As a rule, Automatic Payments to Firm apply only to current charges being billed (i.e., work-in-process, credits, sales tax, and finance charge). The Previous Balance is only taken into consideration when there are credit transactions on the statement, or if all or a portion of the Previous Balance has a credit balance.

Credit Transactions Apply to Previous Balance

When determining the amount of an automatic client funds payment, if there is a credit transaction on a statement, the credit applies first to the previous balance before it applies to the current work-in-process. However the Total Current Work figure on the statement includes the credit transaction. This presents a situation where the automatic client funds payment may be greater than the Total Current Work.

In the following example, the Total Current Work is $200.00. You might expect the automatic client funds payment to be $200.00 as well; but it is actually $300. This is because the $100 fee credit is applied to the previous balance before the automatic payment amount is determined.

Previous Balance                             $500.00

                          Fees
Office Consultation                           300.00
                                              ------
For Current Services Rendered                 300.00

Fee Credit                                   -100.00
                                              ------
Total Credits for Fees                       -100.00

Total Current Work                            200.00

                        Payments
Payment                                      -300.00

Balance Due                                  $400.00
                                             =======

                       Client Funds
Initial Deposit                             2,000.00
Fee Payment                                  -300.00
                                           ---------
        Ending Client Funds Balance        $1,700.00

Furthermore, the credit applies only to the appropriate portion of the previous balance. If the previous balance in the above example consisted solely of billed expenses (i.e., no billed fees), then the automatic client funds fee payment would be $200 because the previous balance had no fees due that the fee credit could apply to.

The Accounts Receivable by Invoice Report is the best report for determining the Previous Balance breakdown. It is important to break down sales tax because a non-taxable credit cannot apply to a previous balance tax.

Sections are Calculated Separately &
Credit Balance Sections Will Not Generate a Corresponding Automatic Payment

When dealing with client funds payments that are set up as Automatic All, Tabs3 calculates the required amount for each individual section (i.e., fees, expenses and advances) before adding the sections together to determine the automatic payment. When there are credit transactions, it is possible that the Total Current Work will be less than the automatic client funds payment.

In the following example, there is no previous balance. The Total Current Work is $425.00. You might expect the automatic client funds payment to be $425.00 as well; but it is actually $500.00. This is because the total expenses is $-75.00. Whenever the total amount in an individual section has a credit balance (i.e., is less than 0.00), no automatic payment is generated for that section.

                          Fees
Document Preparation                          500.00
                                              ------
For Current Services Rendered                 500.00

                        Expenses
Photocopy Charges                              25.00
                                               -----
Total Expenses                                 25.00

Expense Credit                               -100.00
                                              ------
Total Credits for Expenses                   -100.00

Total Current Work                            425.00

                        Payments
Payment                                      -500.00

Balance Due                                   -75.00
                                             =======

                      Client Funds
Initial Deposit                             2,000.00
Payment                                      -500.00
                                           ---------
        Ending Client Funds Balance        $1,500.00

If the client was set up for an automatic expense payment, no automatic payment would be generated at all. If there was a previous balance consisting of $100 or more of expenses, then the expense credit would apply to the previous balance and an automatic all payment would be $525.00.

Current Work Applies to Credit Portion of Previous Balance

Normally client funds payments are unaffected by the previous balance. However, if a client has a credit balance (i.e., a negative previous balance) or any portion of the previous balance has a credit balance, then any current work on the statement is applied to the credit portion of the previous balance before the amount of the automatic client funds payment is determined.

Note: Keep in mind that when dealing with previous balance amounts, the total previous balance does not have to be a negative amount. For example, a $100.00 previous balance may consist of $175.00 past due in fees and a $-75.00 credit balance in expenses. Or, a $-30.00 credit balance may consist of a $-70.00 fee credit balance and a $40.00 advances due amount. Only the credit portion of the previous balance is used when determining automatic payment amounts. Furthermore, the type of balance must also be taken into account (e.g., you cannot apply a fee credit to an expense balance due). The Accounts Receivable by Invoice Report is the best report for determining the Previous Balance breakdown because this report breaks down sales tax. It is important to recognize sales tax as its own type of balance. For example, a $-90.00 credit balance, may consist of $-100 fee credit and $10 fee sales tax.

In the following example, the Total Current Work is $300.00. You might expect the automatic fee payment to also be $300.00, but it is only $100.00. This is because the current work applies to the credit previous balance. 

Previous Balance                            $-200.00

                          Fees
Office Consultation                           300.00
                                              ------
For Current Services Rendered                 300.00

Total Current Work                            300.00

                        Payments
Payment                                      -100.00

Balance Due                                    $0.00
                                               =====

                      Client Funds
Initial Deposit                             2,000.00
Fee Payment                                  -100.00
                                           ---------
        Ending Client Funds Balance        $1,900.00

If the credit balance in the above example was solely for expenses, then the current fees would not have been applied to the credit balance and the automatic payment would be for $300.00.

Note: When a client funds automatic payment is calculated for a client which is set up for Receipt Allocation by Invoice, the due amounts are tracked by record type. The program will determine how all credits will apply based on specific record type. If there are credits remaining, it will take these into consideration, regardless of the record type, in order to determine the amount of the Client Funds payment. It is important to note that the program is using this method only for the purposes of calculating the amount of the automatic payment.