 180.-- € thereof 115.--€ is still outstanding.

Private receivable (travel costs)

Due date 15.04.2009

Date of the dunning run 22.07.2009

Base interest rate from 01.01.2009 to 30.06.2009 = 1.62%

Base interest rate from 01.07.2009 to 31.12.2009 = 1.75%


Interest on arrears = outstanding amount * (base interest rate + 5%) / 360 (days in a year) * number of days past date due

Interest on arrears = 115.--€ * 6.62% / 360 * 180 (for period 01.01. to 30.06)

Interest on arrears = 115.--€ * 0.0662 / 360 * 67 = 1.42 €

Interest on arrears = 115.--€ * 6.75% / 360 * 22 (for period 01.07. to 22.07)

Interest on arrears = 115.--€ * 0.0675 / 360 * 67 = 0.47 €


Total interest on arrears 1.42 €+ 0.47 € = 1.89 €


Dunning costs such as postage/paper/telephone can be also added to this. This amount is determined by the university.


Calculation for deferral

Interest is charged to the amount of annually 2% above the fixed base interest rate for the duration of a granted deferral.

It is calculated regardless of whether it is a receivable subject to private or a public law.

The interest can only be determined at the end of the arranged deferral period based on the base interest rate.


E.g.: Receivable of 180.-- € thereof 115.--€ is still outstanding.

Private receivable (travel costs)

Due date 15.04.2009

Deferral until 22.07.2010


Interest on arrears = outstanding amount * (base interest rate + 2%) / 360 (days in a year) * number of days past date due

Base interest rate from 01.01.2009 to 30.06.2009 = 1.62%

Base interest rate from 01.07.2009 to 31.12.2009 = 1.75%

Base interest rate from 01.01.2010 to 30.06.2010 = 1.85%

Base interest rate from 01.07.2010 to 31.12.2010 = 2.45%


Interest on arrears = 115.--€ * 3.62% / 360 * 180 (for period 01.01.09. to 30.06.09)

Interest on arrears = 115.--€ * 3.75% / 360 * 180 (for period 01.01.09. to 30.06.09)

Interest on arrears = 115.--€ * 3.85% / 360 * 180 (for period 01.01.10. to 30.06.10)

Interest on arrears = 115.--€ * 4.45% / 360 * 22 (for period 01.01.10. to 22.06.10)


Interest on arrears = 2.08 € + 2.16 € + 2.21 € + 0.31 €

Interest on arrears = 6.76 €

Raising the Dunning Key and Posting Fees

1. Insert in table Dunning history

View the table description for information on the fields

Content is entered in the corresponding fields of the respective dunning level.

Example: dunning level 1 -> dunning date1, dunning key1

Overwriting is not possible: error message


2. For each dunning case the dunning key is raised by one dunning level. The respective subsequent key is entered in the table “dunning key”.


3. Fees and costs charged must be posted separately as receivable.

The specification of which ledger is to be used to make the postings is found in the maintenance dialogue “Switch settings and adjustments” in payment transactions.

The accounting record is: Debtor to revenues from dunning fees

The subsequent dunning key of the receivable being demanded is entered as dunning key. Due date = immediately

The dunning date of the receivable being demanded is entered as dunning date.

1 is added to the value in the dunning level field.

Output Dunning File

See new output file

Write Record

See output file

Functional Requirements

Configuration

Persona-Based Scenarios

Assumptions & Dependencies

Assumptions

Dependencies

User Interface

New User Interface

New Tables

Dunning key


Dunning history


New Dialogues

Maintenance dialogue for table Dunning key

See table Dunning key


Maintenance dialogue for table Dunning history

See table Dunning history


Start window dunning run

The following parameters must be given to begin the dunning run:


New Output File

The following data is required in order to do further processing in a text processing system:

New Record

See output file

User Interface Change

License

License Code Description

Functionality Enabled by the License Code

Discussion Items

Open Discussion Items

Closed Discussion Items

Appendix

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