Overview

Dunning is the process of attempting to capture a successful payment by a payment processor over a predefined period of time and number of tries. Leapfin accommodates for two distinct scenarios to create JEs for this process.

  • Transactions do not impact the GL until they are successfully paid
  • Transactions do impact the GL, but if the dunning process is unsuccessful, then recognized revenue is placed into a bad debt account

Note that this document assumes all transactions will be processed by either the linear time or event (trigger) based recognition rules.

Note that this feature does not determine an invoice’s status - this is usually handled by the billing system, however, Leapfin can create a new feature to set this if necessary.

Configuration

Required

Account

Fields

Non-deferred Recognition Account

Invoice Status

A/R Account

Payment Processor Wallet Account

Deferred Account

Deferred Recognition Account

Bad debt Account

Paid Only Policy

When a transaction comes in with its invoice in a non-paid state, no JE will be created. On the day that the status of the invoice transitions to “Paid”, JEs will be created to recognize any accumulated recognized revenue from the start date to the end date on the paid date, and deferring out the rest to be recognized either linearly or event-based.

No actual output for this particular rule as a linear or event based recognition + a filter on a tracked paid date will be enough to handle this.

Example

$10 transaction invoiced on 3/15, and paid on 4/1 through Stripe

3/15
No JEs created

4/1 Deferral

Account

DR

CR

A/R

10

Deferred Revenue

10

April Total Recognition (March revenue pushed to April)

Account

DR

CR

Deferred Revenue

10

Recognized From Deferred

10

Paid on 4/1

Account

DR

CR

Payment Processor Wallet

10

A/R

10

Bad Debt Policy

When a transaction comes in a non-paid state, Leapfin will defer (if necessary) and start recognizing revenue. If the invoice is paid off within the dunning period, only the payment JE will be recorded (by the payment rule). However, if the dunning period elapses and the invoice is deemed “Uncollectible”, then new JEs will be triggered to move the money recognized to a bad debt expense account.

Example:

$30 transaction invoiced Sept 15, not paid by end of dunning period at Oct 6 where it is set to uncollectible. Look up any recognition that has been locked in previous months (i.e. Sept recognition lock is ~$16) and debit Bad Debt. Debit deferred for the remaining deferred amount, and credit A/R to remove the invoice from A/R.

Deferral on 9/15

Account

DR

CR

A/R

30

Deferred Revenue

30

Recognition for Sept.

Account

DR

CR

Deferred Revenue

16

Recognized from Deferred

16

The above will be handled by the recognition rule (not the dunning rule)

Output of dunning rule:

Account

DR

CR

Bad Debt

16

A/R

30

Deferred Revenue

14

Oct 6 Dunning period ends, and invoice is uncollectible

Reverse all future recognition JEs for the original transaction.


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