Processing Payment Documentation PDF

ACCOUNTING AND FINANCE LEVEL - III Based on November, 2023 Curriculum V - II Module Title: - Processing Payment documentation MODULE CODE : LSA ACF3 M08 1123 Nominal duration: 70 Hours Prepared by: Ministry of Labor an...

ACCOUNTING AND FINANCE LEVEL - III Based on November, 2023 Curriculum V - II Module Title: - Processing Payment documentation MODULE CODE : LSA ACF3 M08 1123 Nominal duration: 70 Hours Prepared by: Ministry of Labor and Skills November, 2023 Addis Ababa, Ethiopia Page 1 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Acknowledgment Ministry of Labor and Skills wish to extend thanks and appreciation to the many representatives of TVT instructors and respective industry experts who donated their time and expertise to the development of this Teaching, Training and Learning Materials (TTLM). Page 2 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Table of Contents Unit One: Entering Data to System........................................................................................................... 6 1.1. Basics of data and systems........................................................................................................... 7 1.1.1.Characteristics of Data Quality.................................................................................................. 7 1.2. Allocating and updating data..................................................................................................... 12 1.3. System Controls......................................................................................................................... 14 Self check - 1.............................................................................................................................................. 18 UNIT TWO: Payment Facility................................................................................................................ 20 2.1. Characteristics of payment facility............................................................................................ 21 2.2. Maintaining documentation....................................................................................................... 24 Self check - Two........................................................................................................................................ 29 Unit Three: Payments against Documentation....................................................................................... 31 3.1. Confirming authorization for payment...................................................................................... 32 3.1.1 Importance of payment authorization...................................................................................... 32 Credit Card Authorization................................................................................................................. 34 3.2. Discrepancies of payment Facilities.......................................................................................... 39 3.2.3 Types of Invoices..................................................................................................................... 42 Self check question - 3................................................................................................................................ 44 LAP T Test 3.1............................................................................................................................................ 47 Unit Four: Effect of Payments................................................................................................................. 48 4.1. Credit arrangements................................................................................................................... 49 4.1.1. Types of credit........................................................................................................................ 49 4.2. Payment instruments.................................................................................................................. 51 4.1.2. Classification of Payment instruments.................................................................................... 52 4.3. Cancelling Payment documentation........................................................................................... 54 Self check 4................................................................................................................................................. 55 Unit Five: Documentation........................................................................................................................... 56 5.1.Filing Documentation................................................................................................................. 57 5.2. Accessing Documents................................................................................................................ 60 Self check- Five.......................................................................................................................................... 61 UNIT SIX: Authorization of Payment........................................................................................................ 62 6.1. Methods of authorizing payments.............................................................................................. 63 6.2. Release of funds authorization................................................................................................... 65 6.3. Payment authorization............................................................................................................... 66 Self check - 6............................................................................................................................................. 67 Reference.................................................................................................................................................... 68 Page 3 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Introduction of the module Accounting and finance filed; the Processing Payment Document in the work place helps to know the Entering data to system, Creating payment facility ,Verifying payments against documentation , Effecting payments ,File documentation ,Authorized payment Accounting and finance filed. This module is designed to meet the industry requirement under the Accounting and Finance occupational standard, particularly for the unit of competency Processing Payment Documentation This module covers  Entering data to system  payment facility  payments against documentation  Effect of payments  File documentation  Authorized payment Learning objectives of the Module: At the end of this session, the students will able to:  Allocate and enter data to system  Identify Payment facility  Establish payments against documentation  Explain Effect of payments  Prepare File documentation  Process Authorization of Payment Module Instruction For effective use this modules trainees are expected to follow the following module Instructions: 1. Read the information written in each unit 2. Accomplish the Self-checks at the end of each unit 3.Perform Operation Sheets which were provided at the end of units 4. Read the identified references book for Examples and exercise Page 4 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Acronym POS_____________________________________ point of sale CNP_____________________________________ Card not present PA ______________________________________ Payment authorization TX _____________________________________ Transformation Extender ATM _____________________________________ Automatic Teller machine Page 5 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023 Unit One: Entering Data to System This Unit is developed to provide you the necessary information regarding the following content coverage and topics:  Basics of data and systems  Allocating and updating data  System controls This Unit will also assist you to attain the learning outcomes stated in the cover page. The completion of this learning guide, you will be able to:  Identify data and systems  Allocate and update data  Maintain System controls Page 6 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  1.1. Basics of data and systems Data is information that has been translated into a form that is efficient for movement or processing. Relative to today's computers and transmission media, data is information converted into binary digital form. It is acceptable for data to be used as a singular subject or a plural subject. An organized, machine-readable collection of symbols, to be interpreted as a true account of some enterprise Data is defined as a collection of individual facts or statistics. (While ―datum‖ is technically the singular form of ―data,‖ it's not commonly used in everyday language.) Data can come in the form of text, observations, figures, images, numbers, graphs, or symbols. Information is a stimulus that has meaning in some context for its receiver. When information is entered into and stored in a computer, it is generally referred to as data.  Data is a related group of files  file is a related group of records  record is a related group of fields  field is a specific attribute of interest for the entity (record) 1.1.1 Characteristics of Data Quality Correctness Data should be sufficiently accurate for the intended use and should be captured only once, although it may have multiple uses. Data should be captured at the point of activity. Data is always captured at the point of activity. Performance data is directly input into Performance Plus (P+) by the service manager or nominated data entry staff. Access to P+ for the purpose of data entry is restricted through secure password controls and limited access to appropriate data entry pages. Individual passwords can be changed by the user and which under no circumstances should be used by anyone other than that use Where appropriate, base data, i.e. denominators and numerators, will be input into the system which will then calculate the result. These have been determined in accordance with published Page 7 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  guidance or agreed locally. This will eliminate calculation errors at this stage of the process, as well as provide contextual information for the reader. Data used for multiple purposes, such as population and number of households, is input once by the system administrator. Validity Data should be recorded and used in compliance with relevant requirements, including the correct application of any rules or definitions. This will ensure consistency between periods and with similar organizations, measuring what is intended to be measured. Relevant guidance and definitions are provided for all statutory performance indicators. Service Heads are informed of any revisions and amendments within 24 hours of receipt from the relevant government department. Local performance indicators comply with locally agreed guidance and definitions. Reliability Data should reflect stable and consistent data collection processes across collection points and over time. Progress toward performance targets should reflect real changes rather than variations in data collection approaches or methods. Source data is clearly identified and readily available from manual, automated or other systems and records. Protocols exist where data is provided from a third party, such as Hertfordshire Constabulary and Hertfordshire County Council Timeliness Data should be captured as quickly as possible after the event or activity and must be available for the intended use within a reasonable time period. Data must be available quickly and frequently enough to support information needs and to influence service or management decisions. Performance data is requested to be available within one calendar month from the end of the previous quarter and is subsequently reported to the respective Policy and Scrutiny Panel on a Page 8 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  quarterly basis. As a part of the on-going development of Performance Plus it is intended that performance information will be exported through custom reporting. This will improve access to information and eliminate delays in publishing information through traditional methods. Relevance Data captured should be relevant to the purposes for which it is to be used. This will require a periodic review of requirements to reflect changing needs. Completeness Data requirements should be clearly specified based on the information needs of the organization and data collection processes matched to these requirements. Checks will be made to ensure for completeness of data. An annual assessment of this is undertaken by Internal Audit. 1.1.2. Benefit of data  Improve operational efficiency  Customer Acquisition and Retention  Focused and Targeted Promotions  Potential Risks Identification  Improve Supplier Networks  make informed decisions that can lead  enhanced business performance  strong customer relationships Page 9 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Manual and Computerized Accounting System Proper supporting documentation (itemized invoice) must be attached to the payment request to support the legality of a payment or to accurately describe the goods or services being purchased. Many small businesses do their accounting manually and they are happy with this setup. Others may be considering using a computerized system, since accounting software is so affordable these days. Accounting systems can be classified as: a. Manual Accounting System b. Computerized Accounting System.  Computerized Accounting System System allows the user to enter the transaction into the program once, and all accounts are updated as necessary. For example, if your business buys Br 800 worth of office supplies with a combination of Br 300 cash and Br 500 credit, instead of going to each accounting and posting the transaction, with a computerized system you would check office supplies, cash and the selected account payable account and the transactions automatically would post to the accounts. Computerized Accounting System is sometimes called Accounting Information System is a collection of resources such as people and equipment designed to transform financial data into information. The information is communicated to a wide variety of decision makers. Computerized accounting systems usually consist of five components: a) The people who operate the system and perform various functions. b) The procedures both manual and automated involved in collecting, processing, and storing data about organization‘s activities. c) The data about the organization‘s transactions d) The software used to process the organization‘s data e) The information technology infrastructure including computers, peripheral devices, and network communication devices. Page 10 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  The five components together enable the computerized accounting systems system to fulfill three important functions in any organization. a) It collects and stores data about activities and transactions. b) It processes data into information that is useful for making decisions. c) It provides adequate controls to safeguard the organization‘s assets including its data, to ensure that the data are available when needed and are accurate and reliable.  Manual Accounting System Accountant or bookkeeper to post business transactions to the general journal, general ledger and worksheet by hand. This process can be completed by either using actual paper journal and ledger sheets or by creating these sheets in a computer program such as Excel. It is considered manual because each transaction is entered into the system individually. An expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense. An expense is a cost that is "paid" or "remitted", usually in exchange for something of value. Something that seems to cost a great deal is "expensive". Something that seems to cost little is "inexpensive". "Expenses of the table" are expenses of dining, refreshments, a feast, etc.  Basics types of Expense Accounts  Cost of Goods Sold  Operating Expenses  Non-Operating Expenses (or Other Expenses)  Employee and Officer Expense Accounts  Cash flow In a cash flow statement, expenditures are divided into operating, investing, and financing expenditures.  Operational expense – salary for employees  Capital expenditure – buying equipment  Financing expense – interest expense for loans and bonds Page 11 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  1.2. Allocating and updating data Allocation is the process of requesting access to a data established. If you allocate a data set that exists, the system allows you to open the data set. If you allocate a data set that does not exist, the system creates space for it on an available device and allows you to open that space Data Allocation is an intelligent distribution of your data pieces, (called data fragments) to improve database performance and Data Availability for end-users. It aims to reduce overall costs of transaction processing while also providing accurate data rapidly in your DDBMS systems. 1.2.1. Types Data Allocation A. Data Fragmentation B. Data Duplication  Data Fragmentation Fragmentation is a process of disintegrating relations or tables into several partitions in multiple locations. It divides a database into various sub tables and sub relations so that data can be distributed and stored efficiently. Database Fragmentation can be of two types: horizontal or vertical. In a horizontal fragmentation, each tuple of a relation r is assigned to one or more fragments. In vertical fragmentation, the schema for a relation r is split into numerous smaller schemas with a common candidate key and a special attribute. More details on horizontal and vertical fragmentation will be discussed in the next section. Methods of Data Fragmentation In this section of our fragmentation and replication in distributed database guide, we discuss the two fundamental fragmentation strategies: horizontal and vertical. In addition to these, Distributed Database Management Systems also allow the nesting of fragments in a hybrid fashion, called Hybrid Fragmentation. This will be discussed separately in our third fragmentation strategy.  Horizontal Fragmentation  Vertical Fragmentation Page 12 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Horizontal fragmentation Horizontal fragmentation refers to the process of dividing a table horizontally by assigning each row or (a group of rows) of relation to one or more fragments. These fragments are then be assigned to different sides in the distributed system. Vertical Fragmentation Vertical fragmentation refers to the process of decomposing a table vertically by attributes are columns. In this fragmentation, some of the attributes are stored in one system and the rest are stored in other systems. This is because each site may not need all columns of a table. 1.2.2. Data Duplication Distributed Database Duplication is the process of creating and maintaining multiple copies (redundancy) of data in different sites. The main benefit it brings to the table is that duplication of data ensures faster retrieval. This eliminates single points of failure and data loss issues if one site fails to deliver user requests, and hence provides you and your teams with a fault-tolerant system. However, Distributed Database Replication also has some disadvantages. To ensure accurate and correct responses to user queries, data must be constantly updated and synchronized at all times. Failure to do so will create inconsistencies in data, which can hamper business goals and decisions for other teams Problems created by duplicate data.  Lost Income and Wasted Costs  Lack of a Single Customer View  Lack of Personalization  Ineffective Customer Service  Inaccurate Reporting  Lost Productivity  Storage Costs  Confusion among Customers  Missed Sales Opportunities Page 13 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  1.2.3. Data updating Data updating means the functional process of updating information already contained in a data base within the System that results in the creation of a new record and may result in storage of existing data as history. The modification of data that is already in the database is referred to as updating. You can update individual rows, all the rows in a table, or a subset of all rows. Each column can be updated separately; the other columns are not affected. 1.3. System Controls Any organized assembly of resources and procedures united and regulated by interaction or interdependence to accomplish a set of specific functions. System can be defined as a collection of interrelated components that work together towards a collective goal. A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its boundaries, structure and purpose and expressed in its functioning. Systems are the subjects of study of systems theory and other systems sciences. Benefits of Systems Integration  Accessibility, Accuracy, and Coordination  Efficiency and Productivity  Cost Effectiveness  Availability of New Performance Insights  Security Systems Development Systems development is the process of defining, designing, testing, and implementing a new software application or program. The process of creating and maintain systems is called systems development or systems analysis and design. Page 14 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Figure 1 component of information system 1.3.1. Benefit of Systems Development a) Reduce the time it takes to run the business b) Increase the consistently of customer expectations c) Determination reliable results and quality all the time d) Increase productivity and performance e) Reduce costs f) Create Organization structure within the business g) Establish procedures for resolving issues h) Increase Profitability The double entry system of accounting takes its name from the fact that every business transaction is recorded by two types of entries: 1. Debit entries to one or more accounts and 2. Credit entries to one or more accounts. In recording any transaction, the total dollar (birr) amount of the debit entries must equal the total dollar (birr) amount of the credit entries. Journal: Transactions are initially recorded in chronological order in a journal before being transferred to the accounts. Thus, the journal is referred to as the book of original entry. Page 15 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  For each transaction the journal shows the debit and credit effects on specific accounts. Journalizing: Entering transaction data in the journal is known as journalizing. Special Journals: A journal in which only one kind of business transaction is recorded is a special journal used to record only one type of entries. Special journals differ from the general journal or the combination journal in that they are meant only for specified types of transactions—only one type.  Sales journal: Sales journal is a special journal used to record only sales of merchandized on account.  Purchase journal: used to record purchase on account  Cash receipt journal: use to record cash receipt (cash collection)  Cash payment journal: used to record payment of cash.  Combination Journal: is a multi-column journal that combines all journals into one book of original entry. Revenue, Expense, Profit And Loss Revenues are the gross increases in capital as the result of the sale of merchandise, the performance of services for a customer, the rental of property, the lending of money etc. Revenues are also known as Income. Expense: Is the decrease in capital that results from the operation of a business. Business expenses are the costs of items and services used to produce revenue. Profit: when the total revenue exceeds the total cost of operating a business or expenses, the difference is called a profit Loss: When the total expense (costs) exceeds the total revenue the difference is called net loss. Principles of Debit and Credit for Revenue and Expense Accounts The principles of debit and credit for revenue and expenses account are shown as follows: Account Increase Side Decrease side Account balance Revenue Credit Debit Credit Expense Debit Credit Debit Companies may use various kinds of journals, but every company has the most basic form of journal, a general journal. Typically, a general journal has; spaces for dates, account titles and explanations, references, and two money (amount) columns. Page 16 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  It generates useful financial information in the form of financial statements including income statement, balance sheet, cash flow statement and statement of changes in equity. It is called a cycle because the steps are repeated each reporting period. Analyzing analyze transactions in preparing for journalizing Jornalize record debit and credit in a journal Post transfer debit and credit from the journal to ledger Preparing unadjusted trial balance: summarize ledger accounts and amounts Adjust ETBing account balance up to date Preparing adjusted trial balance summarize adjusted ledger accounts and amounts Prepare statements prepare income statement, balance sheet etc from adjusted trial balance. Close close temporary accounts and update owner‘s capital account Prepare post closing trial balance test clerical accuracy of debit and credit of adjusting and closing steps Reverse (optional)  Checking for accuracy Since, accuracy is extremely important in all accounting work, there are certain built in mechanisms to check the accuracy of the bookkeeping work. The beginning balance sheet is said to be accurate if it is ‗in balance‘. Similarly, every journal entry is said to be accurate if it is ‗in balance‘. That is if the sum of the debit entry equals the sum of the credit entry.  Making correction If the debit part of an entry does not equal the credit part it indicates as an error is made. The error must be discovered and corrected right away. If an error is made in writing any part of entry the credit part an entry the incorrect part is c Page 17 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Self check - 1. 1. Part I: Fill in the blank space 1. -------------------is the process of creating and maintaining multiple copies (redundancy) of data in different sites. 2. ---------------- is defined as a collection of individual facts or statistics. 3. ---------------------- is a related group of records 4, ---------------- method of data fragmentation dividing a table horizontally by assigning each row or (a group of rows) of relation to one or more fragments Part II Multiple-Choice 1. Which of the following characteristics defines correctness of data? A) Accurate data captured multiple times B) Data captured at the point of activity C) Data captured only at the end of the process D) Data captured without considering its relevance 2. What distinguishes a computerized accounting system from a manual one? A) Manual systems allow for automatic data entry B) Computerized systems require paper-based documentation C) Computerized systems update all accounts automatically D) Manual systems cannot process expenses accurately 3. Which type of data fragmentation involves breaking down tables into smaller schemas? A) Horizontal Fragmentation B) Vertical Fragmentation C) Data Duplication D) Hybrid Fragmentation Page 18 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Part III: Write short answer for the following question 1. Define Data __________________________________________________________________ __________________________________________________________________ 2. Write the types of data allocation __________________________________________________________________ __________________________________________________________________ 3. Identify methods of data fragmentation __________________________________________________________________ __________________________________________________________________ 4. Identify possible problem that can be made Data duplication _____________________________________________________________________ _____________________________________________________________________ 5. Write five components of an information system Page 19 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  UNIT TWO: Payment Facility This Unit is developed to provide you the necessary information regarding the following content coverage and topics:  Characteristics of payment facility  Maintaining documentation This Unit will also assist you to attain the learning outcomes stated in the cover page. The completion of this learning guide, you will be able to:  Describe payment facility  Maintain documentation Page 20 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  2.1. Characteristics of payment facility Payment is the voluntary transfer of money, equivalent, or other valuable items from one person to another in exchange for goods or services received or to meet a legal obligation. The person who gives the money is often called the payer, while the person who gets the money is called the payee. Payment is the exchange of money, goods, or services for goods and services in an acceptable amount to both parties and has been agreed upon in advance. You can pay with cash, a check, a wire transfer, a credit card, a debit card, or even crypto currency. The way money works now, you can pay for things with cash. Money is a convenient way to pay for things and easy to store. It has made economic transactions easier. Before, many people used money and other ways to make payments; people would trade one good or service for another. For example, if an egg farmer had a lot of extra eggs and wanted milk, he would have to find a dairy farmer who would trade eggs for milk. If a good dairy farmer couldn't be found in time, the egg farmer wouldn't get the milk, and the eggs would go bad, making them useless. On the other hand, the money stays worth what it is worth over time. But bartering is still used by businesses that want to trade services. Payment can be the exchange of something of value or use to both parties. Most of the time, an invoice or bill comes before a payment. Payees can usually choose how they want to be paid most of the time. However, several rules say that the payer must take up to a certain amount of the country's legal cash. When a payment is made in a foreign currency, there are often fees for the foreign exchange transaction. These fees are usually between 2 and 3 present of the total payment amount, but they can be much higher depending on the bank, card issuer, and place of purchase. Page 21 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Privacy: It refers to whether the payment model is anonymous or not. It is concerned with whether a third party can trace back who was involved in payment transaction. Security: This is concerned with whether the payment method is secured, in particular whether it is easy to perpetrate different kinds of fraud such as forged payment. Transferability: This refers to whether a payment can be carried out without the involvement of a third party such as bank. Divisibility: This refers to whether a payment can be divided into arbitrary small payments whose sum is equal to original payment. Acceptability: This refers to whether the payment method is supported globally, i.e. not by a closed group only.  Ways of payment Figure 2.1. Way of payment Page 22 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Credit Most people use credit and debit cards to buy things and pay for them. But many businesses that accept credit cards are charged a fee by both the merchant who provides the machine and payments infrastructure and their bank. Most of the time, this fee is a fixed rate or a percentage of the transaction amount. Cash Cash is still used in a lot of businesses, including retail. For example, you can still pay cash at coffee shops and convenience stores. Due to the fees with debit and credit cards, many small stores would rather have customers pay in cash. Cash can be lost, stolen, or destroyed, which is bad. Businesses that do a lot of large transactions often have to pay more for security measures. Mobile Phones Contactless payment technology has made it easier to pay than ever in the past few years. The customer's banking information can be accessed by the credit or debit card machine, also called a point of sale terminal (POS). This is done through the software application on the customer's mobile device. Once the phone has read the information from the POS terminal, a signal is sent to let the customer know that payment has been received. Checks A bank cashier's check or a certified check is two types of checks that banks offer to help sellers get the money that the buyer owes them. Over time, people have used checks less and less because technology has made it possible to send payments electronically. There are, however, times when checks can be useful, such as when the vendor needs a guarantee of payment. Page 23 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  2.2. Maintaining documentation Documentation is any communicable material that is used to describe, explain or instruct regarding some attributes of an object, system or procedure, such as its parts, assembly, installation, maintenance and use. Documentation encourages knowledge sharing, which empowers your team to understand how processes work and what finished projects typically look like. Documentation is any communicable material that is used to describe, explain or instruct regarding some attributes of an object, system or procedure, such as its parts, assembly, installation, maintenance and use. As a form of knowledge management and knowledge organization, documentation can be provided on paper, online, or on digital or analogue media, such as audio tape or CDs. Examples are user guides, white papers, online help, and quick-reference guides. Paper or hard-copy documentation has become less common. Documentation is often distributed via websites, software products, and other online applications. Documentation as a set of instructional materials shouldn't be confused with documentation science, the study of the recording and retrieval of information. 2.2.1. Types of documentation a) Product Documentation b) Process Documentation c) Sales and Marketing Documentation a) Product Documentation Product documentation describes the information related to a product and includes the method to use this product. The information includes the product specifications, manuals, logic, disclaimers, and information on all the features of the product. Page 24 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Types of Product Documentation Although there are many types and sub-types, product documentation can be divided into two major categories.  System Documentation  User Documentation System Documentation System documentation contains information such as architecture, design, and source code that is used by product designers and manufacturers. The technical part of system documentation is aimed at a highly technical audience such as researchers and engineers. The business part of system documentation is aimed at business developers and marketers. System documentation is not generally released to the public. User Documentation Use documentation is the content you provide end-users with to help them be more successful with your product or service. Depending on the product, the information is aimed at either a technical or a non-technical audience. Examples are user manuals, quick start guides, and troubleshooting manuals. b) Process documentation A process guide is a step-by-step document that explains how to do something in your business. For example, it might explain exactly how to transition an aspect of your data from legacy servers to the cloud. It might take the form of a policy, a tutorial or a flow chart. It could live in your business plan, your company handbook, your new-hire training manual or your cloud-based standard operating procedures. Process documentation is the act of capturing or documenting all of the steps in a particular task. Ideally, it should happen in real time. As employees perform a task, they document each step they take. On-going process documentation, followed by regular process review, helps staff and managers learn what works and what doesn‘t, helping everyone adapt the process guides as the business evolves. Page 25 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Examples of process documentation include:  Step-by-step guides: Detailed, sequential instructions for completing a specific task or operation  Checklists: A list of items to verify, inspect, or complete, ensuring consistency and thorough  Tutorials: Educational resources that guide users through a process, often including tips and best practices  Process maps, diagrams, or flowcharts: Visual representations of a process that display the sequence of steps, decision points, and possible outcomes  SOPs (Standard Operating Procedures): Formal, written instructions that outline how a specific task should be performed within an organization  Workflow documentation: Formal documentation that specifically focuses on operational aspects of a process, such as task sequences, interactions between roles or teams, and dependencies.  Company policies: Official rules, guidelines, or principles that define how employees should perform tasks, make decisions, or interact with stakeholders Page 26 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Figure 2.2. Checklist Template Page 27 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  C). Sales and Marketing Documentation Sales documentation is writing down anything that helps your sales team close deals. It can range from: Sales processes, such as your sales methodology and methods of collaboration with other departments, too. Sales collateral, such as slide decks and case studies A marketing requirements document is one that tells you exactly how you are supposed to market a particular product or service. This document is supposed to be created by the product creators or service providers, but the truth is many of them don't know they need this. Payment documentation means all documents which are either (i) specified in the Purchase Order which must be sent to and approved by Schneider Electric as the condition for payment of the Price or Purchase Order Price, or (ii) if the relevant Purchase Order fails to specify any documents, (a) A commercial invoice correctly stating the Price or Purchase Order Price and, if any, all requested details as per applicable law, (b) an original copy of the Final Acceptance Certificate bearing Schneider Electric‘s company stamp and its authorized representative‘s signature; and (c) if any third party Intellectual Property Right is involved in the manufacture, use, or delivery of the Products, Works and/or Services, all necessary documents or certificates which prove that Schneider Electric has the license or right to use, sell or otherwise dispose of the Products and/or Services supplied by the Supplier. Page 28 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Self check - 2.1. Part I Say true for correct statement and false for incorrect statements (one point each) 1. Payment is the exchange of money, goods, or services for goods and services in an acceptable amount to both parties and has been agreed upon in advance. 2. System documentation is the act of capturing or documenting all of the steps in a particular task. 3. Security is only the characteristics of payment. 4. Sales documentation is writing down anything that helps your sales team close deals. 5. Mobile phone is a method of payment good and service. Part II - Choice 1. What payment method might be preferred by small retail businesses due to its immediate availability and avoidance of transaction fees associated with credit/debit cards? a) Credit cards b) Mobile phone payments c) Cash d) Checks 2. For launching a new product, which type of documentation is crucial to provide clear instructions and information for both technical and non-technical users? a) Process Documentation b) Sales and Marketing Documentation c) User Documentation d) System Documentation 3. Which form of documentation aids in capturing detailed step-by-step guides, checklists, and process maps, essential for ongoing process review and optimization? a) Sales Collateral b) User Manuals c) Process Documentation d) Marketing Requirements Document Page 29 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  4. What documentation is necessary within a business-to-business context to ensure compliance and successful payments as per specified conditions in the Purchase Order? a) Final Acceptance Certificate b) Intellectual Property Documentation c) Payment Documentation d) Sales Methodology 5. Which payment method has been increasingly facilitated by contactless payment technology, allowing customers to make transactions through their mobile devices at point- of-sale terminals? a) Checks b) Credit Cards c) Cash d) Mobile Phone Payments Part III- Write short answer for the following question 1. Discuss Characteristics of payment __________________________________________________________________ __________________________________________________________________ 2. Define ways of payment __________________________________________________________________ __________________________________________________________________ 3. Identify type of documentation __________________________________________________________________ __________________________________________________________________ 4. Identify Sales and Marketing Documentation Page 30 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Unit Three: Payments against Documentation This Unit is developed to provide you the necessary information regarding the following content coverage and topics:  Confirming authorization for payment  Discrepancies of payment Facilities. This Unit will also assist you to attain the learning outcomes stated in the cover page. The completion of this learning guide, you will be able to:  To confirm authorization for payment  To identify and follow up discrepancies Page 31 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  3.1. Confirming authorization for payment Payment Authorization is a process through which the amount to be paid on a payment method is verified. In case of credit cards, authorization specifically involves contacting the payment system and blocking the required amount of funds against the credit card.Payment authorization, also called credit card authorization, is a process that verifies a customer has enough funds to cover the amount to be paid on a sale. This process also applies to debit card transactions and PayPal transactions. Payment Authorization is a kind of an approach which guarantees evidence that the certain account is valid and adequately provisioned inquiry can be approved. If the client conducts a payment by his/her card, the data must be transmitted to the cardholder‘s financial establishment for handling. The PA is a type of operation which ensures the security of clients‘ payments. It is a kind of pending charge or hold of the payment in order to guarantee that the client‘s account has a sufficient sum of funds which can cover the price of the product/service. The PA commonly occurs in the pending transactions of the cardholder‘s account. 3.1.1 Importance of payment authorization I. Minimize fraud and charge backs We‘ve learned a payment authorization from confirms the authenticity of the purchase and serves as verification of the transaction in the event of a customer dispute. Unfortunately, some customers have second thoughts on purchases of goods or services and don‘t want to pay for them. As a result, a customer requests their financial institution to mark a payment as fraud or unauthorized, and a chargeback initiates against your business. This debits the funds for your bank account without prior warning or your authorization. The health of your merchant account, in turn, suffers, and it is a frustrating scenario to deal with when your company is not in the wrong. In cases where a dispute arises, the burden of proving payment was authorized falls to you as the merchant. Providing the authorization form to the bank confirms serves as proof payment was submitted with the customer‘s consent. This, in turn, assists the process of reversing the chargeback, so it doesn‘t count negatively towards your business. Page 32 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  II. Minimize errors Human error is inevitable – mistakes happen all the time. It is not uncommon in a CNP payment environment to key in the payment digits incorrectly or transposes a number. Certainly, with your trusty payment authorization form on file, you can easily confirm the details without creating a frustrating experience for the customer should you receive a payment error. III. Establish positive merchant reputation If operating in a high-risk industry, you most likely are subject to many restrictions and must adhere to specific guidelines. This encompasses the requirements you need to maintain with your merchant bank. Falling outside of the rules established can leave you without the ability to process an electronic payment. This can quickly create a negative situation for your business…fast. Establishing a payment authorization form process proves to your processor you take the responsibility to accept a payment seriously and are doing your part to reduce the risk of fraudulent transactions occurring. Having a good reputation with your payment processor can, in turn, lead to lower processing rates or a higher monthly volume when requested. To conclude, accepting CNP payments comes with risk – no matter how you look at the scenario. The payment authorization is one tool available to your business to ensure you are receiving valid payments. But it is just one tool – there are many options available to reduce your merchant risk. Looking to learn more? Reach out to Payment Savvy today to discuss how we provide secure, reliable, and innovative payment solutions to a wide array of high- risk merchants Page 33 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Credit Card Authorization Now that we‘ve covered the fundamentals of credit card authorization, let‘s look into how the process actually works. Figure2.1.Authorization process Step 1: The customer uses their credit card at checkout Payment authorization starts when your customer offers a credit card for payment at checkout and inserts, swipes, or taps their card into your payment terminal. It might also begin when your client orders from your website and enters a credit card number in an online form. In some instances, credit card authorizations take place when a customer gives their number to one of your sales agents over the phone. Step 2: An authorization request is sent to the bank Once this information is received, your client‘s credit card information is sent through an authorization switch. This authorization switch is established and managed by the organization or system hosting your POS device, sales support, or online ordering. Page 34 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  By analyzing the transaction information, the authorization switch determines which financial institution is servicing the credit or debit card. It then sends an authorization request for the transaction to the issuing bank or acquirer for verification. Step 3: The request is approved or declined After the bank verifies that your client‘s credit is in good standing and has not exceeded the credit limit, your payment terminal receives an authorization message. At this time, merchants have the option to place an authorization hold on the cardholder‘s account for the authorized amount of the sale. You can then complete the sale, often instantaneously. Authorization Letter to Collect Payment on Behalf of Me Sample It may not always be feasible to collect the payment money from a party personally by the person, who is supposed to receive it. Hence, he can authorize someone in writing to collect the money on his behalf. You may be wondering, in this day and age, why a person will have to write a letter and why he cannot just call over the phone and inform the payer that someone is coming to collect the payment. Payment authorization form In any scenario where (CNP) payment transaction initiates, an agreement between the cardholder and your business for the product or service provided is paramount. Typical CNP payments occur over the phone, online, or still via snail mail in some instances. Having a payment authorization form process for these transactions helps confirm and verify the payment details agreed upon with your customer. It certainly establishes validity when assessing debits against a particular card or bank account. In short, it is a financial agreement between your business and your consumer. It is signed by the authorized account holder and grants merchant permission to charge a specific dollar amount to the payment method for concrete for a period of time. It can be used in both one- time and recurring payment transactions. Page 35 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  The details confirmed within the document vary among businesses as needs differ, but standard items generally include:  Agreement Date  Merchant‘s Address and Contact Information (Customer Service Phone Numbers and Email Addresses)  Customer‘s Billing Address on File with the Payment Method  Language Authorizing Your Business to Charge the Payment Method on File  Instructions on how a Customer can Alter a Payment  The Account Holder‘s Payment Information  Name on Card or Checking/Saving Account  If Credit/Debit – Card Type, Card Number, Expiration Date, and CVV Code (if One-Time Payment)  If Checking/Savings Account – Account and Routing Numbers, Check Numbers (if Applicable)  Signature and Name of Account Holder It is because a signed authorization letter serves as evidence in case the matter is disputed between the parties in the future and the case ends up in the court of law. An organization can authorize any of its officials to collect money on its behalf. Here are examples of authorization letters for collecting money on behalf of someone. TEMPLATE #1 (Official Authorization) Ref:................... Date:................. To (Name of the Party) (Address) (Phone Number) Sub.: Authorization for collecting payment Dear............., Page 36 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  We are hereby authorizing the following official of our company to collect a payment of a sum of Rs.................... (Rupees...................... only) in respect of the amount outstanding towards invoice number................. Dated.............. For the supply of the.............. Goods Name of the employee:......................... Designation:....................... Employee code:................. Signature:................ You may pay him the said amount in cash or by cheque or demand draft as suitable to you. Thank you for your cooperation! Yours faithfully, For.................... Limited, (Signature) (Name of the Officer) (Designation) TEMPLATE #2 (Email Authorization) Dear..............., Greetings of the day! I hope you are doing well. You are hereby authorized and directed to pay to Mr................... an amount of Rs................ owing in respect of the loan, which I gave you last year. He will be visiting your house tomorrow morning to collect the money. You may verify his identity through his government identity card before handing over the money. This shall be your good and sufficient authority for so doing. In case of any query, please contact me at (Phone Number). Thanks & Regards, (Name of the Person) TEMPLATE #3 (Personal Authorization Letter) Date:................. From Page 37 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  (Name of the Sender) (Address) (Phone Number) (Email Id) To (Name of the Person) (Designation) (Name of the Organization) (Address) (Phone Number) Sub.: Authorization to collect payment Dear Sir/Madam, I, the undersigned, hereby authorize Mr / Ms‘ (Name of the Person) for collecting money from you for an amount of Rs................/- towards the services rendered by my firm last week vide invoice number............. dated........... For the purposes of identification, Mr / Ms‘ (Name of the Person) is the holder of Passport/ Aadhar card bearing number................., which you may verify as well. This authorization letter will be valid until (Date). In case of any questions, feel free to contact me at (phone number). Thanking you, Yours sincerely, (Signature) (Name of the Sender) Page 38 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  3.2. Discrepancies of payment Facilities. Invoice Discrepancy means discrepancies in invoices, discrepancies between the invoices and the accounts of the Paying Party and/or any dispute related to the invoices. After you identify a discrepancy, you might have to contact the vendor if you think that the information on the invoice is incorrect. Depending on the resulting agreement with the vendor, you can then take one of these actions: Accept the price difference, and post the invoice that has matching discrepancies. Invoice Invoice is a document given to the buyer by the seller to collect payment. It includes the cost of the products purchased or services rendered to the buyer. Invoices can also serve as legal records, if they contain the names of the seller and client, description and price of goods or services, and the terms of payment.An invoice is a document submitted to a customer, identifying a transaction for which the customer owes payment to the issuer. This document represents an asset of the issuer and a liability of the customer. An invoice typically identifies the following information. An invoice is an important source document for a company‘s auditors. An auditor will likely want to review a sampling of all invoices issued as part of the procedures associated with an audit. The auditor will also send requests for confirmation to a seller‘s customers, asking them to confirm the amounts stated on the invoices. Page 39 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  3.2.1. Evolution of invoices for payment Stone invoices Hand-written Electronic Online invoice Mobile invoices invoices invoice Figure.2.2. Evolution of invoice Stone invoices Invoices and records of transactions were made as early as 5000 BC in Mesopotamia. The merchants used to carve details of transactions on clay or stone tablets using the earliest form of math. Hand-written invoices Invoicing later evolved to hand-written invoices on animal skin, parchment, or paper. These invoices contained most of the elements of a modern invoice and used signatures or seals. Electronic invoices The invention of computers brought about the next big change in invoicing. This revolution was triggered by the desire to reduce traditional costs and labor. Invoicing became cheaper, easier, and faster with electronic invoices. Online invoices The advent of the internet led to better, more secure, greener ways to communicate with clients. Online invoices are paperless as the invoices are sent through email, and payments are made online. Page 40 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Mobile invoices Invoicing in the modern world has gone mobile. Specialized SaaS (Software as a Service) companies ensure that invoicing is now automated, secure, and instant, so you can invoice on the move. 3.2.2 Functions of invoices Companies need to deliver invoices in order to demand payments. An invoice is a legally binding agreement showing both parties' consent to the quoted price and payment conditions. However, there are other benefits to using invoices. A. Maintaining records The most important benefit of an invoice is the ability to keep a legal record of the sale. This makes it possible to find out when a good was sold, who bought it, and who sold it. B. Payment tracking An invoice is an invaluable tool for accounting. It helps both the seller and the buyer to keep track of their payments and amounts owed. C. Legal protection A proper invoice is legal proof of an agreement between the buyer and seller on a set price. It protects the merchant from fraudulent lawsuits. D. Easy tax filing Recording and maintaining all sale invoices helps the company report its income and ensure that it's paid the proper amount of taxes. E. Business analytics Analyzing invoices can help businesses gather information from their customers' buying patterns and identify trends, popular products, peak buying times, and more. This helps to develop effective marketing strategies. Page 41 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  3.2.3 Types of Invoices Figure 2.3. Invoice Pro forma invoice Sent before any work is carried out, these documents list out the goods and services being provided along with the price they aren‘t usually a request for payment but more a notice of when your client will need to pay the invoice. a. Interim invoice When working on very large projects, instead of waiting until the end of the work and issuing one big invoice, interim invoices allow you to send them intermittently throughout the project. b. Recurring invoice These invoices tend to be scheduled to go out indefinitely or for projects set to last for a set period of time, for example 12 months. Page 42 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  c. Final invoice This is the last invoice sent to a client outlining all the work that has been carried out as well as any outstanding balance due. d. Collective invoice If a business is doing lots of small projects for a client, instead of issuing multiple small invoices, they can instead provide one collective invoice grouping together the smaller invoices. These tend to be beneficial as you don‘t need to keep track of multiple invoices and keep transaction fees to a minimum. e. Credit invoice Credit invoices are issued by businesses to clients to provide a refund or discount as a result of a previous invoicing error. They usually include a negative amount that needs to be paid. f. Debit invoice Much like a credit invoice, your client may issue a debit memo if you have under billed them. Debit invoices are useful to small businesses and freelancers when they need to make slight adjustments to an existing bill. Page 43 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Self check question – 3.1. Part I -True or False 1. Payment Authorization is solely related to credit card transactions and doesn't apply to debit cards or PayPal transactions. 2. Payment authorization helps to minimize errors by ensuring that all transactions are error-free, without any human mistakes. 3. An invoice is a legally binding agreement that only serves as a record of a sale between a buyer and a seller. 4. Recurring invoices are only sent for projects that are set to last indefinitely and not for a specific duration, like 12 months. 5. Credit invoices are issued to clients in the case of overbilling or charging them incorrectly. Part-II Matching Column A 1. Minimize fraud and chargeback 2. Establish positive merchant reputation 3. Payment Tracking 4. Collective invoice 5. Final invoice Column B A. Payment authorization serves as evidence of authorized payments to prevent customer- initiated disputes. B. Having a payment authorization process showcases responsibility in accepting payments, potentially leading to better terms with payment processors. C. An invoice helps in tracking payments and amounts owed, aiding both the seller and the buyer in accounting. D. Grouping together multiple small project invoices into a single invoice to streamline transactions. E. The last invoice sent to a client, detailing all completed work and any remaining outstanding balance. Page 44 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Part III- Short Answer 1. what do you mean Payment Authorization __________________________________________________________________ __________________________________________________________________ 2. what are the importance of payment authorization __________________________________________________________________ __________________________________________________________________ 3. What are the steps to authorization Payment or Credit Card Authorization __________________________________________________________________ __________________________________________________________________ 4. Identify the types of Invoices __________________________________________________________________ __________________________________________________________________ 5. List Function of invoice Page 45 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Operation Sheet. 3.1. Payment Authorization letter Instructions:-Prepare tools for authorization letters. Computer, A4 papers, pen, pencils, company manuals and guide lines, Customer information Task1:- list the necessary steps to prepare authorization letter 1. Agreement Date 2. Merchant‘s Address and Contact Information (Customer Service Phone Numbers and Email Addresses) 3. Customer‘s Billing Address on File with the Payment Method 4. Language Authorizing Your Business to Charge the Payment Method on File 5. Instructions on how a Customer can Alter a Payment 6. The Account Holder‘s Payment Information  Name on Card or Checking/Saving Account  If Credit/Debit – Card Type, Card Number, Expiration Date, and CVV Code (if One-Time Payment)  If Checking/Savings Account – Account and Routing Numbers, Check Numbers (if Applicable) Signature and Name of Account Holder Page 46 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  LAP T Test 3.1. Instructions: Given necessary templates, tools and materials you are required to perform the following tasks accordingly. Task 1: Prepare at least one financial institution how to enter data into system. Task 2: Prepare at least 1 financial institution how to process Documentation manual. Page 47 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Unit Four: Effect of Payments This Unit is developed to provide you the necessary information regarding the following content coverage and topics:  Credit arrangements  Payment instruments  Cancel primary documentation This Unit will also assist you to attain the learning outcomes stated in the cover page. The completion of this learning guide, you will be able to:  To make payment within agreed credit arrangements  To update payment instruments  To Cancel primary documentation Page 48 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  4.1. Credit arrangements Credit is a contractual agreement in which a borrower receives something of value immediately and agrees to pay for it later, usually with interest. The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. In general Credit A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date. When a consumer purchases something using a credit card, they are buying on credit receiving the item at time, and paying back the credit card to the company according to the agreement between the creditor and debtor. Any time when an individual finances something with a loan (such as an automobile or a house), they are using credit in that situation as well. 4.1.1. Types of credit a. Trade Credit Trade Credit refers to credit in business dealings like selling goods on credit where the customer promises to pay money later, buying goods on credit where we, the customer of the supplier, promise to pay to the supplier on a later date. It is given based on the borrower‘s financial capability, i.e., credit taker. In some cases, it is given based on a relationship with the person asking for credit, or it depends upon business rules. In a large organization, the credit rules are the same for all the customers. b. Bank Credit Bank Credit is an extension of consumer credit. In bank credit, the bank gives loans and credit facilitates to clients. Consumer credits are given based on creditworthiness, analysis of financial statements, and value of the asset given by consumers as security. Examples of consumer credit are mortgage loans, cash credit facility, housing loans, etc., letter of credits, bank guarantee, discounting of bills of exchange also falls under the bank credit facility. c. Revolving Credit Revolving credit involves the continuous credit in which the lender gives the extension of credit to the borrower so long as the account is regular and open by regular payments like in case of credit card the credit is given regularly and limit of credit is given and payment to be Page 49 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  made on monthly or quarterly basis. And the account will continue till it is closed, i.e., credit is extended every month. d. Installment Credit Installment credit is the extension of bank credit. When we obtain credit from banks by way of loan, the bank sets the fixed monthly Installment as repayment type of loan along with interest up to a certain period till the loan gets re-paid along with interest. The bank or finance company charges a penalty if the borrower cannot pay the instalment e. Mutual Credits In mutual credit, money is not used as in this case. If one person owes another person for something that another person also owes to the first one, the credit becomes mutual credit. So credit gets cancelled with each other, and in case a balance remains after that, then the same is settled by the mode of cash or equivalent. Like in business, one person is a creditor and a debtor. Hence, they mutually settle the payments. f. Service Credit In-service credit, the credit is given for services availed earlier. Like lawyers ask for final fees once the case is over, the accountants charge after filing the returns. Electricity bills, telephone bills, gas bills, and post-paid bills are examples of service credit. Service credit borrowers can pay after availing of the service at fixed intervals. But if the service receiver fails to pay at fixed intervals, it may cancel services or charge a penalty for late payments. Page 50 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  4.2. Payment instruments A payment instrument means any electronic or written instrument; it is a designation for how a payment was or will be made. For example a check, draft, warrant, money order, traveler‘s check, electronic instrument, or other instrument, payment of funds, or monetary value (other than currency), The term does not include any credit card voucher, letter of credit, or tangible object redeemable by the issuer in goods or services. 4.1.1. License payment instrument in Ethiopia According to the directive a person other than the licensed financial institutions, shall submit a complete application to NBE to get a license to issue a payment instrument. As part of the application process, the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the- counter transactions; and inward international remittances services. Besides, based on written approval of the National Bank, a licensed payment instrument issuer under full responsibility of and written outsourcing agreement with a regulated financial institutions and pension funds may be allowed to provide Page 51 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  4.1.2. Classification of Payment instruments Cash payments Cash payment is money in the physical form of currency, such as banknotes and coin. It I used in small-value transactions relating to everyday purchases. Non-cash payments Non-cash payments are mostly made by means of (1) credit transfers, (2) checks, (3) payment cards, and (4) direct debits.  Credit transfers A credit transfer is a payment transaction by which a payment service provider transfers funds to a payee's account against a payer's order, and the payer and the payee can be the same person.  Checks A check payment is a negotiable instrument drawn against deposited funds, to pay the recipient a specific amount of funds on demand. A check has traditionally been physically routed from the payer to the payee, then to the payee's bank, which issues funds to the payee, and then by the payee's bank to the payer's bank.  Payment cards  Credit cards A credit card is a type of credit facility, provided by banks that allow customers to borrow funds within a pre-approved credit limit. It enables customers to make purchase transactions on goods and services.  Debit cards A debit card is a payment instrument which allows the cardholder to acquire goods and services in authorized establishments, using financial resources from a bank account, as well as to make withdrawals in ATM‘s. The operation‘s approval and corresponding debit in the cardholder‘s account happen the moment the payment is made.  Retailer cards Retailer cards, which are mainly issued by major stores, can only be used only at the shops of the same group, i.e., they are ―in-store‖ cards. The use of this instrument implies, in fact, Page 52 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  payment deferment (sometimes the issuer admits payment by installments, without explicit financial fees). On the due date, the payer normally uses either cash or another payment instrument (check or debit card) to settle the obligation, having to return to the commercial establishment to do so.  Pre-paid cards Prepaid cards are technically a type of debit card. Issued by a financial institution or credit card company—Visa, MasterCard, and Discover all offer them—they are deposited or "loaded" with a certain amount of money. They then can be used in person or online to purchase items or pay bills.  Direct debits Direct debits are normally used for recurrent payments, that is, those that are made on a periodic basis, mostly related to utility services (water, electricity, and telephone, for example). For such payments, the payer should pre-authorize the bank to accept funds transfers initiated by the payee, which should previously send to the payer, for his control, the correspondent invoice. The authorization is usually for an indefinite period of time, therefore valid until not cancelled.  Updating payment instruments Once a payment instrument is already active, you can only update its status. you can update the balance account associated with the card. Keeping customers' payment card information up to date is very important. Updating payment card information is simple, safe, and secure. Use a separated field‘s form to update the expiration date, or billing address.  Update Credit card You can visit the card issuer‘s branch for changing the address on credit card, email ID, or registered phone number. You will have to fill out a Customer Request Form (CRF) with new details. For address change, you will have to submit a self-attested copy of the proof of the new address. The bank will notify you once your request is processed through the updated details. Page 53 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  4.3. Cancelling Payment documentation Cancellation is the act of destroying a document by making lines through it, tearing it up, or defacing it with the intention of rendering it void. Cancelling Payment If Payee went to cancel the payment, Call the company and tell them you are taking away your permission for the company to take automatic payments out of your bank account. The company‘s customer service should be able to help you, and there might be an online form you can use. Then, follow up by writing a letter or an e-mail. When you contact the company, you can explain whether you are cancelling your ongoing contract or subscription, or only changing the way you are paying them. For example, you might cancel automatic payments and decide to pay invoices when they arrive. Cancellation payment form Figure 7 Cancellation payment form Page 54 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Self check 4. Part I True or False 1. Trade credit is solely based on the borrower's financial capability. 2. Bank credit always requires collateral in the form of an asset. 3. Revolving credit involves a fixed repayment schedule. 4. Mutual credit involves the use of money in settling debts. 5. Service credit is exclusively provided by financial institutions. 6. Cash payments are typically used for large-value transactions. 7. Direct debits are commonly used for one-time payments. 8. Prepaid cards are a type of credit card. 9. Updating payment card information requires a complex process. 10. Cancelling a payment through automatic withdrawals can be done solely by phone call. Part II. Answer the following questions 1. Identify the term Credit 2. How to update Credit card 3. List the type of Credit 4. What are the difference between Installment and revolving credit Part III. Matching 1. Retailer card A, VISA 2. Debit card B, negotiable instrument 3. Direct debit C, ATM 4. Prepaid card D, store card 5. Check E, for utility service Page 55 of 69 Author/Copyright : Version -I Processing Payment Documentation Ministry of Labor and Skills November, 2023  Unit Five: Documentation This Unit is developed to provide you the necessary information regarding the following content coverage and topics:  Filing Documentation  Accessing Documents This Unit will also assist you to attain the learning outcomes stat