Fund Management

What is a Fund?

A fund is essentially a bank account for your customers where the bank is your company, and your customer's deposits can be in the form of dollars, points, or both. Each customer can have their own fund, or many funds, each with their own purpose. For example, one fund can contain dollars that are to pay for an upcoming trip (vacation) and another fund can contain promotional points that can earn a free advertisement for your customer's business. Technically, the system considers a fund to be the combination of a customer account and a marketing program. The key to the Fund File is customer account number plus a marketing program code.

Talk the Talk

Fund management comes with its own language. Before we examine the finer points of managing funds, here are some terms you should be familiar with.

Term	Definition
Overbill	A unit charge added on to the amount normally charged a customer. For example, you normally charge $3.69, but you are adding a .20 overbill thereby actually charging $3.89. The .20 per unit goes toward the fund.
Hidden Overbill	A unit charge added on to the amount you could charge the customer of which the customer. For example, you have just saved $.20 per unit with a new deal from your supplier, and you tell your customer that if he buys enough of the product he will get a free toaster. You keep the customer's price the same, but divert the extra $.20 gross profit (due to the cost savings) into a fund for toasters that the customer is actually paying for.
Free	The illusion of goods or services provided without expense.
Fund Contribution	Any deposit into a fund. The deposit can be in the form of dollars or points. Fund contributions are made via overbills, point promotions, and direct contributions via use of a Fund Item.
Fund Item	An item that is used in Order Entry and invoicing for the sole purpose of depositing to or withdrawing from a fund. This method enables a customer to directly contribute to the fund. For example, the customer may have, through overbills, accumulated $2200.00 towards a trip, but the deadline is near and $2500.00 is required to qualify for the trip. Using a fund item, the customer can request to be billed the additional $300.00 needed to go on the trip. In Order Entry, a fund item is used to bill the $300.00. The transaction affects funds without affecting sales.
Trip Fund	A fund that is designed specifically to accrue funds for a travel event or vacation.
1099 Form	What you need to send your customers who have participated in a trip fund. You should be aware of what type of promotions qualify for a 1099. If in fact the customer paid for their own trip via overbills, you may not be required to consider any of the funds to be a perk or extra income for the customer. If your company is contributing to, or matching funds, then you probably need to issue a 1099. You must familiarize yourself with all government requirements regarding funds.
Matching Funds	An automatic contribution to a customer's fund, made by your company for a specific percentage of the customer's contribution. In a 100% matching fund, your company matches the customer's contribution completely.
Co-op Fund	Similar to a matching fund, but usually for cooperative marketing between the supplier, wholesaler, and retailer. When the retailer contributes a certain amount, the wholesaler and/or manufacturer also contributes toward a joint marketing event.
Trip Reserve	Although this term is not used within the software itself, it is commonly used in the industry. A trip reserve is a general fund that can be used toward any applicable trips. For example, you might have a 1996 trip to Bermuda that requires $2500.00 per person, a 1996 Florida trip for $500.00, and a 1997 Australia trip for $3500.00. A trip reserve fund could be used for all or any of the trips offered by your company. When a trip is taken, the trip reserve fund is reduced by the value of the trip, and remaining dollars and points can be applied to the next trip.
Points	Promotional points can be assigned to a sale instead of, or in addition to, an overbill. Promotional points have no affect on the prices or gross profit within the system. However, when points are used, your company should probably assign a dollar value to each point for internal analysis. You may not want your customers to know that each point is worth $.05, or whatever value you assign.
Fund Type	There are different types of funds, as designated by the Fund type field in the Fund File. Basic fund types includes: trip reserve fund, special trip funds, cooperative advertising funds, give-away funds and margin adjustment funds. Examples of these types of funds will follow.

Fund Management

Complete the following steps to create and manage a fund.

Define the marketing programs for which the funds will be collected. Funds can be collected in dollars, points, or both. For example, enter marketing program H04 for the Hawaii 2004 trip fund. The marketing program is established in the Classification Codes File.
Create Promotional Pricing File entries that either overbill, assign points, or both for specified products. Specify that the promotional price record is to contribute to a marketing program. For example, enter a promotional pricing records that adds $1.00 per unit of tile, and contributes to marketing program H04, the Hawaii 2004 trip. Usually, the Promotional File record is assigned to specific accounts, or to the same marketing program to which the funds are contributed. For example, you could assign marketing program H04 to all customers signed up for that trip by entering H04 on the Codes Screen of the Billto File. Then, you can assign the Promotional File records to marketing program H04 instead of to the specific accounts. The system automatically applies the promotion to any customer assigned to H04.
Create a default Fund File record in the Fund File for that marketing program. A default Fund File record is created using the marketing program code and account number 000000. This record can establish the rule governing the fund for all accounts that use the fund without having to enter a fund record for each account. The system automatically creates the fund records as required.
Optionally, you can create Fund File records for specific account numbers. This is necessary only if the rules governing the fund are different for individual accounts. For example, some accounts may want to see the overbills separately on the invoice, and other may not. Optionally, load balance forward amounts for each fund if you have been manually managing the fund and there are existing balances.
Monitor the fund using the available screen displays and reports:

Fund File Profile Screen shows information and balances.
Order Entry Additional Functions Screen enables drill down fund inquiries by account and marketing program.
Fund Analysis Report and Promotional Pricing Report can list fund details.
Fund Listing shows summarized fund balance information.

How the System Processes Funds

Order Entry automatically picks up the overbilled dollars and promotional points for customers and products that have promotional programs involving funds. The overbilled dollars and points on the Order Entry and Inquiry screens.
Gross profit never includes overbilled dollars or promotional points in its calculations. Each line item on the system has a separate field for fund dollars and for points.
Invoices pick up the overbilled dollars and promotional points as assigned at order entry, but these values can be overridden when invoicing.
When invoices are posted during the night jobs, Fund File records are added (if new) or updated (if they already exist) and new balances for both dollars and points are established. All sales and gross profit statistics exclude fund dollars. Net invoice amount and accounts receivable include fund dollars.
Up-to-date fund balances and history for customers can be viewed from within Order Entry by using the F4 option on the Wildcard Screen. From a detail line on order entry, press F24 followed by F4 to view a customer's fund information.

The basic accounting for an invoice with fund dollars is as follows:

If the invoice is for $110.00, including $5.00 in fund dollars, accounts receivable is debited for $110.00, sales is credited for $105.00, and a liability accounts (such as accrued funds) is credited for $5.00. The $5.00 fund contribution is a liability; it is reserved for covering a future expense such a paying for a trip.