1. Accounts Receivable Implementation Guide
  2. Understanding Draft Collection

Understanding Draft Collection

You can arrange to collect funds for a draft in one of these ways:

  • Wait until the funds become available on the due date specified by the draft.

  • Request an advance from the bank before the due date of the draft. This is called discounting the draft. Typically, banks charge a fee when they advance funds for a draft before its due date. You must account for this fee separately during draft collection.

Your bank collects the funds for the draft from the customer's bank on the due date of the draft. Your bank informs you if it cannot collect the funds. On or after the due date, both you and the customer recognize the transfer of funds. You update the status of the draft in the records to show that it has been collected.

Some companies prefer to close the draft on the draft due date, while others wait until the payment appears on their bank statement. Processing options control the pay status code that the system assigns to paid draft records (R1) and whether to close the draft. The system removes the open amount from the draft record and creates records in the F03B14 table when you close the draft. If you select to leave the draft records open, you must run the Draft Collection with Status Update program (R03B680) again to select and update the draft records and to create matching records in the F03B14 table. After you collect the draft and close it, you must post the draft batch to create the appropriate journal entries.

Additionally, the bank might assess fees for draft collection. Typical fees include charges for incomplete bank information, discounted drafts, and commissions. In addition, the tax regulations in certain countries might require that VAT be assessed on these fees. You account for all fees by creating a separate journal entry using the Journal Entries with VAT program (P09106).

You can run the Draft Collection with Status Update program in either proof or final mode. This table illustrates the differences between these two modes:

In proof mode, the system:

  • Selects drafts that are either accepted or remitted.

  • Prints a report that shows the drafts to be updated. It shows all drafts that have a payment status of G (draft deposited, not due) with a due date that you specify in a processing option.

In final mode, the system:

  • Creates a batch header record in the Batch Control Records table (F0011) for collected drafts. You must post this batch to create the appropriate journal entries.

  • Changes the pay status of draft invoice records (R1) to P (paid) or to another value that you select.

  • Changes the draft status on the records in the F03B13 table from either 2 (Remitted - Cash or Discount) or 3 (Remitted - Contingent) to 0 (Collected).

  • Creates one or more records in the F03B14 table, depending on whether you remit drafts. If you remit drafts, the system creates a reversing draft remittance record in addition to the record the system creates for the collected draft.