Collection Letters: All that you need to know

I'm happy to be back to my writing space here on LinkedIn after a short work break.

In this blog, I will explain more about the collection letters on Dynamics 365 Finance.

So, let's start by diving deep into the important part of the Credit and Collection Module of Microsoft Dynamics 365 Finance.

What are Collection Letters?

Collection letters?are formal communications sent to customers with overdue invoices. They serve as reminders to settle outstanding balances promptly. They are also called as Dunnying letters/Dodging letters. These letters follow a predefined sequence, escalating urgency if payments remain unpaid. By automating this process, businesses can streamline their accounts receivable management.

Collection letters in Dynamics 365 F&SCM work sequentially, meaning the 2nd collection letter can't be created/posted/printed for a customer unless the 1st collection letter has already been posted/printed for him.

Dynamics 365 offers sequences containing up to 5 collection letters.

Importance of Collection Letters:

1. Prompt Payment: Collection letters prompt customers to pay their outstanding invoices promptly, improving cash flow.
2. Customer Relations: Well-crafted letters maintain positive customer relationships while emphasizing the importance of timely payments.
3. Automation Efficiency: Automating collection letters reduces manual effort and ensures consistency in communication.

Dynamics 365 F&SCM Offerings for Collection Letters:

• Generate, Print, and send the collection letters
• Create various types of collection letter sequences
• Associate a sequence to Customer Groups/Posting Profiles
• Add charges or interests to customer balance
• Set up a minimum overdue balance to enable letter generation
• Block Customer Invoicing

Let's Set it up

1. Define/Create a Collection Letter Sequence

Collection Letter Sequence is setting up the order to send the reminders. It is on the collection letter sequence form where we can define the parameters of how many collection letters need to be created, when should a collection letter be sent, collection fees/charges that need to be levied and terms of payment linked to it, etc.

Path - Credit and collections>Collection letter>Set up collection letter sequence.

We can have multiple Collection letter sequences with multiple collection letters in each.

• Main Account: This field is used to select the revenue account to post the fee that will be charged for late/non-payment of dues on time.
• Fees in currency: A fixed amount can be automatically charged to the customer's balance when posting a collection letter. Then, the amount and currency must be filled in, and the corresponding main account must be charged with this fee.
• Minimum overdue balance: Setting up a minimum amount for the overdue transactions is possible. In that case, the letters will be generated and sent to the customers only if the outstanding amount exceeds the mentioned amount.
• Days: A field to record the grace period that can be entered as a number of days: the collection letters will then be generated and sent to the customer at the following date : [invoice due date OR posting date of previous collection letter – + grace period in days].
• Block: Select this box to stop the customer from further deliveries and invoicing after posting the corresponding collection letter.
• Terms Of Payment: Filed is used to record the terms of payment for the fee that will be charged while posting the collection letter, if any.
• Notes: This field records the generic message that needs to be printed on the collection letter, along with the list of outstanding invoice lines.

Note:
<> The grace period for collection letter 1 is relative to the due date on the invoice.
<> The grace period for collection letters 2 and higher is relative to the date that the previous collection letter is posted or printed, depending on the selection in the Update collection letter code field in the Accounts receivable parameters page.        

Once created, the collection Letter Sequence needs to be mapped to the posting profile. Without mapping it to a posting profile, the system will not be able to create any collection letters.

2. Set up a collection letter sequence on the posting profile

• Go to Credit and Collections> Setup > Customer posting profiles.
• You can expand the Table Restrictions tab to enable the processing of collection letters. Only the collection letters will be created for the posting profile if this field is set to Yes.
• Select a collection letter sequence from the drop-down list under the Setup Fast tab. Leave the field blank if you do not want to generate collection letters for transactions using this posting profile.
• When various posting profiles exist, it becomes necessary to set up the collection letter sequence on all profiles, which will require this functionality.

3. Credit and Collections Parameters

Two important points that need to be considered here are:

• Update Collection Letter code: This option defines when the next collection letter should be created, i.e. when collection letter two will be created, on posting or on printing of collection letter 1.
• Create Collection letter per: This option defines the creation rules of the collection letters. Would you want the collection letter per Invoice or Customer?

And we are set to process our 1st collection letter...

Process collection letters - Create, Print, Post & Send

This can be done in Two simple steps:

1. Create
2. Review - Print/Post/Send

Create collection letters

• Go to Credit and Collections> Collection letter > Create collection letters.

• The system will pop up with this parameter window, select the appropriate options, and click on Okay to create the collection letters for users to review.
• Select the transaction types for which you will collect letters. All the open transactions for these types will be included in the calculation.
• The "Collection Letter" field will be prefilled and greyed out as it is fixed at the Credit and collection parameters form itself.
• You can select a posting profile if you change.d Use posting profile from to Select. There are two posting profile options:Account – Use the posting profile assigned to the customer account for each interest note.Select – Use the posting profile that you select in the Posting profile field.
• Use the "Records to Include" section to filter out the collection letter creation process at the Customer or customer Group levels.

The system will start the creation process basis the options selected in the parameters form. Once created, the system will send out a notification under the Action Center as below:

Once you click on Message details, you can find the list of collection letters created for further processing:

Review collection letters (Print/Send/Post)

• Credit and Collections module > Collection Letter > Review and Process Collection Letters.

• This screen lists all collection letters generated for past-due customers meeting the potential criteria entered. By default, all letters appear, whichever their status might be (Created, Posted, Canceled).
• In order to display only the latest letters just generated, filter on the status column for "Created".
• In order to display the layout of the letter that will be sent to the customer, click "Print > Collection letter note" at the top of the screen.
• Once you click Print, the Printed column value will change from No to Yes once you click Print.
• The posting process is systematically required, even when no fees are charged to the customers along with their collection letters.
• This is the way the system can identify whether a customer has already been through the previous collection letters process (or not).
• The status of the collection letter shows cancelled in case the user manually cancels it or if the user runs the creation process without posting the 1st collection letter. The number of the collection letter will remain the same until it is not posted; it will just recreate the letter again the second time when the creation process is run.
• The Fees that we would have configured on any of the collection letter sequences will be posted into the system only when the collection letter is posted; till that time, it will just show the value but not create any financial entry into the system.
• The voucher button at the top will be enabled only when any posted collection letters have any fees posted.

That's how collection letters/dunning letters can be set up, created, printed, and posted in the system.

I hope this is helpful to you at some point in time.

Do share it further if you feel this can be useful for someone.

Happy Learning

Nandish Kothari ????