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Cheque clearing

This window is used to clear or bounce cheques. Cheque clearing is the process of moving funds from one account to another for payments made by cheque. Once a payment is made by cheque the cheque will have a default status of queue.

In Loan Performer you can make cheque transactions for buying\selling shares, savings deposits, loan disbursements and loan repayments.

Loan Performer offers the flexibility of clearing a single cheque at a time and also a batch of cheques in one go.

Note that: Before entering a cheque, you have to ensure that the corresponding bank account has been configured for the savings, loans and other operations. Before the cheque transaction is effected it is kept in the system until you clear it this is when it will take effect in the relevant GL accounts.

Note:

1. Loan Performer allows you to offer current accounts with cheque books to your clients. The account holders will be able to withdraw money from their accounts or to pay third parties within the MFI. All you have to do is to create a savings product and indicate the product allows cheque transactions by activating the check box “Product has cheque books” under System Configuration/Savings/Savings Accounts Settings.

2. The charges for cheque books or cheque leafs and other cheque transactions are defined under the menu System Configuration/Savings/Savings Accounts Settings and the GL accounts on which these charges are booked are defined under the menu System/Configuration/Savings/ Savings GL accounts.

3. To issue a cheque book or a cheque leaf to a client, go to the menu Savings/Cheque Transactions/Issue cheque books or single cheque leaf. These cheques are for internal use within the MFI and don’t have to go through the clearing house of the Central Bank since MFIs and SACCOS are not regulated by the Central bank. The cheque transactions updates the account of the client immediately and there will be no need to clear the cheque.

4. To make a withdrawal using an internal cheque within the institution under the menu Savings/Savings Withdrawal - Transaction Information, the LPF user has to tick the option "Cheque", then enter the cheque number and the amount to withdraw if the bearer is the account holder. In this case the cheque is just like a savings withdraw slip. However, if the account holder is not the cheque bearer, then the third party has to take the internal cheque to the issuer's MFI to be paid. In this case the LPF user contacts the issuer before honouring it under the menu Savings/Cheque Transactions/Honour Cheque Payments (There must be sufficient funds in the account). Then the user makes a withdrawal by cheque if the beneficiary wishes to have cash or a deposit by cheque on to the beneficiary's account. In case of insufficient funds, you can dishonour the cheque under the menu Savings/Cheque Transactions/Stop Cheque

5. However, if it is an external cheque i.e if the MFI disburses a loan by cheque to a client from it's bank or if a client makes a loan repayment from his bank by cheque, then the bearer has to present the cheque to his bankers and wait for some days for the cheque to clear. At the clearing house of the central bank, the beneficiary's bank contacts the issuer's bank to clear the cheque once cleared, the LPF user will clear this cheque under the menu System/Cheque clearing (There must be sufficient funds)

6. Loan Performer allows cheque printing in batches. For example if you disburse loans to 100 clients every 10th of the month, you can automate the cheque printing. Do the disbursing to the clients before actually calling the beneficiaries and save the cheques as a batch file. The user with the appropriate access rights can then print all the cheques in the batch file at a go under System/Cheques awaiting printing. Ensure that the option "Activate cheque printing" under the menu System/Configuration/Design and print Cheques is ticked, otherwise, the cheques won't appear in the window.

7. Loan Performer allows you to design your own cheques and define the printer to use to print them under the menu System/Configuration/Design and print Cheques. LPF comes with a cheque template as a sample you can use and the designing is done inside LPF by clicking on the button "Modify cheque template" or outside in the LPF installation directory (C:\LPF816\External Files\Report Templates). Note that the actual cheque books are printed using a special printer outside Loan Performer. You need to find a service provider in this field. With Loan Performer, you only print the necessary information on the cheque leaf inserted into the ordinary printer such as the cheque beneficiary and the amount. For example Loan Performer allows you to disburse loans by cheque to your clients.

8. Note that to work with cheques in Loan Performer, you should have issued a branch cheque book under the menu Support Files/Branch Cheque Book.

9. In addition, you can consult at any time the report on issued cheque books under the menu Savings/Savings Reports/Issued Cheque Books Report.

10. All cheques internal and external must be cleared under the menu System/Cheque clearing.

How to clear a single Cheque

To clear a single cheque you go to System->Cheque Clearing->Process single cheque. The Cheque clearing dialog box is displayed and looks as follows:

To clear a cheque first highlight the cheque transaction to be cleared by clicking on it in the transactions grid. All the cheque details will be displayed in the text boxes in the upper part of the screen.

• Cheque No.: This field is read only and will display the cheque number for the cheque under clearance, e.g., "011".
• Transaction No.: This field is read only and will display the transaction number for the cheque under clearance, e.g., "1202000015".
• Payment Date: This field is read only and will display the date on which the payment of the cheque under clearance was made, e.g., "02/03/2017".
• Transaction Type: This field is read only and will display the transaction type for which the cheque under clearance, was made, e.g., "Loan Disbursements".
• Details: This field is read only and will display the details of the transaction for which the cheque under clearance, was made, e.g., "Loan Number: DB/000002".
• Status: From the status drop down menu select option that is relevant, e.g., "1 - Queued.".

Note that all cheques in the scroll space have the status "1 - Queued" by default.

• Reason for Rejection: If you select option "3 - Bounced" then the reason for rejection textbox will become active. From the drop down you will choose the appropriate reason for bouncing the cheque. Note that the option for rejection should have been set at Support Files->Bounced Cheque Reasons.
• Date Cleared: Enter the date when you deem the cheque cleared.
• Commission Charged for Bounced Cheques: In this text box enter the commission that your organization charges on bounced cheques. The amount of commission can be made default or compulsory in the menu Configuration->Savings.

Loan Performer allows you to sort the cheques by the column headers in the search grid. Click on one of the headers (Bank Account, Amount, Cheque No, Cleared or Clearing Date) and the information in that column will be sorted.

At the bottom of this screen you can do a search by the Cheque number. Enter the number in the corresponding text box and press the Search.button. The corresponding cheque number will be displayed in the search grid.

• Make a Selection: You can reduce on the scope of search for the cheques by choosing to include cheques from particular banks only or cheques with particular status like "All Cheques", "Cheques in the clearing", "Bounced cheques only", "Cleared cheques only". You can also view or print the made selection. You can also clear the selection of the cheques by clicking on the Clear button

If your cheque has bounced, the current savings balances are automatically reduced with the bounced cheque balance (plus added commissions if any). In case of a loan disbursement or repayment, the bounced cheque automatically deletes the disbursement or the repayment. If a cheque was used to disburse a loan and you have indicated under menu System->Configuration->Loans Configuration that you want to report the due dates at the moment of cheque clearing, then the disbursement date on the Loan Repayment Schedule will be the clearing date of the cheque and not the date that the cheque was issued. Then the first installment due will be set at the clearing date plus grace days plus installment period. The due dates will be updated, accordingly, on the Loan Repayment Schedule.

Scenario of Cheque clearing in Loan Performer:

Joseph a client of XYZ Micro finance is also a holder of a current account with Barclays Bank Kampala. Joseph decides to pay his Loan Installment with XYZ by a Barclays bank cheque who have their account with both Barclays and Centenary banks.

XYZ will present this cheque to their banker’s i.e Centenary or Barclays because they are not members of the clearing house but their bankers are.

XYZ has two options:

1. It can bank this cheque with its account in Barclays in this case this becomes and Internal cheque to Barclays and will not have to go through the clearing house but cleared internally.

2. XYZ can bank this cheque with Centenary and this becomes an external cheque to XYZ and will now warrant Centenary taking it to the clearing house. Centenary bank will then present this cheque together with other such cheque claims they have against other banks to the clearing house and will in turn receive cheques from other bank’s claims against them.

Joseph’s bankers Barclays will receive this cheque, check it against Joseph’s bank account with them and if the money is sufficient to meet that claim, it is then cleared for payment by Barclays and Centenary bank credited with that amount while Joseph's account is debited.

However if Joseph’s account with Barclays doesn’t have sufficient funds to meet the demand, then this cheque will be dishonored / bounced and Barclays returns it to XYZ Microfinance notifying them that the cheque has bounced.

A designated officer in XYZ Microfinance will then have to update loan performer with the status of this cheque. He /she will go to System/Cheque clearing and change status to either bounced or cleared, he can also state the reasons for bouncing. These reasons should have been defined under Support files/ Reasons for bouncing cheques. You can also charge the Client for bounced cheques if this was set under System Configuration/ Savings Accounts Settings bounced and stop cheque charges.

• To make a withdrawal using an internal cheque within the institution under the menu Savings/Savings Withdrawal - Transaction Information, the LPF user has to tick the option "Cheque", then enter the cheque number and the amount to withdraw if the bearer is the account holder. In this case the cheque is just like a savings withdraw slip. However, if the account holder is not the cheque bearer, then the third party has to take the internal cheque to the issuer's MFI to be paid. In this case the LPF user contacts the issuer before honouring it under the menu Savings/Cheque Transactions/Honour Cheque Payments (There must be sufficient funds in the account). Then the user makes a withdrawal by cheque if the beneficiary wishes to have cash or a deposit by cheque on to the beneficiary's account.
• Account holder withdraws by cheque from his own account.

• Account holder issues Internal cheque to pay a third party who also is a client within the institution. The account holder's account will be debited and the recipient account credited as seen below:

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