Claims & Charge Backs Overview

The Claims/Charge Backs Control (AR36) program is a documentation tool used to create a separate Claim/Charge Back record that is linked to an Invoice and any subsequent Debit Memo and/or Credit Note. There are hot-link buttons to Notes for all of those documents to record follow-up conversations, investigation notes and resolution notes. There is also some tracking of who created the Claim/Charge Back record and who authorized any resulting Credit Note.

Customer charge backs are claims from the customer for some form of reduction or adjustment to an invoice for reasons that are not related to the return of a product (which is typically controlled through the RMA programs). Examples might be a pricing issue or the goods are not of the expected quality but they will keep them for a discounted price or the goods were not received at all, etc. In some cases, claims are made prior to payment but in other cases the customer refuses to pay any of the Invoice until the claim is resolved. These Claims/Charge Backs can be recorded, managed and controlled until resolved using program AR36.

Here are some Charge Back scenarios:

Scenario #1 - Customer Advises of Claim and Remits Partial Payment

In this scenario, the customer remits only a portion of the payment associated with the undisputed portion of the invoice and withholds the portion related to the claim. The procedure to record this through the Accounts Receivable system is:

  • Record the original invoice as partially paid - or -
  • Record the original invoice as fully paid and create a Debit Memo as an open item in AR30, representing the unpaid portion.
  • Investigate the nature of the claim and either:
    • Issue a credit to reflect the validity of the claim and match the Credit Note against the outstanding Invoice or Debit Memo - or -
    • Collect the debit by convincing the customer that their claim is without merit.
    • In either case, the debit item is cleared from Accounts Receivable.

Scenario #2 - Customer Advises of Claim and Withholds Payment Pending Resolution

In this scenario, there is no corresponding Debit Memo in the Accounts Receivable system. The reference is the original invoice. The procedure to record this through the Accounts Receivable system is:

  • Investigate the nature of the claim and either:
    • Issue a credit to reflect the validity of the claim and provide the credit to the customer who, in turn, pays the invoice and takes the credit - or-
    • Collect the invoice by convincing the customer that their claim is without merit.
    • In either case, there is no Debit Memo to process through Accounts Receivable.

When a Charge Back record is created and linked to an Invoice, it is stamped with system time and date and the Created By Operator ID. Notes can be added against the Charge Back Reference number and/or the Invoice number. The Reason for the Claim and Claim Status fields can also be entered.

If a Debit Memo is created for the unpaid portion of an Invoice, the Debit Memo number can be recorded in the Charge Back record and Notes can be added against the Charge Back record and/or Debit Memo number and possibly the Claim Status field updated.

If the claim results in a Credit Note being issued to the customer, the Credit Note number is recorded in the Charge Back record and then the Charge Back record can be archived. It is intended that AR36 be used to review only claims that have not been resolved. If a Charge Back is archived prematurely, it can be reinstated to an Active status.

There is a Print function within AR36 that can be used to print a Claim/Charge Back Control Document if for some reason a hard copy is required.

Purge Claims/Charge Backs (AR37) is used to purge Claim/Charge Back records that have been archived.

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