Definition of a Payment
Fundamentally, a payment is a positive entry on a customer account, indicating that your business has received some type of monetary exchange, such as a cash, check, E-check or credit card payment. These funds are used to balance outstanding charges or debits (negative entries) on customer accounts.
Note: Credits can also be placed on accounts for tracking non-monetary compensation, such as work in trade, coupons or other business compensations.
The Anatomy of a Payment
When you create a payment in iClassPro from the New Payment window on a family ledger, you have the option of whether or not to immediately associate it with a charge on the customer’s account. This is referred to as applying a payment.
If there is no charge or you choose not to apply the payment, the positive entry is still made on the family account to offset the customer’s overall ledger balance. However, the payment is considered Un-applied and no individual charges on the family ledger are actually reduced. The un-applied positive amount of funds on the family ledger is called Account Credit.
Note: Please note that Account Credit is different from a Credit entry used to track non-monetary compensation.
How to Apply a Payment
Payments can be Applied, or attached, to a specific charge to reduce the amount the customer owes on it. This can be done in two ways:
- Using the New Payment Window, when entering the payment into the system. (This allows you to choose specifically where the payment is applied.)
- Using the Auto-apply Credit button in the ledger from the charges view (applies the oldest account credit available in the account to that specific charge) or from the payments view (applies the specific payment to the oldest outstanding charge).
How it Works
When a payment is applied, the applied funds go from being reported as Un-applied to having an association with the Program and Charge Category of the charge it is applied to. This is how you track income to different areas of your business inside of iClassPro.
If the funds of the payment exceed the amount of the charge it is applied to, the payment will be only partially applied up to the amount of the charge. The remainder can be left Un-applied or Applied to another charge on the family ledger until the full amount of the payment has been used.
After being Applied to a charge, a payment can be easily un-applied by opening either the charge or the payment itself and removing the unwanted relationship (by clicking the [x] button next to it, then saving). At this point, the funds return to the un-applied status until they are applied again.
Reporting Day-To-Day Changes
Within iClassPro, we are tracking each change in a payment's status and reporting information about what happens to payments after they are recorded on a day-by-day basis in financial reports. This results in a timeline type of view of your financial data. This is different from the previous system in that charge dates, payment dates and new applied dates become vital data.
For example, if a payment taken today is applied to a future dated charge in the system, the payment is considered un-applied until the entry date for that charge. On the date the payment is recorded, it will appear as new income on the financial reports that it is un-applied. This is because if you were to plot the payment and charge on a timeline, the charge is not current on the date of the payment.
On the date of the charge entry, the payment will be shown again in the adjustments section of the Program Deposit Split report as being applied - with a negative entry shown in the un-applied section (to show money being moved out of un-applied payments) and an equal positive entry corresponding to the program and charge category of the charge (showing the same money getting applied). This has a $0 effect on the totals of the adjustments section.
This gives accountants and bookkeepers the tools they need to keep up with a detailed account of how money is being moved within the business by employees after it is received from the customer. Having this information reported daily is vital for achieving matching numbers for the different areas of income your business tracks between your external accounting system and iClassPro at the end of the financial year.