How to do Overpayment Recovery in IFHRMS - ( Full Guide )

Check out the above video to learn how to do "Overpayment Recovery" in IFHRMS - (2021 Full Guide).

Visit - 👉 IFHRMS 👈 to do the "Overpayment Recovery" process.

What is Overpayment Recovery?

Overpayment recovery is a process in which IFRS accounting entries are revised to reflect an increase in a liability amount following the recording of a decrease in an asset amount.

In other words, it is a process wherein IFRS accounting entries for assets or liabilities are adjusted downward when they have been overstated.

Overpayment recovery helps to improve the understanding between two parties who have entered into some transactions and helps to reconcile the books that were created during different periods.

The main objective of overpayment recovery is to ensure that the proper financial statements are presented and that all the transactions related to accounts receivable, inventory and other assets have been issued correctly on both sides of accounts.

How Overpayment Recovery works in IFHRMS

There are different methods by which overpayment recovery is done in IFHRMS. In this section, we will be covering the three main methods of overpayment recovery as provided by IFRS.

The simplest form of overpayment recovery is where a straight-line amortization is applied to a liability or asset to restate an existing amount.

The other way is where a discount or premium is initially charged to a customer for future payment and realized upon the actual payment being made towards the customer.

This method can be used when the discount was originally pointed out in the contract but not actually used.

The other form of overpayment recovery is to use the same systematic amortization method as used in determining the interest on loans.

When this method is used, the amount of the liability recorded should be equal to the difference between the acquisition cost of an asset or an amount owed by a customer and its present value.

This charge-off process can be used for items like inventory items where overpayment arose because of wastage, spoilage or obsolescence.

How to do Overpayment Recovery in IFHRMS

In this section, we will be discussing the steps involved in the IFHRMS overpayment recovery process.

Step 1: Identify the transaction that is to be recovered

If a customer has returned a product within a set time frame, then you can use a discount to recover part of your payment from them.

You can identify this from your journal entry or you can find an option from the invoice biller's register to indicate that this has been recovered.

Step 2: Record "Paid back" entry in the journal and use entries in asset/liability balances for recording new entries

The journal entry you will be making is to refund the amount using a credit adjusting entry. Also, use the LC_RECOVERY_ACCT process to do your recovery work.

You can also use an asset or liability account to record the new entries.

Step 3: Create bank deposit entries for any refunds made

When you have created your adjusting entry, use the LC_BANK_DEPOSIT_CREATE to create a bank deposit for any refunds made for this transaction. You can find this process under Transaction Processing -> Bank Processing -> Bank Deposit Create.

Step 4: Complete the bank transaction and complete the journal entry

You need to track your refund transaction status in your bank account. During this period, your refund will be pending and you will need to wait for it to settle.

After you have received your company's payment, you may need to determine whether the refund was greater than the amount of that payment or not.

If it is, then use an adjusting entry in the liability balance using an item number, amount and date of transfer as source information.

If the refund is less than the payment received, then use a debit adjusting entry and post it in asset/liability balances as per the above steps. You will also need to create a bank deposit entry for the refund.

Step 5: Create adjustments for bank deposits

If you have created an excessive bank deposit entry, then you need to use an adjusting entry in the asset/liability balance using an item number, amount and date of transfer as your source information.

You can also correct your bookkeeping by creating journal entries on these events.

Step 6: Complete adjustment for bank deposits

If you have created any credit adjusting entries in the asset/liability balances, then you can use an adjusting entry in the liability balance using an item number, amount and date of transfer as your source information.

You can also correct your bookkeeping by creating journal entries on these events.

Step 7: Refund the bank deposit

If you have created any credit adjusting entries in the asset/liability balances, then you can use an adjusting entry in the asset/liability balance using an item number, amount and date of transfer as your source information.

You can also correct your bookkeeping by creating journal entries on these events.

And finally...

After you have completed all the above steps, you will be able to see that these are all under the "Overpayment Recovery" sub-module of the IFHRMS module.

This sub-module has all the details of your transactions which you can see, print or export to any type of format.

Also, you can create journal entries or bank deposits for these adjusting entry items.

How to overcome the failure in overpayment recovery?

There are times when you will be unable to achieve your overpayment recovery in IFHRMS. As such, you should understand the causes and the effects of such failure.

When you use a discount for underpayment, then it is possible that your customer may return the product before making payment. This could be because they ran out of fertilizer due to low rainfall or because they feel that your product will not work better than the other one that they were using and therefore, don't want to pay more.

Therefore, you need to keep a check on your customer's feedback and try to improve your services if needed if this happens again.

Also, when you use a refund and the product is not returned, then you need to track this and take necessary actions if it is found that the product was never returned.

You can take action against your customer or find a different route for recovering your payment from them.

In addition to this, there are times when you record an overpayment when in reality, you have received an actual payment from your customer. In such cases, you will receive a credit in either asset or liability balances because of the erroneous transaction.

This will be reflected not only in the back-transfer journal entries but also in the asset/liability balances because of the erroneous transaction codes.

If this happens frequently, then you need to check the root cause of the problem and make necessary corrections.

The Asset/Liability balance of IFHRMS is the first step that you should take for doing overpayment recovery. The credit adjusting entries first go into liability balances and then your overpayment recovery will be complete.

This means that IFHRMS first deducts your customer's payment amount from their payment due amount, marks the uncollected amount as an overpayment and gives it back to you as a credit on your balance sheet or cash account.

This feature allows you to maintain your bookkeeping in a systematic way and monitor your company's financial status.

You may also want to register the customer's payment along with their purchase into an asset/liability account or item number so that you will know into which bank account you should transfer the customer’s payment.

After IFHRMS does its calculations, you can see your uncollected payment on the asset/liability balance of IFHRMS where it will show these details about your uncollected payments.

The user interface of IFHRMS is managed by various modules. One of them is the user interface module which controls all the other modules. It is responsible for providing the user with various functionalities. The IFHRMS user interface module controls all the IFHRMS modules respectively.

The default view of IFHRMS allows you to view your company's books reports/reports, bank accounts, journal entries and transaction details. The transactions can be performed using the "Quick & Easy" report which will generate an account statement in the format of PDF.

There are also other reports which can be generated manually or through shortcuts or key-strokes, for example, the "Overpayment Recovery" report which generates a manual report in the format of an Excel sheet.

IFHRMS provides a number of reports to make your bookkeeping easy and systematic.

These reports can be generated from the user interface module's preferences menu which can be accessed from the "preferences" link in the IFHRMS toolbar.

If you need to know your company’s financial status, then you will need to go through these reports which you can generate manually or with the help of shortcuts. They provide this information about your company by using different formats like Excel sheets, PDF files and so on.

IFHRMS has an extensive online help section that contains detailed explanations of each module.

Interfaces to Overpayment Recovery

There are several interfaces to implement the overpayment recovery process in IFHRMS. These interfaces can be used in different ways. A user can also use the same interface to implement an overpayment recovery process in any transaction processing module of FMS.

The IFHRMS module also has some interfaces. These are used for retrieving information about your invoice biller's register, the company's bank details and for retrieving information about refund transactions.

These interfaces can be used to retrieve information from any of the transaction processing modules of FMS.

Conclusion

For overpayment recovery, IFHRMS is the ideal solution. This system is easy to understand and use, has many reports to monitor your books, provides an intuitive user interface and also has flexible interfaces. Therefore, you will certainly like using this system to maintain your company's financial information.