R030601: Auto Allocation Of Payments


The Payments and Adjustments by Date report shows "unapplied payments" even after the payments have appeared on a bill. In fact, all payments entered with Auto Allocation selected are added to the "unapplied payments" total, which appears at the end of the report.

As a result, you cannot get the total fees or expenses received for a specified period from this report.

A detailed explanation of this problem follows.



The Old Way
Prior to Version 2.09, when you entered a payment, it created a "payment" transaction. Every payment, with Auto Allocation selected or not, created the same type of payment transaction. The amount of the payment was allocated to fees, expenses, late charges, and taxes (let's call it "fees and expenses" for short) at the time it was entered. The allocation was done by the user, if Auto Allocation was not selected, or by RTG Bills, if Auto Allocation was selected.

The Payments and Adjustments by Date report was able to show the fees received during any specified period by adding up the fees on each payment transaction.

Sometimes Auto Allocation did not do the allocation correctly. For example, if you entered a payment before some expenses that it should have paid, it might pay off fees instead of the expenses. Also, if you entered a payment that exceeded the amount due, you were forced to use a retainer account to hold the excess.

The New Way
In Version 2.09, if Auto Allocation is not selected, it works as before. You enter the amounts allocated to fees and expenses, and a payment transaction is created. We call this a manual payment transaction.

However, when Auto Allocation is selected, the amount of the payment is not allocated to fees and expenses. RTG Bills creates a new kind of transaction, which we call an automatic payment transaction. This appears as a "Payment Received" on the Payments and Adjustments report.

When you print the next bill for the matter, RTG Bills allocates the payment to fees and expenses, based on the amounts due at that time. At the same time, RTG Bills creates a payment used transaction.

To summarize, a payment without Automatic Allocation creates a manual payment transaction. A payment with Automatic Allocation creates an automatic payment transaction when it is received and a payment used transaction when it is used on a bill.

Click here to see a sample Matter Ledger in a separate window. It shows an automatic payment on 5/27 and the corresponding payment used on 6/12. Notice that the automatic payment does not affect the balance, but the payment used does.

In effect, automatic payment transactions put money into an unapplied payments account. The payment used transactions take money out of the unapplied payments account and use it to pay the balance due for the matter.


The Report

The Payments and Adjustments by Date report in RTG Bills Versions 2.09 and 2.10 shows manual payment and automatic payment transactions, but it does not show payment used transactions.

The manual payment transactions contribute to the totals shown for fees and expenses. The automatic payment transactions contribute to the total shown as unapplied payments.

Because the report does not show how the automatic payment transactions were eventually allocated to fees and expenses, you cannot use the report to find the total fees received during a specified period of time.

Adding the payment used transactions to the report would not solve the problem, because the date that appears on those transactions is the Bill Date, not the date when the payment was received.



RTG Bills now includes a report, Payment Summary by Matter. This report matches the automatic payment transactions with the payment used transactions for each matter to determine how the automatic payments were allocated to fees and expenses. You can use it to get an accurate total of the fees and expenses received for any specified time period.

For payments that have not yet appeared on a bill, the Payment Summary by Matter report assumes they will be allocated to fees and expenses based on the amounts due at the time the report is printed. A payment that exceeds the amount due will be shown as an overpayment on the report.

The Payments and Adjustments by Date report in RTG Bills should only be used as a record of the transactions as they were entered. It cannot provide an accurate total of fees and expenses received.


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