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Tutorial/Collections

Collections Overview

When it comes to financial transactions and cash flow, “collections” typically refers to the process of collecting outstanding payments from customers. Effective collection processes are crucial for maintaining healthy cash flow and ensuring business sustainability. This document provides an overview of how collections are approached within the Nue ecosystem.

In Nue, we ensure seamless integration with various payment systems such as Stripe, QuickBooks, NetSuite, and others. This integration allows users to leverage these systems for collection operations while ensuring that transaction data is properly written back to Nue. Nue thus serves as a centralized Transaction Hub that monitors financial transactions and analyzes financial data in a unified way.

This document outlines the collection use cases applicable to most, if not all, integrations with payment systems. These use cases are designed to ensure that regardless of the specific payment system used, the collection processes are efficient and the data integration is seamless.

This document serves as a guide for Nue admin users and integration partners to understand the various collection use cases supported by Nue and how to integrate a third-party collection system with Nue.

Let's get started!

Primary Concepts

Invoices, Debit Memos, and Credit Memos are considered billing transactions. Invoices request payment for goods or services provided, credit memos reduce the amount a customer owes typically due to returns or billing errors, and debit memos increase the amount a customer owes due to underbilling or additional charges.

The transactions are always represented at the item level, specifically:

Invoice Items
Debit Memo Items
Credit Memo Items

Each transaction contains the key transaction attributes, e,g. transaction date, transaction amount, transaction currency, etc.

Payments, Refunds are considered payment transactions. Currently, Nue does not own these transactions. These are thus referred to as external transactions. Some systems represent transactions at the header level (e.g. Stripe) because small-medium businesses don't necessarily need that level of complexity. Some systems represent transactions at the line level (e.g. NetSuite, Zuora).

Nue manages all forms of billing transactions, and delegates to external systems for managing payment transactions. Additionally, Nue records the relationship between payment transactions and billing transactions in the form of Payment Application records. Payment Application records can be of Payment or Refund record types.

The following diagram illustrates the above concepts:

Collection Operations

Collection operations typically involve a Payment or a Refund operation. An external payment system typically also includes billing transactions, minimally Invoices. Some systems also have some sort of credit memos or debit memos.

Payment

A payment operation creates a payment to an invoice or a debit memo. When a customer makes a payment towards their outstanding balance, it reduces the A/R balance by the amount of the payment.
A payment can be collected via different payment methods. It can also be paid from the credit balance of a customer.

Refund

A refund operation creates a refund to a payment.
1. Credit Memo: In this approach, finance operations create a credit memo that is attached to the original invoice. The credit memo serves as a record of the refund and is applied against the outstanding balance of the customer. This method maintains a clear audit trail by linking the refund to the original transaction. The credit memo can include details such as the reason for the refund, the refund amount, and any adjustments made to the customer's account.
2. Invoice Reversal: Alternatively, finance operations may choose to cancel the original invoice altogether. Instead of creating a credit memo, a new transaction is created to cancel out the original invoice. This method effectively nullifies the original transaction, removing it from the accounts receivable balance. However, it may be necessary to retain records of the cancellation and the associated refund for accounting and auditing purposes.

In the payment system, a refund can be issued back to the original payment, or issued as credits.
When a company issues a refund for a payment, the specific approach for handling it can vary depending on the company's policies and accounting practices. However, there are two common methods to consider:

Payment Applications

To streamline payment and refund processes external to Nue systems, we use Payment Applications to document the payment and refund transactions related to invoices and credit memos within Nue. While Payment Applications do not constitute payment transactions on their own, they serve to record the connections between payments/refunds and invoices/credit memos.

It is important to know that in Nue, an invoice may have multiple payment applications, and a payment application must only be associated with one invoice.

Record Types

There are 4 record types for Payment Applications, each indicating a type of payment or refund operation:

RECORD TYPE	DESCRIPTION
Payment	A payment type payment application is created when the invoice is paid via an external payment
Refund	A refund type payment application is created when a paid invoice is refunded or canceled
Credit Memo	A credit memo type payment application is created when a credit memo is applied or unapplied to an invoice
Negative Invoice	A negative invoice type payment application is created when a negative invoice is applied or unapplied to an invoice

Operations

There are the following operations available for the payment applications:

OPERATION	DESCRIPTION
Pay	This action occurs when paying an invoice, offsetting the invoice balance with a positive amount.
Unpay	This action is taken to reverse a payment on an invoice, resetting the invoice balance with a negative amount. (This action will be available in future releases).
Refund	This action involves refunding an invoice or canceling a paid invoice, associating a credit-back credit memo with the invoice.
Apply	This action applies credit memos/negative invoices to an invoice, offsetting the invoice balance with a positive amount.
Unapply	This action reverses the application of credit memos/negative invoices to an invoice, resetting the invoice balance with a negative amount.
WriteOff	This action occurs when writing off an uncollectible invoice, associating a write-off credit memo with the invoice. (This action will be available in future releases).

Payment Types

There are the following payment types:

PAYMENT TYPE	DESCRIPTION
Payment	A payment type application occurs when a standard payment method is used to settle an invoice (e.g. Credit Card).
Credit Memo	A credit memo type application occurs when a credit memo is used to offset the balance of an invoice, for example, a Credit Memo in an external system is used to offset the balance of an invoice created in Nue.
Negative Invoice	A negative invoice type application occurs when a negative invoice is used to offset the balance of an invoice.

Payment Methods

The following 2 payment methods are used for the operations:

PAYMENT METHOD	DESCRIPTION
Electronic	Describes the process by which payments are handled through payment systems.
Non-electronic	Refers to the method by which payments are processed via cash or checks.

Transaction Amount and Financial Impact

The transaction amount of a Payment Application record is always positive, unless the billing transaction is Negative Invoice that has a negative amount.

The combination of Record Type and Operation fields determines the credit and debit impacts on financial accounts, as well as the signs used in financial reporting. The following table helps in understanding the financial implications of various payment transactions, ensuring accurate record-keeping and financial reporting.

Record Type	Operation	Description	Debit Impact	Credit Impact
Payment	Pay	Occurs when paying an invoice, decreasing the invoice balance	Increases Cash/Bank Account (Asset)	Decreases Accounts Receivable (Asset)
Payment	Unpay (Future)	Reverses a payment on an invoice, increasing the invoice balance	Decreases Cash/Bank Account (Asset)	Increases Accounts Receivable (Asset)
Refund	Refund	Refunding or canceling a paid invoice, credit-back memo applied	Increases Accounts Receivable (Asset)	Decreases Cash/Bank Account (Asset)
Credit Memo	Apply	Applies credit memos to an invoice, decreasing the invoice balance	Increases Sales Returns/Allowances (Contra)	Decreases Accounts Receivable (Asset)
Credit Memo	Unapply	Reverses applied credit memos, increasing the invoice balance	Decreases Sales Returns/Allowances (Contra)	Increases Accounts Receivable (Asset)
Negative Invoice	Apply	Applies negative invoices to an invoice, decreasing the invoice balance	Increases Other Revenue (Revenue)	Decreases Accounts Receivable (Asset)
Negative Invoice	Unapply	Reverses applied negative invoices, increasing the invoice balance	Decreases Other Revenue (Revenue)	Increases Accounts Receivable (Asset)
Credit Memo	WriteOff (Future)	Writes off an uncollectible invoice, associating write-off credit memo	Increases Bad Debt Expense (Expense)	Decreases Accounts Receivable (Asset)

Billing Transactions: Payment Statuses Explained

The following payment statuses are used to indicate the payment status of billing transactions, including invoices, credit memos, and debit memos.

PAYMENT STATUS	DESCRIPTION
Not Transferred	The billing transaction has not been transferred to the payment system.
Transferred	The billing transaction is transferred to the payment system successfully.
Transfer Error	The billing transaction wasn’t successfully transferred to the payment system.
Paid	The billing transaction is paid in full (not applicable to credit memos).
Partially Paid	The billing transaction is partially paid (not applicable to credit memos).
Refunded	The billing transaction is refunded (not applicable to credit memos).
Partially Refunded	The billing transaction is partially refunded (not applicable to credit memos).
Applied	The billing transaction is applied (applicable to credit memos only).
Partially Applied	The billing transaction is partially applied (applicable to credit memos only).
Write Off	The billing transaction is written off (not applicable to credit memos).
Credit Back	The transaction is created as part of the refund process to offset invoices and debit memos.
Canceled	The billing transaction is canceled and has never been paid, then its Payment Status is set to Canceled as well.

Transaction Hub

In the complex landscape of finance and revenue operations, gaining a comprehensive understanding of billing transactions across various systems has been a challenge.

Integrations with multiple external third-party systems, spanning collection, accounting, taxation, and revenue recognition, adds layers of complexity. It is critical to track the status of each transaction across these diverse platforms.

The Transaction Hub is a solution designed to provide granular visibility into the transfer status of every transaction across disparate external systems. Serving as a centralized control point, Transaction Hub empowers authorized users to seamlessly initiate and monitor the transfer of transaction records with ease and efficiency.

In Nue, the mappings of all transactions and their mirror in the external systems are recorded in the Transaction Hub. Using the transaction hub, users can view the mapping information, the mirrored transactions’ statuses, and retry failed transaction mirroring.

Upload a mapping between existing Nue customers and customers in the payment systems

Users can upload a mapping between existing Nue customers, and customers in the payment systems by following the steps below:

Upload a mapping between Nue products and products in the payment systems

Users can upload a mapping between Nue products and products in the payment systems by following the steps below:

QuickBooks

View transaction status and payment status in Nue

Users can view the transaction status and payment status of every billing transaction in Nue through the transaction hub for supported integrations, including invoices, credit memos, and debit memos.

View mirrored transaction ID

Users can view the mirrored transaction ID through the transaction hub, as shown below.

Retry failed transaction mirroring

For each failed mirrorred billing transaction, users can manually retry the transfer of a single transaction in the Transaction Hub.

Download Transaction Hub records

Users can use the Export API to export up to 10,000 Transaction Hub records into a CSV file. The following is a Transaction Hub export API example;

curl --location 'https://api.nue.io/api/cpq/async/exports' \
--header 'Content-Type: application/json' \
--header 'apiAccessKey;' \
--header 'nue-api-key: {{nue-api-key}}' \
--data '{
  "format": "CSV",
  "objectNames": ["TransactionHub"],
  "query": "query {TransactionHub { id createdById createdDate direction errorCode errorMessage externalId externalSystem nueId status transactionType} }"
}
'

Then use the Get Export Job Result API to retrieve the exported CSV file:

curl --location 'https://api.nue.io/api/cpq/async/exports/{{export-job-id}}' \
--header 'ApiAccessKey;' \
--header 'nue-api-key: {{nue-api-key}}'

Collection Scenarios

In this section, we outline all the collection scenarios supported by Nue, along with the webhooks and APIs we provide for integration with third-party payment systems. It is important to note that some payment systems, such as Stripe and QuickBooks, support webhooks, while others may not. Therefore, the implementation of the payment scenarios may vary depending on the specific payment system used.