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<< Click to Display Table of Contents >> Navigation: Revenue/Billing > Rev/Bill Company Maintenance > Rev/Bill Company > Pty Susp/Net Tab |
The top part of this screen will set the Petty Suspense rules for during the cycle. Below are the main points to remember for this tab. There is detailed information in the Help and we will discuss these points in more detail later in training.
Transfer petty suspense to A/R for WI owners that are netted |
The normal setting is Yes. If yes, the petty suspense balance is 'paid' by transferring a credit to A/R. See examples of use at bottom of page. Additionally, if this option is set to "No," the funds will go to petty suspense instead of A/R. The transfer will work with all owner netting types but "None." |
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Petty suspense test rule |
Apply the minimum (petty) suspense test Before or After billing deductions. The Before test does not take into consideration any netting of amounts due. The After test will compare the calculated net to the minimum pay setting before deciding if a check will be printed. The netting deduction, if applicable (see netting option below), is the sum of the current billing and any balance outstanding from prior months (balance forward). If the netting deduction amount is a credit balance, then there is No deduction, thus this Petty suspense test rule has no effect. Credit balances can be refunded based on the Owners options and the Refund Credit A/R Option and if refunded are included in the amount being paid to the owner in order to meet the minimum payment rule for that owner. |
Automatically Flush Petty if older than: (in months) |
The system will look at owners who would not normally get a check because they are still below the minimum suspense test. If the owner has a payable transaction with a run date xx months older than the current check date and the total amount payable is greater than or equal to the “minimum check amount when flushing petty suspense”, then a check is written for the owner. This is normally set to 12 (months). |
This is the lowest check amount that the system will write when flushing petty suspense. (This amount should be lower than payment codes 1, 2 and 3.) |
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Always Flush if Older than |
This will automatically reduce the Suspense Minimum Pay Amount to a penny. This is a safety net to keep owners from being "lost" by the system and then end up getting their funds sent to the state. Normally set to 24 months. |
Petty Suspense Amts for Owner Pay Codes Code 1-9 |
Option to assign nine different minimum payment code amounts (petty suspense amounts). The amounts correspond to payment codes (1-9) that you assign for each Owner (F12). A new Owner’s default minimum payment code is 2, so place your standard minimum payment amount in this field. |
Netting Option AFE/Operations |
Ability to separate Drilling and Completion from normal operations; the ability to easily net operations without having the Drilling getting deducted. May also match up multiple A/R Accounts with Multiple Prepaid Accounts. Options available: Mix AFE and Operations and net AFE with Operations – current style: •Mix AFE and Operations and net AFE with Operations – classic style Current month AFE charges, all balance forwards, current monthly operating costs are all netted against Operations Revenue. •Separate AFE and Operations - no netting of AFE - No netting whatsoever between AFE’s and Operations. This will be the default option when creating a new company. Note you can still net Operations Revenue less Operations Costs as an Owner level option. •Separate AFE and AFE Operations - Net Unpaid Beg AFE Balance only - If they got an AFE billing one month, and didn’t make a prepayment nor did they pay what was billed on the AFE and the amount is still outstanding on the following billing, it deducts only the outstanding AFE balance forward from their operations income. It will not deduct any current cycle AFE charges. •Separate AFE and Operations - Net AFE with Operations - Current month AFE charges and balance forward AFE charges are both netted against Operations revenue. This is the same netting behavior as the classic style (of one A/R account) but you can enjoy the separation of AFE charges and Operation charges that the new style provides. NOTE: when using any of the "Separate AFE..." options, we recommend that you set your Owner AR to Open Item instead of Balance Forward. This way you will have the ability to attach a deposit to a specific invoice. I.e. - AFE charges or Operating charges. See Netting Options - AFE/Operations for examples |
Optional Distribution Rounding Owner |
Designate which owner in DOI. Sets the rounding difference. Only used if you desire owners with same percentages to have identical rounding. |
With this company option turned on, it will work with an “other category type” exemption on a DOI and it will not charge the Royalty owners that are not exempt from the “other category type” charge the burden of the exempted owner. This will be your default behavior on all DOI’s but you do have the option to not have this happen for some if you desire by using an option on the account maintenance. |
Examples of Transfer Petty Suspense to A/R:
Owner is being netted. The owner's net revenue (Revenue after taxes) is $1,000. The owner's share of the expenses is $999, leaving a net check of $1. Operator does not want to print the owner a check unless the amount is at least $10. If a check is not written, then traditionally the amount would go into Petty Suspense until such time that enough money is accumulated to meet the minimum.
Petty suspense is a great tool when distributing revenue to owners. It keeps the operator from writing a lot of small checks that then causes problems with bank reconciliation because small checks tend to go un cashed (causing the operator to have to reissue the checks and/or turn the money over to the state). However, when combined with JIB (JIB doesn't have an option to suspense just one owner's billing), then it creates some serious issues.
In the above example, if the owner's check goes into suspense, the owner is sent a bill for $999 and there is no mention of any revenue. This forces the operator to either write a letter of explanation, hold the billing for that owner until a check is written, or mail the bill anyway and let the owner/investor think they had a big mistake investing with this operator. Records show the owner owes the operator money (which is really not true). 1099 only reflects monies "paid", so the amount in suspense is not counted. On the Operator's books, both A/R and Suspense grow creating misleading financial statements. Investors don't know where they are on the well unless other correspondence is generated and mailed.
Alternative A: (1) Code this owner with a Minimum Payment code of "P" or another Code, either of which could be setup with a cut-off point of a penny. This will cause the system to write the owner a check for $1 in this example (which is what we said we were trying to avoid). (2) Change the Company Option "Revenue Petty suspense test rule" to "Before". This causes the system to compare the $1,000 against the petty suspense criteria and the end result is the same as the first option, a $1 check is written. The 2nd option is at least semi-automatic for all the working interest owners, where as the first option would have to be adjusted owner by owner.
These alternatives solve the issues, but causes small checks to be written which could become reconciliation problems.
Alternative B: "Transfer petty suspense to A/R for WI owners that are netted". It can be the best of both worlds. It causes all the revenue detail to appear on their statement, for all of the owner's JIB expenses to be "Paid", and then the $1 credit rolled into A/R. On the investor's next statement, it will start off with a $1 credit and continue to give the owner all the details about the property. As soon as the investor has accumulated enough credits for a check, a check will be written. 1099's reflect when the money was credited to the account. There is no large misleading A/R balance on the Operator's books. And there is no bank reconciliation problem created.
Many operators have increased their minimum payment amounts to $100. This works well with royalty owners, but with small working interest owners in marginal properties, this will eventually create problems. Having a different minimum payment amount (perhaps $10-25) and using the above option to shift amount less than that to A/R is an alternative. See How Netting Works in Pak Accounting.