Q&A: Netting vs Summing Fees

Q&A: Every question deserves an answer...

Since both the Netting and Summing of fees involve an account's earnings allowance I'll start there.

Earnings Allowance is the dollar equivalent of the credit rate earned for the balances held in your account.  However, this earnings allowance can only cover analyzed charges so the netting or summing of fees will only involve these particular service charges.

When the earnings allowance of an account is more than the analyzed charges due for that same account, the account has an excess earnings allowance balance. 

When the earnings allowance of an account is less than the analyzed charges due for that same account, the account has a deficit earnings allowance balance.

Whether an excess or a deficit, this balance is shown as either Excess/Deficit Earnings Allowance or Excess/Deficit Earnings Allowance-Adjusted. 

What's the difference between Ex/Def EA and Ex/Def EA Adj?  

Ex/Def EA considers any adjustments to Earnings Allowance or Analyzed Charges.

So...

        Earnings Allowance
less Analyzed Service Charges
       Ex/Def Earnings Allowance

No adjustments? Then Ex/Def EA Adj should equal Ex/Def EA.

Adjustments? Then the difference between Ex/Def EA and Ex/Def EA Adj should equal the total adjustment amount.

What is Netting Fees versus Summing Fees?

If a financial institution allows a company to apply excess earnings allowance from one account to the deficit earnings allowance of another account, this is called Netting Fees.

If a financial institution does not allow a company to apply excess earnings allowance from one account to the deficit earnings allowance of another account, this is called Summing Fees.

Both of these scenarios involve two balance:

Excess/Deficit Earnings Allowance-Net Settlement Period to Date; the last place to hold a sign to indicate an excess or a deficit earnings allowance.

Excess/Deficit Earnings Allowance Due This Statement; indicates whether a Netting or Summing relationship exists since all excess balances zero out leaving only deficits.

Whether a bank does or does not allow netting, the excess for an account will appear as a positive value in Excess/Deficit Earnings Allowance-Net Settlement Period to Date while a deficit value will appear as a negative value.

If the bank does not allow netting, the excess for an account will appear as $0.00 in Excess/Deficit Earnings Allowance Due This Statement.  But, a deficit for an account will appear as an absolute value in Excess/Deficit Earnings Allowance Due This Statement since this balance can only carry a positive value.

Whether a bank does or does not allow netting, the excess for an account will appear as a positive value in Excess/Deficit Earnings Allowance-Net Settlement Period to Date while a deficit value will appear as a negative value.

Excess/Deficit Earnings Allowance Due This Statement tells the relationship...

Most know that numbers can tell a story; in this case, so does how those numbers appear in certain balances.  Have an Account Analysis question? Send me an email girlmeetaa@gmail.com

Happy Analyzing!

Average POSITIVE Collected Balance (5/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average POSITIVE Collected Balance

This balance may be pretty straightforward since its value is computed as Average Net Collected Balance plus Average Negative Collected Balance.

         Avg NET Collected Balance
plus  Avg NEG Collected Balance
         Avg POS Collected Balance

What is not included in the computation above is Balance Adjustment Prior Period Avg Float.  This balance, as its name states, is for any adjustments made to your Float balance from the prior period.  Since most adjustments from prior periods are sent during the current period, this balance will fall between the Avg Net Collected and the Avg Neg Collected.

        Avg NET Collected Balance
plus Balance Adj Prior Period Avg Float
plus Avg NEG Collected Balance                
        Avg POS Collected Balance

The balance in red because, as with all adjustments, an account may not have any from a prior period so this balance may be zero if it is sent at all.  If sent as a non-zero value, this balance may either be a negative or positive value which determines how its calculation is treated in the above equation.

Happy Analyzing!

**Note: Average NET Collected Balance has been updated**

Average NEGATIVE Collected Balance (4/14)

Account Analysis consists of balances and fees which comprise a basic math calculation. There are 14 balances that I refer to as "Remember the Math". I will discuss all 14 in 14 different posts.

Average NEGATIVE Collected Balance

This balance is sometimes referred to as Collected Overdraft (OD) Balance.  To compute this balance, the sum of the daily end-of-day uncollected balances (negative collected) in the analysis period is divided by the number of days of the analysis period.  Taking the sum divided by the days in period is what computes the average value for this balance.  Obviously, this balance will equal zero if there were no collected balance overdraws during the analysis period.

This balance should always be sent as a positive value (no negative sign).

Since this balance directly corresponds to any account ODs which occurred during the analysis period, you can expect to see corresponding service line items on the account statement.  Some example OD-related service descriptions are:

• Negative Collected Balance Fee
• Daily Overdraft Occurrence Fee
• Overdraft Interest
• Drafts Handling Charge
• Daily Ledger Overdraft
• NSF Items Paid/Returned

Happy Analyzing!

What are Waived Charges?

From my experience, banks send service charges one of four ways: analyzed, hard, waived, or debited.  Usually, most bank services are sent as analyzed charges on an account analysis statement but what are waived charges?

Waived means the charge for this bank service is not charged to the account holder so although the charge may be sent on the account analysis file, the charge is not part of the account's final billing invoice.

Waived Charges are sent on an account analysis statement as Service Charges - Line Item Waived. All waived charges for one account during a particular time frame should be shown in this balance. 

Service Charges - Line Item Waived is a memo balance. 

It serves only to display the total of all waived service charges for the period.

But, there is also another balance called Service Charges Waived.  While this is a memo balance, a sent value for this balance will be included in the calculation of bank services to compute the final total service charges due this statement. 

It creates a clean audit format where the account holder can track the calculations from beginning to end.

Most financial institutions do not send or know how to send waived charges.

One of the common complaints I get from customers is that their paper statement does not match the data captured from their EDI 822 file.  Once I check the raw data for sent service charges (which ones are analyzed, which ones are hard, etc) against the balances sent by the bank, it solves the mystery.  Although there are specific AFP balances for each service charge type, financial institutions usually don't know they exist.  This results in showing the bank how the charges are formatted on the file versus how they should be formatted on the file according to the AFP implementation standard for the EDI 822.

Note: one clue that a service charge may be waived is if the bank sends the charge as $0.00.  There may be both a sent price and a sent volume but the sent charge is $0.00.

Happy Analyzing!