Simon,

I work in local government, where the auditing of accounts is taken very seriously, where accounting practices have to be especially accurate and where large numbers of invoices are processed daily. I didn't just create the process I outlined for the correct handling of credit notes; I spoke to colleagues who are professionally-qualified accountants to confirm how credit notes should be processed by a business.

A credit note is raised where there is any agreed discrepancy between the amount that the customer has paid for goods/services from a supplier. The could be over the dispute of an invoice (where a credit note covers an entire invoice), or for an overcharge, as you mention. Or it could be due to early termination of a service, or the substitution of goods at one value against another, or the under-supply of goods (you buy X idgets but only receive Y).

A credit note should never automatically be allocated (applied to an invoice) by a supplier, and certainly not without informing the customer. The customer should always state how they wish the credit note to be allocated. They may choose to receive it as a payment e.g. cash/cheque. More commonly they may wish to offset the credit note against one or more subsequent invoices from that supplier, depending on value. When making a remittance to a supplier, the reference numbers of the credit notes being applied will be highlighted to indicate which credit note the supplier may now deem to have been settled. A customer may have several trading accounts with the supplier and may wish to ensure that the credit note is properly applied to an outstanding invoice for a particular account, not just on any account.

By automatically offsetting a credit note against an imminent invoice, the supplier risks placing the customer in a position of underpaying one invoice and over-paying another. The books may appear balanced at the end of the day, but an accountant/auditor would be highly critical of such a practice. It risks placing the customer in a position where they believe they've settled an invoice in full, but the supplier believes that the invoice is only part-paid. At best this leads to a heated exchange with the supplier, at worst it could lead to the involvement of a debt-recovery agency. There will also very likely be tax implications, even for those not VAT registered - your supplier might be. Mis-allocated credits may result in VAT claims being incorrect, something which HMRC could regard as poor accounting at best and fraud at worst.

Whilst you (personally) choose to handle credit notes in the way that you do does not make it the correct business practice. Very likely you're dealing with a small number of invoices, even from the same supplier, and probably aren't too concerned about the VAT implications. You are unlikely to need to have your accounts audited and lodged with Companies House. Zen on the other hand do have to have their accounts audited and do have to make sure that credit notes are issued and allocated correctly according to the express wishes of customers, not based on assumptions.

Yes, Zen made an administrative mistake with your billing. Mistakes happen - even you aren't perfect - what is important is that they acknowledge that and will sort it (which appears to be the case, is it not?). However, they handled the credit note situation correctly according to proper business practice, whether you care to accept this or not. I've already said that I think that they need to make this practice clearer to customers as not all of them will appreciate how credit notes should be handled. But that does not constitute "mismanagement". If Zen were regularly screwing up peoples billing then I might agree with the use of the word, but in all the years I've had dealings with Zen - both as a residential customer and a business customer - I've only had to contact their accounts people two, possibly three times. And in all three cases the issues were resolved promptly and efficiently, the same level of service as we all praise Zen's customer and technical support functions for.

If you want "mismanagement" of the handling of accounts, I give you two examples. First, BT Private Circuit Billing (BT PCB), who issue a credit note to the customer and then automatically allocate it to any outstanding private circuit account you have, regardless of whether it is the same account as the credit note was raised against, and not telling the customer they've done this. This often leads to the credit effectively being "claimed" twice - once by the customer using the credit note when making a remittance, and once by BT PCB arbitrarily allocating it to a customer's account. The net result is that the customer then gets nasty letters from BT PCB saying that the account is underpaid, threats of circuits being suspended, etc. etc.

The other example of "mismanagement" is Demon's accounts/billing people. Here, we don't even get into the use of credit notes, simply the allocation of remittances to outstanding accounts (invoices). When a remittance is sent it will contain a remittance advice note, a list of the invoices the remittance (payment) is intended to cover. Demon's accounts people occasionally disregard this and simply allocate the payment to whatever outstanding invoices that customer may have. This leads to the situation where a customer believes a particular invoice is paid, yet Demon start chasing because the invoice (according to their system) is only part-paid, because the payment for that invoice was partially allocated to another outstanding invoice.

Wow thats a big chunk of text!

But thanks for taking the time to post it none the less!

Thanks for that - and especially for the paragraph breaks!

I don't dispute anything you have said. But I think it's very likely that Zen are able to distinguish between their personal and business customers and I'm sure that there should be different processes used depending upon the type of customer. Businesses may well be used to getting credit notes and responding to them with instructions. Private customers certainly aren't. Typically, and justifiably, they place the onus on Zen to proceed to balance the account - which in the vast majority of cases would mean a refund to a card or an adjustment to their next bill. I got neither -- nor any notice to give Zen instructions. In fact, my credit note states clearly: "This invoice adjusts the billing of your broadband service after the regrade from "Zen Office 8000 Max" to "Zen 8000 Pro" on 24th October 2008" - and it was therefore obviously not followed through since my next invoice a fortnight later was for another month's sub at the full Office 8000 Max tariff.

So, however right you may be, there was still plenty of mismanagement of my account -- and several processes which are flawed in terms of handling business with private customers.

Simon

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Thanks for that - and especially for the paragraph breaks!

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You're welcome Simon, I thought it might help educate you in the ways of business.

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I don't dispute anything you have said.

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Oh really? So why still maintain this view of "mismanagement" as opposed to "honest mistake"? Must be so difficult being so perfect.

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But I think it's very likely that Zen are able to distinguish between their personal and business customers

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How so? If I order an ADSL connection for business use, I don't necessarily need to either (a) establish a trading account with Zen or (b) only purchase the "Office" branded services. I can (and have) bought Home 8000 services. How then do you expect that Zen could tell any difference between my own home service and my business services?

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Businesses may well be used to getting credit notes and responding to them with instructions. Private customers certainly aren't.

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And I've already stated (both here and in the thread that covered this many moons ago) that Zen ought to mak it clearer to ALL customers what their processes are for handling credit notes. I agree that residential customers won't be aware of how they should claim the credit. I disagree that it should be automatic for some; as I've already mentioned, the PCI are not keen on refunding to cards as a way of settling a credit note (since the value of the credit note is unlikely to be exactly the same as the invoice that was charged to the card in the first place). I also prefer Zen not to hold my card details for those purposes.

So why still maintain this view of "mismanagement" as opposed to "honest mistake"?
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In the past three weeks there has been a series of "honest mistakes" on my account. I allow only the first one in a series as an mistake. The second one starts to trouble me. By the third one, we're getting into flawed processes. Don't encourage me to post chapter and verse. I am happy with Zenops Gary's actions and his reply in this thread -- which acknowledges the problems with their processes and promises to review them.

You're welcome to disagree with his assessment of course.

Simon

No, I'm disagreeing with yours.

You're welcome to do that too.

Simon

I've already said that Zen need to make it clearer to customers what the credit note is and how to "claim" the credit. However, this doesn't equate to "mismanagement".
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Different rules should be applied to private/personal customers; it's as simple as that. Zen surely know whether they have a customer called John Smith or John Smith Ltd. That's all it takes. Business customers may well be happy to settle for a credit note and no automatic refund. Private individuals expect, and deserve, their money back as quickly and automatically as possible whenever they have overpaid for any reason.

The Times branded the utility firms as "rip-off Britain" when it was revealed that they were holding on to up to �1bn of customers' overpayments (overpayments which the same companies were automatically refunding back to their customers in other parts of Europe). Linky. I'm sure that Zen wouldn't want to be tarred with the same "rip-off" brush.

You will also find that it is the policy of all local authorities to automatically refund overpayments back to customers' banks or credit/debit cards. Linky. All state education institutions act in the same way.

The Office of Fair Trading gives refunds, not credit notes, when there has been an over-payment for a credit licence. Linky

Internet retailers automatically refund overpayment or payments for goods which aren't in stock.

It isn't rocket science. If a company has your cash and isn't entitled to keep it then it should be automatically refunded. There is no moral justification for not doing so, even if there may be some basis in law for issuing a credit note and sitting back.

So, in short, treat business how they expect to be treated. And treat individuals as people who don't have enough money to lend it to you at 0% interest.

Simon

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Different rules should be applied to private/personal customers; it's as simple as that. Zen surely know whether they have a customer called John Smith or John Smith Ltd.

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Zen have no way of knowing which of their customers are business and which are residential. You don't have to tell Zen, and certainly the name you provide Zen doesn't have to include any type of business suffix (such as Limited or Plc) even if you are ordering on behalf of one.

I have provided Zen with no information which would tell them which type of customer I am, so even if they did have 2 processes, how do they know which to use on me?

It's been quite interesting reading both sides of this discussion - sitting as an impartial observer I think you both make salient points.

Cheers
Ruz

Zen have no way of knowing which of their customers are business and which are residential. You don't have to tell Zen, and certainly the name you provide Zen doesn't have to include any type of business suffix (such as Limited or Plc) even if you are ordering on behalf of one.
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It's difficult to buy into the notion that a company which has to market its services doesn't know who its customers are! I would make it my business to find out. But failing that, I would assume that all accounts which are paid for out of a personal, named individual's account should be classed as private customers while those paid out of a company account are obviously business customers.

Alternatively, treat all Home account customers as private customers, whether they are or not; and treat all Office account customers as businesses, whether they are or not.

It really isn't difficult to arrive at a process which allows Zen to occupy the moral high ground -- which is where money owed to private customers is automatically refunded to them with no further questions having to be asked.

Simon