An AutoCash Rule That Crosses Six Invoices

'Apply to Oldest Invoice First' is the wrong default for a wire-heavy business. It ignores any remittance reference and applies cash to the oldest open items. When a customer pays a specific set of ten invoices with a deduction, the cash lands on the wrong four invoices and the remaining six stay open - which is exactly the pattern here. The rule works only where customers pay on account with no remittance advice.

Better fit: 'Match then Apply to Oldest Invoice First'. It first tries to match the receipt to invoices using the customer's remittance reference, then falls back to oldest-first for anything unmatched. Trade-offs:

• It depends on the remittance reference being populated accurately from the bank file or lockbox; poor reference data means it degrades to oldest-first anyway.
• It needs clean invoice numbers in the remittance, which means customer education and validation of the bank transmission format.
• It will still misapply when the customer pays a net amount after a deduction, because the match is by invoice, not by amount. That residual case needs a deduction-handling process.

Also review whether these receipts should be manual at all; automatic receipt creation from the bank statement would carry the reference through consistently.

Correct the application first, then decide the deduction.

1. Unapply the receipt from the four invoices it hit. The cash is now unapplied and available for reapplication.
2. Reapply it against the correct ten invoices. Because the customer deducted 2%, the receipt will not fully clear all ten - apply the cash across the ten and leave a shortfall of $4,240 against one invoice rather than leaving six invoices completely open.
3. Record the $4,240 as a deduction or claim, tied to the invoice and the customer, with a reason code for 'unearned discount taken'. This keeps it visible, aged, and owned by collections or the account manager, and it no longer triggers dunning as if the whole invoice were unpaid.
4. Verify the contract terms before any resolution. If the discount is genuinely not contracted, raise a claim and pursue collection. If a side agreement exists, the contract and the payment terms need correcting instead.

Do not write it off. A write-off removes the only audit trail showing the customer took an unauthorized deduction, hides a recurring behavior, and if the customer does it on every wire the amounts accumulate quickly. Write-offs are for validated small balances after investigation, with approval limits, not for making a symptom disappear.

Dunning: the six letters were generated from a false position - the invoices were covered by cash that had been misapplied. Stop the collection cycle on those six invoices, place them in a dispute or collections status with the reason 'receipt misapplication under correction', and note the correction on the account so the customer's next statement is consistent. Once the receipt is reapplied and the $4,240 recorded as a claim, reopen normal collection only on the claim amount, not on the six full invoices. Better still, set a rule that receipts above a threshold, or from customers with remittance advice, are reviewed before the dunning run.

Credit hold: the hold exists because the customer's exposure exceeded its credit limit - an exposure that includes the six invoices dunning treated as unpaid. Correcting the application reduces the open balance, so recompute exposure and rerun the credit check before discussing release. Do not simply override the hold to placate the customer; if exposure is still over limit after correction, the release decision belongs to credit management with a documented rationale. Separating 'our misapplication' from 'the customer's real credit position' is the point: fix the first, then reassess the second on accurate numbers.