There are five possible values available for the Method to Apply Payments field for each client (1-5). The Method to Apply Payments field along with the Apply Payments to Finance Charge field and the Receipt Allocation by Invoice option determines how payments are applied to accounts receivable.

The order in which finance charge is applied depends on whether the Apply Payments to Finance Charge field is configured as First or Last. It also depends on whether the payment is a regular payment (i.e., Type 1), fee payment (i.e., Type 2) or cost payment (i.e., Type 3 with a Transaction Type of Expense or Advance). We recommend using regular payments. Regular payments will apply to any amount due. Additional information regarding use of regular payments vs. fee and expense/advance payments can be found in Knowledge Base article R11297, Use Tabs3 Regular Payments Instead of Fee, Expense, and Advance Payments.

The text labels of the five methods changes depending on whether the client is set up to apply payments to finance charge first or last. By default, clients are set up without finance charge and the available selections for the Method to Apply Payments field will be displayed with the same default options as though the Apply to Finance Charge field is set to First.

Regular Payment and Apply Payments to Finance Charge = First

1 = Oldest Finance Charge, Oldest Advance, Oldest Expense, Oldest Fee
2 = All (Oldest Finance Charge, Oldest Advance, Oldest Expense), All Fees
3 = All (Oldest Finance Charge, Oldest Advance), All Expenses, All Fees
4 = All (Oldest Advance, Oldest Finance Charge), All Expenses, All Fees
5 = All Advances, All Expenses, All Finance Charge, All Fees

Regular Payment and Apply Payments to Finance Charge = Last

1 = Oldest Advance, Oldest Expense, Oldest Fee, Oldest Finance Charge
2 = All (Oldest Advance, Oldest Expense), All Fees, All Finance Charge
3, 4 or 5 = All Advances, All Expenses, All Fees, All Finance Charge

Fee, expense, and advance payments also apply to finance charge. When fee, expense, or advance payments are used, payments are applied as follows.

Fee Payment and Apply Payments to Finance Charge = First

1, 2, 3, 4 or 5 = Oldest Finance Charge, Oldest Fee

Expense Payment and Apply Payments to Finance Charge = First

1, 2, 3 or 4 = Oldest Finance Charge, Oldest Expense
5 = Oldest Expense, Oldest Finance Charge

Advance Payment and Apply Payments to Finance Charge = First

1, 2, or 3 = Oldest Finance Charge, Oldest Advance
4 or 5 = Oldest Advance, Oldest Finance Charge

Fee Payment and Apply Payments to Finance Charge = Last

1, 2, 3, 4 or 5 = All Fees, All Finance Charge

Expense Payment and Apply Payments to Finance Charge = Last

1, 2, 3, 4 or 5 = All Expenses, All Finance Charge

Advance Payment and Apply Payments to Finance Charge = Last

1, 2, 3, 4 or 5 = All Advances, All Finance Charge

The following five Methods to Apply Payments are used for regular payments when the Apply Payments to Finance Charge field is set to First.

1 - Oldest Finance Charge, Oldest Advance, Oldest Expense, Oldest Fee

This method indicates the payment is to apply to the oldest statement first in the specified order. After the payment has been applied to all of the oldest statement, it will then be applied to the next oldest statement in the same order. The payment will continue to be applied to the remaining statements, oldest first, in the order listed above until the payment is completely applied.

2 - All (Oldest Finance Charge, Oldest Advance, Oldest Expense), All Fees

This method indicates the payment is to apply to all finance charges, advances and expenses respectively on all statements. The payment will not apply to any fees until all finance charge, advances and expenses have been applied. In other words, the payment will be applied to the oldest statement's finance charge, then advances and then expenses will be applied, the next oldest statement's finance charge, advances and then expenses, etc. After all finance charge, advances and expenses have been applied to all statements, the payment will then be applied to the oldest statement's fees, the next oldest statement's fees, etc. until the payment is completely applied.

3 - All (Oldest Finance Charge, Oldest Advance), All Expenses, All Fees
This method indicates the payment is to apply to all finance charges and advances for the client before it will apply to any expenses or fees. In other words, the payment will be applied to the oldest statement's finance charge then advances, the next oldest statement's finance charge then advances, etc. Then, the payment will apply to all expenses for the client (i.e., the oldest statement's expenses, the next oldest statement's expenses, etc.). After all expenses have been applied, the payment will then be applied to all fees for the client (i.e., the oldest statement's fees, the next oldest statement's fees, etc.) until the payment is completely applied.

4 - All (Oldest Advance, Oldest Finance Charge), All Expenses, All Fees

This method indicates the payment is to apply to all advances and finance charges for the client before it will apply to any expenses or fees. In other words, the payment will be applied to the oldest statement's advances then finance charge, the next oldest statement's advances then finance charge, etc. Then, the payment will apply to all expenses for the client (i.e., the oldest statement's expenses, the next oldest statement's expenses, etc.). After all expenses have been applied, the payment will then be applied to all fees for the client (i.e., the oldest statement's fees, the next oldest statement's fees, etc.) until the payment is completely applied.

5 - All Advances, All Expenses, All Finance Charge, All Fees
This method indicates the payment is to apply to all advances first, then all expenses, then all finance charges and then all fees.

Three alternative Methods to Apply Payments are used for regular payments when a client is set up to assess a finance charge and the Apply Payments to Finance Charge field is set to Last.

1 - Oldest Advance, Oldest Expense, Oldest Fee, Oldest Finance Charge

This method indicates the payment is to apply to the oldest statement first in the specified order. After the payment has been applied to all of the oldest statement, it will then be applied to the next oldest statement in the same order. The payment will continue to be applied to the remaining statements, oldest first, in the order listed above until the payment is completely applied.

2 - All (Oldest Advance, Oldest Expense), All Fees, All Finance Charge

This method indicates the payment is to apply to all advances and expenses on all statements before it will apply to any fees or finance charge. In other words, the payment will be applied to the oldest statement's advances and expenses, the next oldest statement's advances and expenses, etc. After all advances and expenses have been applied, the payment will then be applied to the oldest statement's fees, the next oldest statement's fees, etc. until all fees have been applied. After all fees have been applied, the payment will then be applied to the oldest statement's finance charge, the next oldest statement's finance charge, etc., until the payment is completely applied.

3, 4, or 5 - All Advances, All Expenses, All Fees, All Finance Charge
This method indicates the payment is to apply to all advances first, then all expenses, then all fees and then all finance charges.

Note: When referring to the "oldest statement," Tabs3 uses the client ledger reference number as opposed to the statement date or statement number to determine the oldest statement. These three different orders will almost always be identical. Therefore, the oldest statement is the statement with the lowest reference number in the client ledger file. The reference number can be optionally included on the Client Ledger Report.

Note: When more than one payment is processed on a statement, Tabs3 applies the payments in the order they were entered (i.e., by reference number).

Note: If you want a payment to apply to a particular statement, you can enter the statement number in the Statement # field of the Payments program. The payment is applied in its entirety to the specified statement. If the amount of the payment exceeds the amount of the invoice, it will continue to apply using its normal application method. For example, a client with three outstanding invoices sends a payment specifically stating it applies to statement 2. However, if the payment amount exceeds the amount of statement 2, then the payment will begin to apply to statement 1.