INFOLINK UNIVERSITY COLLEGE DILLA CAMPUS

DEPARTMENT OF ACCOUNT & BUDGET SUPPORT LEVEL-IV

Unit Of Competence: -MANAGE OVERDUE CUSTOMER

ACCOUNTS

Module Title:-MANAGING OVERDUE CUSTOMER ACCOUNTS

Code: BUF ACB415 0812

TTLM Code: BUF ACB4M 15 0812 

BY TEREFE KASSA

LO1. Identify customers requiring collection activity

LO 2 Establish contact with customer and

attempt
Managing Overdue Customer AccountsPage 1
Lo 3 Debt Settlement: A Guide for Negotiation LG
Code: EIS BAW2 M07 LO3-LG-27 LG25: Identify and discuss
stamp duty tax
LG Code: EIS BAW2 M07 LO4-LG-28 LG25: Manage tax liability
LG Code: EIS BAW2 M07 LO5-LG-29

LO1. Identify customers requiring collection activity

1.1 Customer Needs Identification

Customer Needs Identification is the process of determining what and how
a customer wants a product to perform. Customer Needs are non-
technical, and they reflect the customers’ perception of the product, not
the actual design specifications, although frequently they are closely
related. This chapter will cover methods of Customer Needs Identification,
a case study, and some direct applications of identifying Customer Needs.
Exploration
Customer Needs Identification has two major goals:

1. To keep the product focused on customer needs

2. To identify not just the explicit needs of the customer, but also the
latent needs
These customer requirements should be independent of any particular
product or potential solution. After all, it’s only after identifying Customer
Needs that one can begin to meet them.

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So with that in mind, the goal is to find out precisely what the customer
wants. Here is a four-step method for identifying Customer Needs:

1. Gather raw data from customers

2. Interpret the data in terms of customer needs
3. Organize the needs
4. Reflect on the Process
1. Gathering Raw Data
Intuitively, the first step must be to gather data from the customers.
Without their input, it would be impossible to identify their needs.

There are three recommended ways to gather data, and there is one
common trap that usually provides deceptively shallow data. First, the
three robust methods for collecting information:

A. Interviews: Interviews are one-on-one meetings with potential

customers, usually 1-2 hours in length. Frequently they take place in
the customer’s own environment, as they are more comfortable there
and there is a chance to see a problem in action.
B. Focus groups: Focus groups are like expanded interviews. They are
about 2 hours long, and they involve about 8 to 12 customers. The
group is lead in a discussion by an interviewer. It is very common for
the group to be watched by some number of unseen observers who
take notes on the proceedings.
C. Observation: Seeing someone struggle with a problem is an easy way
to get a general understanding of the issue.

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These interviews and focus groups are the primary means of learning about
customers, so make sure to conduct interviews as effectively as possible.
Here are a few suggestions that will lead to successful interviews:

2. Interpreting Data
After the interviews it is usually necessary to translate the vague
statements of the customers into a useful list of needs.

So how, exactly, does one transform what the customer says into something
you can work with? Here is a useful process with several helpful
constraints and suggestions for expressing the data.

 Write the needs in terms of what the product has to do, not how it
might do it.
 Express the needs as specifically as the raw data
 Use positive phrasing
 Express the needs as an attribute of the product
 Avoid the words must and should
3. Organizing Needs
After interpreting the data, organize them. Group similar needs together,
prioritize them, etc. Decide what is truly important to the customer. Define
the “critical needs,” those needs which absolutely must be met before the
product can be considered successful.

I. Attractive Quality: when these product qualities are met they

provide satisfaction, but when they are not met they do not cause

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 dissatisfaction. For example, when a backpack has a separate
compartment for a laptop.
II. One-Dimensional Quality: when these qualities are met they
provide satisfaction, and when they are not met they create
dissatisfaction. For example, when the shoulder straps on a backpack
are padded, they provide comfort, but when not padded they are
painful.
III. Must-Be Quality: these product qualities are assumed to be met, and
they cause dissatisfaction when they are not met. Backpacks are
expected to be able to hold books.
IV. Indifferent Quality: these qualities are neither good nor bad, and
they do not increase nor decrease customer satisfaction when met or
not met.
V. Reverse Quality: The qualities cause either satisfaction or
dissatisfaction when met, but it is customer dependent. Some
customers really like the wealth of storage options these spaces
provide, and other customers actively dislike how excessive or
unmanageable those same spaces are.
4/ Reflect on the Process

The final step in the Customer Needs Identification process is to reflect on

what’s been done. Consider the statements that have been gathered and
study the interpretations. Try to evaluate how the process was executed.
Have all types of customers been interviewed? Do any customers require
follow-up interviews? Are any of the needs surprising?

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1.2 Types of customer needs

Customer needs can be classified on the basis of customers of the market

demographics. However, customer needs can be bifurcated into two verticals.

1. Product needs
Product requirements are associated with and around the product. If your product matches
your customer needs they become your potential buyers and vice-versa. The main
attributes of product needs can be: 

 Price – Customers generally set their budgets for any product purchase.
 Features – Customers look for features that would solve their problem and reliability in
functioning while using the product.

 Effectiveness – The product should be effective in streamlining the process to save time.

1.3 Identifying and Collecting Past Due Accounts Receivable Invoices

Identifying Past Due Invoices

Oracle reports and Discoverer queries may be used to identify which awards require follow-up
activity. However, the RF Past Due Invoice Report is the recommended tool for identifying
outstanding invoices that require follow-up with a sponsor. This report should be run at least
monthly or more frequently, if possible. The report includes the customer (sponsor) name, award
number, invoice amount, current balance due, as well as the following information:

 AR Invoice Number – 6-digit unique number assigned in the AR module to an invoice that is
approved and released, or the invoice number that is assigned
to an advance invoice created in the AR module.

 Invoice Date – Date the invoice was released in the Grants Management module, or the date
the advance invoice was created in the AR module.
Note: This field can be changed by the user when releasing the invoice.

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  Due Date – Due date of the invoice based on the relationship between the invoice date and
the billing terms of the award defined in the Award Management
screen. The table below provides an example of the relationship between the invoice date
and billing terms in determining when payment is due from a sponsor.

Invoice Date Billing Terms Due Date

10-JUN-04 IMMEDIATE 10-JUN-04

10-JUN-04 30 NET 10-JUL-04

10-JUN-04 60 NET 10-AUG-04

10-JUN-04 90 NET 10-SEP-04

 Days Past Due – The system-calculated number of days that the payment is past due at the
time that the report is run. As defined above, the payment
due date is based on the billing terms of the award and the invoice date.

1.4 Methods of Follow-up

Collection procedures may vary depending on the sponsor and/or campus procedures. However, it
is important that communication between the campus and the sponsor is continuous throughout
the follow-up process. Follow-up methods can be any one or combination of the following:

 Initial call – Verify that sponsor received invoice. If invoice has been received, determine
when payment is expected. If invoice has not been received,
verify that sponsor name and address are correct. If address is not correct, make the
appropriate changes in the RF Oracle business application and resend invoice. 

 Follow-up calls – Determine reason(s) for nonpayment of invoice and appropriate follow-up
action. Follow-up calls may require numerous attempts to
make contact via leaving messages or aggressive calling in order to make direct contact
with a person.

 Follow-up Letters – Send sponsor either a campus-specific letter or one of the RF Past Due
Invoice Letter.
It is best practice to use a combination of regular follow-up calls and written follow-up
(letters or e-mail.)

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1.5 How to Avoid Overdue Payments

Overdue payments could be a daunting endeavor for business owners due to factors that
often need utmost attention. The following are effective strategies to pay down overdue
payables.

1. Create an aged payables report

This strategy can improve your invoice management. Reports of ageing accounts payables give your
company the ability to forecast payments. You can utilise your invoice payments history to predict
when and how much you'll need to pay for specific accounts instead of waiting for invoices.

2. Track every payment due date

It's crucial for you to monitor all activities related to expense management, including all cash
outflows and due payments. Tracking every payment due allows you to avoid late or double

payments.

3. Re-negotiate payment terms

Communicate openly with your suppliers about your capacity to pay past due bills when things get
too tight. Re-negotiating terms to loosen up the payable crunch is a great way to relieve pressure
from your finances.

4. Set up reminders

While you may feel you can stay on top of payments and invoices without assistance, that's
not always the case. Running a business involves multiple functions and employees, which
is challenging for one person. You can easily handle payables and act towards improving

your accounts payable process by setting up reminders .

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5. Improve your AP procedures

Late payments may indicate inefficient processes in your AP management. You should take
the time to analyse your processes, identify the cause of delay and optimise your AP

workflow to reduce invoice processing time.

1.5 How to Prevent Overdue Payments from Spiraling Out of Control

Settle invoices immediately if cash flow permits

Don't wait for invoices to be overdue before processing them. Settling invoices upon receiving them
lets you organise and manage expenses efficiently, allocate funds to specific receivers, and get the
process started immediately.  However, you should only do so if you have enough cash to circulate. 

 Automate your AP process

Automating your accounts payable process can improve speed, accuracy, and quality. Eliminating
manual processing will help you prevent losing invoices, making double or late payments, and a
negative cash flow.

Here are four simple steps to follow in order to meet customer needs successfully.

 Identify – Follow customer needs analysis via surveys, interviews, focus groups, or social
listening.
 Distribute – Once identified the needs, you can distribute it across the right teams and
departments.
 Create – Tailor product features, create detailed content that speaks about customer needs.
 Collect – Obtain customer feedback regularly to learn how your efforts meet their
expectations.

LO 2 Establish contact with customer and attempt

to resolve outstanding payment matters
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Asking for a debt to be repaid is an uncomfortable but sometimes
necessary part of being a business owner. Usually, sending a friendly
reminder or giving a courtesy call is enough to prompt the customer to
pay you. But if the customer isn't responsive, you might have to escalate
the situation.

Recovering overdue payments

Use the following steps as a guide to recovering an overdue payment

from a customer. The process starts with friendly reminders and
escalates gradually. Following each step can help you try to preserve
your business relationship as much as possible.

Preventing customer debt

Consider the following tips to help prevent customers owing you money.

Outline your expectations to new customers

It's always good practice to clearly outline your expected terms of trade
and payment at the beginning of a customer relationship.

Our new customer engagement template includes a terms of trade

paragraph that you can use to include:

 invoice dates

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  any additional charges for overdue payments
 debt collection procedures

Invoice customers efficiently

To encourage prompt payment you can:

 send invoices out as soon as a job is complete, or on a regular date

 clearly state all payment options and information on your invoices
or contracts
 keep in regular contact with your customers
 offer a small percentage discount for early payment

If your sales staff are rewarded for sales, sometimes they might 'bend the
rules' to book another. Make it a policy that you only pay out rewards
once the money has been collected rather than when the sale is made.

Opt for signatories to the Supplier payment code

If selling to another business, check to see if it has signed the Supplier

payment code.

Business Council of Australia (BCA) and the Victorian Government

developed the Australian supplier payment code to help businesses
commit to fast payment to suppliers, improve cash flow and strengthen
the economy.

By voluntarily signing up to the code, businesses agree to:

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  pay their suppliers promptly and on-time (within 30 days)
 cooperate with suppliers
 help suppliers to improve payment processes
 engage in fair and efficient dispute resolution

My customers are affected by the global slowdown and can’t pay on time. How do I
maintain positive cash flow?

How do I ensure the Accounts Receivable

(AR) process is ready to survive this pandemic and thrive after it?

These are some of the questions that businesses face. The answer lies both in the “here and
now” and in the “future-forward” thinking and actions. What businesses must realize is that
a reactive approach can help them survive, and hence react they must. But parallelly, they
also need to have a proactive action plan to ensure that they thrive.

Accounts Receivable management is all about ensuring customers pay their invoices on
time, with least amount of effort from your end – thereby improving your cash flow while
keeping the cost of collections low. And of course without sacrificing your customer’s
experience.

At a more granular level, a measure to see how your AR is doing can be Accounts
Receivable Turnover Ratio. Receivables turnover ratio is calculated as:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Net credit sales constitute the revenue generated from sales where cash is to be collected
later, minus any sales returns. ‘Net credit sales’ are used instead of net sales because cash
sales don’t lead to receivables. Credit sales lead to receivables.

A high Accounts Receivable Turnover Ratio indicates efficiency in the company’s collection
of receivables. It may also mean that the business operates more on cash sales than credit
sales.

Managing Customers
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These are times of crisis for your customers too, so being empathetic is important across all
your touchpoints and decisions. It is advisable to segregate your customer-base on the
basis of likeliness to pay. Transactional (eg invoices, payments) and the client behavioral
data (delays, broken payment promises, etc) can come in handy. This will help in
prioritizing the collection efforts and designing your communication plan.

Incentivize Upfront Payments

In times like these, you want that sweet, sweet cash to hit your accounts as soon as
possible. If you can afford it, offer discounts on early or upfront payments. In certain cases,
even deep discounts can be a better alternative to receiving no payment at all. This is a win-
win situation for both you and your customers. A word of caution though: keep tabs on the
impact that the discounts have on your bottom-line. 

Create a Payment Plan

Flexible payment terms are great for retaining customers. Net D is a payment term that
refers to the period (10, 15, 30, 45 or 60 days) within which a customer has to pay for their
outstanding invoice (net amount) for the service/product received. This helps your
customers know how long they have to pay for your invoice, among the umpteen other bills
they receive every month. And for you, it serves as a gentle reminder and helps you walk
the thin line between polite requests and badgering. 

Monitor your Customers

Customer responses are a goldmine of insights. Are your customers responding to your
communication? What are the reasons for the delays? Are you asking for the promise-to-
pay dates? Ensure that they are getting recorded at a customer level and are getting
analyzed regularly. This analysis can be useful for reworking your credit policy.

It was a quarterly or maybe an annual affair to check on the customer credit before. But in
these volatile times, you constantly need to be aware of the credit profile of your
customers. Any changes in your credit profile should trigger your next step.

Resolve Disputes Rapidly

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From the silly to the serious, from timely to the untimely, from genuine to sometimes
ingenuine, disputes are one of the top reasons for non-payments and those dreaded Days
sales outstanding (DSOs) going up. Monitor disputes, understand the reasons behind them
and try to resolve them as soon as possible. Remember, a delayed resolution will only
result in further delays!

Improve Operational Rigour

Remote working is only going to add to the challenges for your receivables! Clear
communication and expectations setting is crucial for your remote teams to do what they
do best –  strengthen your relationship with customers. 

Customer Payment Process 

This will take some effort to come by. But knowing this will pay for itself (pun intended!). If
you don’t have this information, there are strong chances that you are baking in delays in
your payment cycle. This is especially true if you have large corporates as your customers
and/or have an offline payment setup. Track whether all the required documents have
been submitted to the customer’s payables teams – and within the right timelines.

Leveraging Tools and Technology

DSOs have a way to creep up and give nasty surprises. It’s time for you to evaluate some
technology interventions that will help your team save time and make their lives easier.

Automation

Start with automating basic customer communication. Remote or not, you don’t want to be
late while expecting the customer to pay you on time. Evaluate specific AR management
tools.

Integration with Online Payment Gateways

This is the need of the hour. Accelerate payments by 20-30% by enabling your customers
to pay through Payment Gateways (PG) – right out of your reminder emails. B2B PGs can
operate on flat costs, irrespective of the amounts transferred. Incentivize your customers to
pay online.

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AR Analytics and Dashboards
Look at your Accounts Receivable trends to identify leading indicators and recurring
patterns. Set up dashboards for your AR analytics for easy tracking. Your discipline and
rigor in creating the right KPIs and understanding the trends will be the difference between
a healthy and a not-so-healthy cash-flow!

The process of managing money-in, is something that has been such a ‘day-to-day’ and
‘done to death’ task, that the challenges it has are hidden in plain sight. External
uncertainty demands that we change that. It’s time to evaluate some of the interventions
and technologies that can help you augment what you already have – and then take it to the
next level. Since the well being – if not the survival itself – of the business, is at stake.

Lo 3 Debt Settlement: A Guide for Negotiation

3.1 How Debt Settlement Works

Debt settlement is an agreement between a lender and a borrower, typically for a large,
one-time payment toward an existing balance in return for the forgiveness of the remaining

debt. It is often used when a borrower cannot keep up with their unsecured debts.

With credit card debt, for example, you might be able to cut your balance by up to
50%.1 For example, if you owe $20,000 on a credit card, and can scrape up $10,000 in cash,
you might be able to settle for that amount.

Lenders are not legally obligated to lower your outstanding debt, but because they want to
protect their bottom line, they may agree to a debt settlement to avoid taking an even
greater loss.
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The Risks of Debt Settlement

Although a debt settlement can take some of the pressure off you, there are risks and
downsides to consider.

First, a debt settlement will affect your credit score. That will make it more difficult for you
to get credit or good interest rates in the future. A debt settlement will typically remain on
your credit report for seven years and you cannot remove it before then. On the plus side,
settling a debt will have less impact on your score than failing to pay completely.4

Finally, when you settle a debt with a credit card company, you risk having that account
closed once the settlement is complete. So you could potentially have no credit line and no
ability to use a credit card to make purchases.

Debt Negotiation Tips

If you're negotiating on your own, you'll want to explain your financial situation to your
lender, and the sooner, the better. If your lender understands that you cannot pay your
bills, and why, it will be more likely to work with you on a solution.

You should also avoid spending with a credit card that has a balance you want to settle.
Lenders are less likely to settle if your credit card statement includes, for example, several
charges for luxury goods. To improve your chance of success negotiating with a credit card
company, try to avoid using that card for three to six months before you request a
settlement.

What Percentage Should You Offer to Settle Debt?

Consider starting debt settlement negotiations by offering to pay a lump sum of 25% or
30% of your outstanding balance in exchange for debt forgiveness. However, expect the

creditor to counter with a request for a greater amount.6

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The Bottom Line

You can potentially lower your credit card debt by negotiating with a lender either on your
own or with a debt settlement company, but keep in mind that a creditor is not legally
obligated to accept less than what you owe.8

If you cannot lower your total debt obligations through a settlement, you can try other
strategies to help reduce the burden. For example, you may want to ask your credit card
company if it can lower your card's annual percentage rate (APR) or provide an alternative
payment plan that works for you. You can also consider debt consolidation through an
additional loan that results in lower monthly payments.

3.2 How to Negotiate With Your Creditors and Settle Your Debts
David Haynes is a full-time attorney experienced in basic bankruptcy concepts, as well as
secured transactions, liens, and lawsuits in bankruptcy court. He currently serves as the
senior attorney and privacy officer at the Office of Systems Integration in Sacramento. Over
the course of the last decade, he has written about complex bankruptcy topics for various
publications, including The Balance and the Loyola Los Angeles Entertainment Law Review.
He also provides legal advice relating to complex, sensitive, and high-profile IT contracts.

Make Initial Contact

Before you talk with a collector, it is best to know your rights.

Collectors are bound by the Fair Debt Collection Practices Act and many

1
similar state statutes.  If you know your rights and understand the process before you
start, you'll be better able to negotiate.

If you are very far behind on your monthly payments, then a creditor or collection company
is probably already calling. If so, the easiest way to start negotiations is to inform the caller
that you wish to settle the debt.

Managing Overdue Customer AccountsPage 17

Set up a time with a creditor or collector to call and discuss a settlement. If the creditor has
not been calling you, you can initiate contact. 

When you talk with the creditor: 

 Act confidently and decisively.

 Ask for clarification if you don't understand something.
 Don't agree to any terms unless you completely understand what is expected from
you.
 Don't agree to anything until you see it in writing.

Have a Strategy

The general strategy of negotiating with your creditors is fairly straightforward: Pay what
you can reasonably afford on the outstanding debt that you owe. This, of course, must be
balanced with how much a creditor is willing to accept. Generally, creditors will prefer a

lump-sum payment over regular payments.

Start Your Offers Low

You have nothing to lose (and maybe a lot to gain) by starting low. This means that you
should certainly not make the highest offer you can afford at the outset.

A creditor will likely counter your offer with a higher amount. If you start low, this will
make it more likely that the creditor's counter-offer will be closer to the range you can pay.

Keep a Professional Tone

It is essential to maintain a positive atmosphere and tone when dealing with creditors.
Although a bill collector may be unpleasant, if you are professional and positive, you will be
more likely to reach a settlement.

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People are more willing to work with those who have a good attitude and treat others well.
This may be difficult, but it is important to achieve the goal of debt settlement.

Not every creditor will respond positively, but even if only some of your creditors agree to
a settlement, this still gives you much more wiggle room for repaying the others.

Get a Written Settlement Agreement

A settlement agreement protects you if you pay the creditor, and the creditor changes its
mind and demands payment on the remaining amount. A settlement agreement will
absolutely be necessary if a creditor has already sued you.

2
The settlement agreement should always be in writing.  Although it is not necessarily cost-
effective to involve an attorney, it is sometimes in your best interests to do so. 

Effects of Debt Settlement

Debt settlement can have the tremendous positive effect of allowing you to avoid filing for
bankruptcy. However, the downsides include having to work with multiple creditors and
no guarantees of success.

Keep in mind that a debt settlement will be reported on your credit report and may lower
3
your credit score.  However, the debt is already on your credit report, bringing your score
down. A debt settlement gives you the opportunity to start rebuilding it.

Get a Written Settlement Agreement

A settlement agreement protects you if you pay the creditor, and the creditor changes its
mind and demands payment on the remaining amount. A settlement agreement will
absolutely be necessary if a creditor has already sued you.

2
The settlement agreement should always be in writing.  Although it is not necessarily cost-
effective to involve an attorney, it is sometimes in your best interests to do so. 

Managing Overdue Customer AccountsPage 19

L.O 4 Agreement is monitored to ensure adherence

In many international agreements, from the Kyoto Protocol on greenhouse gas emissions to
the 1993 Arusha Accords on peace in Rwanda, there are strong incentives to not comply
with the agreement. (The Prisoner's Dilemma is a good metaphor for these situations.)
There are several ways of overcoming these problems. One is to use third parties, who help
ensure successful negotiations and can later help monitor and verify compliance with an
agreement. This essay focuses on monitoring agreements, and methods that help ensure
compliance with an agreement.

What is monitoring?
Peace agreements can be lethal instruments when they are poorly designed and poorly
enforced. For example, the 1994 Tutsi genocide in Rwanda occurred after the failure of the
Arusha Accords, partially because of an inability to monitor the terms of the agreement.[1]

One key to the ability to enforce a peace agreement is the design of the agreement itself.
One cannot separate the terms of peace from the realization of those terms, so provisions
for monitoring peace agreements are quite important.[2] According to
Boulden, monitoring should be divided into two distinct areas:[3]

1. monitoring, which can be either highly generalized or highly directed actions to

gather information, and
2. verification, "the process by which compliance of the parties to the terms of [peace]
accords is judged."

Confusingly, according to Boulden, both monitoring and verification are sub-definitions of

monitoring. A third sub-definition of monitoring, as information gathering, will be referred
to as observation.

We can think of monitoring in terms of increasing levels of involvement:

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  At the lowest level, observation, we have pure passive watching and inspection. At
this level, monitors lack the mandate to judge the actions of the parties being
monitored; they simply observe what is going on.
 As involvement increases, monitors will begin to judge, to verify compliance with the
treaty. In this situation, parties may not only observe actions in relation to the
agreement, but also judge and report violations. This is verification.
 The last level, one that Boulden does not refer to, is enforcement. At this level,
monitoring of an agreement involves not merely observing and compliance with the
treaty, but also enforcing the terms of the agreement through positive and negative
incentives.
In this context, how is agreement monitoring actually realized? We can look at types of
involvement, but we should also explore the specific monitoring provisions that can
stabilize an agreement.

Why do we need it?

Monitoring and verification can be understood in multiple contexts. At the international
level, monitoring can apply to everything from environmental and trade agreements to
peace agreements. However, provisions for monitoring will be remarkably similar from
one agreement to another.

At all levels of involvement, one of the chief strengths of monitors -- be they third-parties or
otherwise -- is to increase the amount of information shared among the parties. It is
generally thought that rational people, sharing information, will be better able to agree and
coordinate actions than those in information-poor environments.[4] After violent conflicts,
when trust and information are scarce, it is easier for mediators to increase trust by
increasing information flow, than vice versa.

How is monitoring done?

There are no hard and fast rules for designing monitoring agreements. If one looks at
environmental agreements, one will find a plethora of methods and rules for monitoring,

Managing Overdue Customer AccountsPage 21

verification, and enforcement, but it is not clear that these rules apply to peace agreements or trade
agreements. Likewise, looking at peace agreements does not immediately inform an
environmentalist about methods of monitoring agreements. If one is looking for generalized rules
for how to monitor, verify, or enforce agreements, it is difficult to find a comprehensive and
generalized source.

It is helpful to compare issue areas, and to generalize some rules of thumb for designing monitoring
procedures. Table 1 compares rules for monitoring environmental standards, as laid out by the
Canadian Council of Ministers of the Environment, to rules laid out by the U.N. Peacekeeping
Operations for Disarmament, Demobilization, and Reintegration. While this comparison is far from
comprehensive, it provides good examples of tasks that might be included in monitoring
procedures.

Methods of Payment

To succeed in today’s global marketplace and win sales against foreign competitors, exporters must
offer their customers attractive sales terms supported by the appropriate payment methods.
Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate
payment method must be chosen carefully to minimize the payment risk while also accommodating
the needs of the buyer. As shown in figure 1, there are five primary methods of payment for
international transactions. During or before contract negotiations, you should consider which
method in the figure is mutually desirable for you and your customer.

Cash-in-Advance

With cash-in-advance payment terms, an exporter can avoid credit risk because payment is
received before the ownership of the goods is transferred. For international sales, wire transfers
and credit cards are the most commonly used cash-in-advance options available to exporters. With
the advancement of the Internet, escrow services are becoming another cash-in-advance option for
small export transactions. However, requiring payment in advance is the least attractive option for
the buyer, because it creates unfavorable cash flow. Foreign buyers are also concerned that the
goods may not be sent if payment is made in advance. Thus, exporters who insist on this payment
method as their sole manner of doing business may lose to competitors who offer more attractive
payment terms. Learn more about Cash-in-Advance.

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Letters of Credit

Letters of credit (LCs) are one of the most secure instruments available to international traders. An
LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter,
provided that the terms and conditions stated in the LC have been met, as verified through the
presentation of all required documents. The buyer establishes credit and pays his or her bank to
render this service.

Documentary Collections

A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of the
payment for a sale to its bank (remitting bank), which sends the documents that its buyer needs to
the importer’s bank (collecting bank), with instructions to release the documents to the buyer for
payment. Funds are received from the importer and remitted to the exporter through the banks
involved in the collection in exchange for those documents..

Open Account

An open account transaction is a sale where the goods are shipped and delivered before payment is
due, which in international sales is typically in 30, 60 or 90 days. Obviously, this is one of the most
advantageous options to the importer in terms of cash flow and cost, but it is consequently one of
the highest risk options for an exporter. Because of intense competition in export markets, foreign
buyers often press exporters for open account terms since the extension of credit by the seller to
the buyer is more common abroad. Therefore, exporters who are reluctant to extend credit may
lose a sale to their competitors.

Consignment

Consignment in international trade is a variation of open account in which payment is sent to the
exporter only after the goods have been sold by the foreign distributor to the end customer. An
international consignment transaction is based on a contractual arrangement in which the foreign
distributor receives, manages, and sells the goods for the exporter who retains title to the goods
until they are sold. Clearly, exporting on consignment is very risky as the exporter is not guaranteed
any payment and its goods are in a foreign country in the hands of an independent distributor or

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agent. Consignment helps exporters become more competitive on the basis of better availability
and faster delivery of goods.

4.2 Breach of employment contract

Both employers and employees can be in breach of a contract of employment, so it's
important to know what this is and what you should do if either you or your
employer breaches your contract.

A. What a 'breach of contract' is

A contract of employment is a legally binding agreement between you and your employer.
A breach of that contract happens when either you or your employer breaks one of the
terms, for example your employer doesn't pay your wages, or you don't work the agreed
hours. Not all the terms of a contract are written down. A breach may be of a verbally
agreed term, a written term, or an 'implied' term of a contract.

B. Employment contracts

Your pay has special additional protection and in some situations your employer may be
prevented from taking money out of your pay even if this wouldn't be breaching the
contract.

Breach of contract by your employer

If you think there's been a breach of contract, check the terms of your contract to make
sure. If there has, you should try to sort out the problem directly with your employer first
of all.

 How to resolve a problem at work

C. Mediation

Before taking legal action, you are required to try other ways to sort things out. For
example, you might try mediation through the Labour Relations Agency.

 Workplace disputes

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 D. Legal action

If you can't sort the problem out with your employer, you can decide to take legal action.
Think carefully before taking any legal action against your employer. Ask yourself what you
want to achieve and how much it will cost. Remember that you'll only get compensation
(called 'damages') if you can prove real financial loss, if for example, your employer doesn't
pay your wages. There's no compensation for distress or hurt feelings.

If you do decide to take legal action, it can either be through an Industrial Tribunal or
through a civil court.

E. Breach of contract by an employee

If you breach your contract, your employer should try to settle the matter with you
informally, but they can sue you for damages in the same way you can sue them.

Your employer would normally use a county court for a breach of contract claim. The only
way your employer would be able to make an application to an Industrial Tribunal is in
response to a breach of contract claim that you have made.

Damages are only awarded for financial loss, if you don't give enough notice for example.
They might be for the extra cost of hiring temporary staff to do your work, or for lost
revenue.

You would still have the right to wages you earned before you left, plus pay for untaken
statutory holiday. The most common breaches of contract by an employee are when

 you quit without giving (or working) proper notice

 you go to work for a competitor when your contract doesn't allow it

F. Common examples of breaches of contract

Most issues about breaches of contract can be answered by checking the terms of your
contract. You will find some common ones here.

If an employer docks your pay for being persistently late

You won't necessarily get paid for time that you're not at work but your employer should
be careful about imposing extra penalties on top of this. If there's nothing in your contract
that allows your employer to do so, they must pay you what you've earned and then decide
whether to sue for any money they've lost because of your lateness.

 Employment contracts

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Some contracts allow the employer to make changes. If yours doesn't, you and your
employer must agree any change. Making changes without agreement is a breach of
contract.

4.3 What Is an Outstanding Check?

An outstanding check is a check payment that is written by someone but has not been cashed
or deposited by the payee. The payor is the entity who writes the check, while the payee is the
person or institution to whom it is written. An outstanding check also refers to a check that has
been presented to the bank but is still in the bank’s check-clearing cycle.

1. How Outstanding Checks Work

One of the ways of making payment for a transaction is by check. A check is a financial
instrument that authorizes a bank to transfer funds from the payor’s account to the payee’s
account. When the payee deposits the check at a bank, it requests the funds from the payor’s
bank, which, in turn, withdraws the amount from the payor’s account and transfers it to the
payee’s bank. When the bank receives the full amount requested, it deposits it into the payee’s
account.

2. Risks of Outstanding Checks

Outstanding checks aren't necessarily inherently bad; however, there are some risks and
downsides to have checks linger.

An overdraft occurs when the account holder who wrote a check that is still pending does not
have enough money in their account to cover the amount of the check when it is eventually
submitted for payment. This can result in the account becoming overdrawn.

Accounting inconsistencies may arise if outstanding checks are not reported and tracked in the
appropriate manner. Because of this, keeping correct financial records can be difficult, and it
may lead to problems during audits or when reconciling finances. For example, payments may
show as being paid but if the cash has not yet been debited from the account, there may be
inconsistencies worth reconciling.

3. Benefits of Outstanding Checks

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There are actually some benefits to have checks outstanding as well, though. Writing checks
makes it possible for organizations and individuals to make payments without requiring
instantaneous cash or electronic transactions to be completed. Checks that linger only buy the
company more time to gather up enough resources for payment to clear if more time is
needed.

4. How to Avoid Outstanding Checks

Forgotten outstanding checks are a common source of bank overdrafts. One way to avoid this
occurrence is to maintain a balanced checkbook. This can help prevent any unnecessary NSFs
if the payee decides to cash the check at a later date.

You can also call or write to remind the payee that the check is outstanding. This may
encourage them to deposit or cash the check. If they haven't received the payment, this may
nudge them to notify you to reissue the check.

5. Outstanding Business Checks

When a business writes a check, it deducts the amount from the appropriate general ledger
cash account. If the funds have not been withdrawn or cashed by the payee, the company’s
bank account will be overstated and have a larger balance than the general ledger entry.

6. Communicating Outstanding Checks to Payee

As businesses have to abide by the unclaimed property laws, any checks that have been
outstanding for a long time must be remitted to the state as unclaimed property. As such, there
is no incentive to wish for an outstanding check to permanently never be cashed as the
payment is subsequently owed to the government for holding.

7. The Bottom Line

Outstanding checks are checks that have been issued but not yet presented for payment or
cleared by the bank. They represent pending transactions where the funds have not yet been
deducted from the issuer's account.

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