How To Remit Gross Or Net Funds

This document discusses the two ways to remit funds in Collect! and how each of them affects calculations and Client statements.

Requirements

- Setup of Client Settings
- Setup Reports and Letters

Overview

There are two types of fund remittance in Collect! -- Gross Remit and Net Remit. Each method has its own way of calculating amounts due or payable and its own report for generating statements.

The type of remittance is set by the switch 'Remit gross funds with invoice' in the Client Settings form.

This form is accessed from the Client form:

1. Pull down the Browse menu and choose Clients.

2. When the Client form displays, select the ADVANCED button to bring up the Client Settings form.

3. 'Remit gross funds with invoice' is in the left hand column. Click in the box to mark it with a check and switch it ON when you want to use Gross Remit. Leave it OFF if you want to use Net Remit.

This switch must be set before you begin to generate Client statements.

See Also:

- How To Setup Client Settings

Gross Remit

All funds collected on behalf of a Client are returned to the Client at the end of the billing period. The invoice sent to the Client, at the same time, lists all commission and taxes due and payable by the Client.

Net Remit

You retain commission and taxes yourself and only return the remaining funds to the Client. At period end, Collect! calculates the amount owed to the Client, or what the Client owes your company, based on the payments received during the billing period.

WARNING: Switching from one type of remittance to the other can produce undesirable results if you have already generated invoices for this client using the type you are switching from. If your client is current now, with no outstanding amounts owing, and is always current, this is not a problem. However, if your client has amounts outstanding, please see below for guidelines on making the change from one type of remittance to the other.

Combined Statements

Combined statements read the To Us, Direct and Commission fields and the totals are calculated when you print the 'CStatement'. They are not affected by the 'Remit gross funds with invoice' switch.

Statements And Invoices

A statement can be generated for either Gross or Net remit.

This setting is read from the Client Settings when generating statements. The Client Settings form, available from the Client form, has an option to control the Gross or Net remit.

It is important that this option is set BEFORE you generate any Client invoices. If you wish to change the setting after you have generated invoices, please see below for guidelines.

The report used when printing the statement batch depends on the switch 'Remit gross funds with invoice' in the Client Settings form. Net remit statements use the report called 'STATEMENT' while gross remit statements print the 'GSTATEMENT' report.

*** BE SURE TO USE THE CORRECT STATEMENT REPORT FOR GROSS OR NET ***

Calculations

Calculations are also altered by the 'Remit gross funds...' switch mentioned above.

1. Amount Due

The Due amount from or to the Client depends on how many payments were sent directly to the Client vs. payments made to the agency.

For Net Remit statements, this is the amount due from the agency to the Client. This amount is calculated as the total payments to the agency (not to the Client) minus total commissions on all payments, whether to agency or direct to Client.

The Due amount is positive if the agency received Debtor payments exceeding the total amount of commissions earned, meaning that the agency will need to send money to the Client.

For Gross Remit statements, the Due amount it is the commission amount due from the Client to the agency.

2. Agency Commission

If the agency commission exceeds the total payments to the agency (e.g. most payments were direct to Client) the amount due is negative. In this case, the agency doesn't have to send money to the Client, but instead the Client must send money to the agency.

For Gross remit statements, the Due amount is the total commissions earned on all payments. It represents the amount the Client must send to the agency.

Positive amounts are owed to the Client while negative amounts are owed by the Client to the agency.

3. Tax

When calculating the amount payable to or from the Client, Tax calculations are different depending on whether Net or Gross remit is being used.

4. Amount Payable

For Net Remit statements, this amount is calculated as the Due amount MINUS the Tax owing on agency commission earned.

For Gross Remit statements, this amount is calculated as the Due amount PLUS the Tax owing on agency commissions earned.

Examples Of Net And Gross Remit

Let me give some examples of Net and Gross remit calculations here.

Example 1:

The agency collects $1000 for the Client. The money is paid to the agency, the commission is 30% and tax rate is 10%.

At the end of month, the Client owes the agency the $300 commission plus 10% tax on $300 which is a total of $330.

If this is a Net Remit statement, and as the agency received a check for $1000 they will need to send back $670 (that's $1000 - $330) to the Client while keeping the remaining $330.

If this is a Gross Remit statement, the agency will send back the whole $1000, and the Client is billed $330.

Example 2:

The agency collects $1000 for the Client. The money is paid to the Client, the commission is 30% and tax rate is 10%.

At the end of month, the Client owes the agency the $300 commission plus 10% tax on $300 which is a total of $330.

If this is a Net Remit statement, and as the Client received a check for $1000, the agency has no money due the Client, and instead the Client is billed the $330.

If this is a Gross Remit statement the agency sends nothing to the Client and the Client is billed $330.

Switching From Net To Gross Remit Or Vice Versa

If you need to change your method of remitting funds to your client, you will have to take a few things into consideration.

First, is your client current now and always current or are there outstanding amounts that your client owes you?

Second, have you already generated invoices for this client using one type of remittance that you now want to switch from?

Third, have you made any changes to your transactions for this client's debtors?

CURRENT

The simplest solution is possible if your client is current. Even if you have generated a few invoices, you can delete them, set the switch in the Client Settings as described above, and regenerate your invoices.

This will not work if you have made changes to your transactions for this client's debtors. In that case, you will have to use method B for non-current clients.

NON-CURRENT

A. If your client has outstanding amounts owing and a few invoices created already, you can still delete them, make the switch and regenerate the invoices. You will notice however, that the numbers will be different.

B. If you have generated many invoices for a non-current client, or have made changes to any transactions for this client's debtors, the best solution is to open the last invoice statement that you generated and change the numbers so that they look correct. Then set the switch in the Client Settings form as described above and generate this month's invoice. It should look correct and will continue to be accurate in the new method from now on.

Summary

You can remit funds in Collect! use Gross or Net remittance methods. Provided you use the correct statement, your results will be very satisfactory. If you must switch from one type of remittance to another, this works best if the client does not owe anything and you have only generated, at most, a few invoices.

See Also

- How To Setup Client Settings