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Honour Cheque Payments

Loan performer allows you to honor payments for issued cheques or to have the cheques bounced if there are insufficient funds on account and there can be charges associated with that. You can set the default charge and the GL account for the charges at System->Configuration->Savings->Savings Accounts Settings.

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.

The process of clearing the cheque is done through the Central Bank or the Clearing House. Loan Performer maintains an account against which the bookings will made. This can be specified under System\Configuration\Savings\Savings GL Accounts, called the Interbank Cheque Clearing Account.

Note that you will not be able to honor or dishonor cheque payments if you have not defined the Interbank Cheque Clearing Account.

For instance, if Client A of our Bank\MFI has a cheque book and issues a cheque to person B of another Bank\MFI. This other Bank\MFI sends the cheque to the Central Bank or the Clearing House. This then forwards the cheque to our Bank\MFI for approval. After the approval, a report on the honored and dishonored cheques will be sent back, at the end of the day, to the Central Bank or the Clearing House for further processing at the beneficiary's bank. This report can be accessed at Savings->Savings Reports ->Honored Cheque Payments Report..

How to Honour Cheque Payments

To honour cheque payments you go to Savings->Cheque Transactions->Honour Cheque payments. You will see the following screen:

• Savings Account: Here you select the savings account on which you want to honour the cheque payment. Click on the Search command button (a list of all opened savings accounts will be displayed). Pick the Client Name or Savings Account Number that you want, e.g., "DB/I/000004".
• Client Name: The client name for the selected savings account will automatically be displayed in this field, e.g.,"Okello Okello".
• Client Code: In this field, the client code will automatically show up for the selected savings account number, e.g., "D/B/000004".
• Beneficiary Name: In this field you enter the name of the person to whom the cheque was issued, e.g.,"Klan Sam".
• Beneficiary Bank: This is the name of the beneficiary bank where the issued cheque was deposited, e.g., "Equinox Bank".
• Account No: This is the account number of the beneficiary at the beneficiary bank where the cheque was deposited, e.g., "01400255".
• Cheque Number: Here you enter the cheque number, e.g., "365" and in the Action field choose whether to Honor cheque payment or to Dishonor cheque payment.
• Cheque Amount: Enter the amount to be honored. This must be the same amount entered when this cheque was issued, e.g., "1,000,000".
• Account Balance: This is the balance available on the selected savings account from which the cheque is to be paid. This balance will be displayed automatically as soon as the relevant savings account has been selected, e.g., "2,500,000".
• Date honoured: This is the date when the cheque has been honored, e.g., "22/08/2012".

Loan performer also gives a Report on honored or dishonored Cheque's Report in a period and you can access this report at Honored Cheque Payment Report.

NB: When a cheque payment is honored, the balance on the Clients Savings Account is reduced by the amount on the Cheque honored. This can be seen by viewing the client's Saver's Statement at Savings->Savings reports->Saver's Statement.

Click on the Save command button tosave the changes andthe Close command button to exit the menu.

Related Topics

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