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In traditional billing systems, a client's account is determined to be paid or unpaid based on its debtor balance alone. ContactsLaw provides more granular control over how incoming funds are allocated to bill items. Receipt allocation is the process by which funds are distributed across items on unpaid bills. Any funds not assigned to a particular bill item are said to be unallocated.
 
Receipt allocation is usually a transparent process. When funds are receipted to a file using the debtor receipt or trust transfer activities, a process of automatic allocation occurs:
  1. For each bill, starting from the oldest bill:
    1. Allocate funds firstly to interest (if applicable).
    2. Allocate remaining funds to disbursements (starting with GST-free disbursements) until all disbursements have been paid.
    3. Allocate remaining funds to products.
      1. For each product, allocate first to fixed charges until all fixed charges have been paid.
      2. Using whatever funds remain, allocate to professional fees on a pro-rata basis (according to the proportion each member's fees represent of the total).
  2. Once all bills have been exhausted, allocate to anticipated disbursements.
  3. If any funds remain, store the remainder as unallocated funds.
 
Receipt allocation screen
 
The maximum degree of granularity for each type of bill item is as follows:
  • Interest - A lump sum figure can be allocated fully or in-part.
  • Disbursements - Each disbursement transaction is a separate allocation item, which can be allocated fully or in-part.
  • Products - An amount can be allocated to a product as a whole, or to its component parts:
    • Fixed charges - Each fixed charge type represents a separate allocation item (the charge postings cannot be individually allocated-to), which can be allocated fully or in-part.
    • Professional fees - Each member whose time appears on the bill is a separate allocation item (the journals cannot be individually allocated-to), which can be allocated fully or in-part.
Receipt allocation also encourages data integrity. It aims to circumvent common accounting mistakes, assists in disputes and protects the debtor refund process (by only permitting unallocated funds to be refunded to the client).

Regarding discounts

Discounts cause a bill to become partially allocated, hence reducing the amount "unpaid" and thus the amount that can be allocated when posting a receipt. For bills where a time-dependant discount is applied (i.e. the bill must be paid within a certain period in order to be eligible for the reduced total), you can decide during allocation as to whether the discount is still valid. By default, the discount will be honoured up until its expiration, then will automatically be reversed unless you indicate otherwise. Note that you will not be able to keep the discount if it has previously been reversed (by an earlier receipt or subsequent bill). The discount reversal transaction also reverses the effect of the allocations to the discount, thus increasing the "unpaid" amount and making it possible to fully allocate funds to the bill.