CRM4M Accounting Set Up and Miscellaneous Accounting Guide Rev. 10/17/2008 rb

CRM4M Accounting Set Up and Miscellaneous Accounting Guide Rev. 10/17/2008 rb Topic Page Chart of Accounts 3 Creating a Batch Manually 8 Closing a Batch Manually 11 Cancellation Fees 17 Check Refunds 19 Credit Card Refunds 21 Credit Card Processing Basics 22 Definitions related to Accounting Processes in the CRM4M Acquiring Bank/ Merchant Bank: The financial institution that conducts business with merchants who accept credit cards. The bank buys the merchant's sales slips and credits the monetary value to the merchant account. Batch: Contains all your daily transactions for the purpose of recording all of your income and cash. Card Absent/ Manual Entry: Credit card information that is manually keyed-in through a computer or terminal key pad as opposed to being swiped though a terminal. Cardholder: An individual who has opened a credit card account to make purchases and obtain cash advances. Card Present/ Swiped Card: Credit card information that is entered electronically by swiping the card through the terminal. Chargeback: A reversal against a sale that was credited to the merchant's account. Chargebacks are usually the result of an error made by the card holder's bank, a misunderstanding by the customer, or fraud. The merchant must provide proof that the goods and services in question were provided to the customer. Chart of Accounts: The system you use to organize your revenue and expenses into categories. The list is called the Chart of Accounts. Discount Rate: A fee charged by the bank for processing credit card transactions. The fee is based on a small percentage of the merchant's total sales volume. ISO: An independent sales organization that is registered through Visa and MasterCard to set up credit card merchant accounts. ISOs represent banks or third party processors. Merchant: A business that has a merchant account to accept credit cards. MSR: A merchant service representative that contracts to an independent sales organization. MOTO: Stands for mail order/telephone order. Typically, businesses that conduct credit card transactions over the phone or by mail are considered to be riskier than retail businesses that swipe credit cards. Retrieval Request: A request from a cardholder's bank for information about a charge which is being disputed. Retrieval requests usually precede a chargeback. Page 1 of 30

Third-Party Processor: A company that processes credit card transactions and distributes funds. Many banks choose to outsource credit card processing to third party processors instead of handling it inhouse. Transaction Fee: A per transaction fee that is charged by the bank for processing transactions. Page 2 of 30

CHART OF ACCOUNTS CRM4M Accounting Set Up and Miscellaneous Concepts Guide Based on information provided by your Section, ACA already pre-entered your chart of accounts. To view your chart of accounts: 1. In CRM4M, click Settings, then CRM4M Settings: 2. Click Organizational Settings: Page 3 of 30

3. Click Chart of Accounts: 4. In the View Box, Click and select your Section s name: Page 4 of 30

5. The following screen allows you to view only your Section s chart of accounts: 6. While ACA National initially did the data entry, you can make changes and additions yourself as described below. NOTE: No account can be deleted (not even by ACA National) because the CRM4M system does not allow it. You can however change the status of an account in inactive see below. a. To change an account: Double click on the account to open it. The following screen appears. Make changes, and then click Save and Close b. To add a new account: Click on the New button. The following screen appears. Enter information, the click Save and Close. Page 5 of 30

c. To Inactive and Account already in the CRM4M: Select the account but do not Double Click to open. Then, click on More Actions Page 6 of 30

Then click on Deactivate Confirm the deactivation by clicking OK Then click Save and Close. Page 7 of 30

CREATING A BATCH MANUALLY Batches are created everyday for your Section in the back end. A Web Batch is also created automatically for you anytime something is processed over the Web. There may be a time when you want to manually create a new batch. 1. In the Navigation Pane, click CRM for Members, then click Accounting Manager 2. Click Batch Management Page 8 of 30

3. Click Batch Log Manager 4. In the Batch Log list, click New Page 9 of 30

5. The following screen appears. Enter information as described below: Description: Enter a name for your batch that MUST BEGIN with your Section Code of ACA, (Example: ACA, VA) and then add something descriptive to set it apart from your regular daily batch and your web batch. Example: Batch Number: DO NOT ENTER. It will automatically be assigned. Batch Date: Enter the current day s date. Batch Type: From the drop down, choose Standard GL Detail Creation Company: From the drop down, choose your Section Leave the rest of the fields as is. 6. Click Save and Close.. You will be returned to the Batch Log List. Click Save and Close to complete. Page 10 of 30

CLOSING A BATCH MANUALLY Batches are automatically Closed by the system. There may be situations when you want to manually close a batch. 1. In the Navigation Pane, click CRM for Members, then click Accounting Manager 2. Click Batch Management Page 11 of 30

3. Click Batch Log Manager 4. In the Batch Log List double click on the batch you want to close. Page 12 of 30

5. Check the Closed Box 6. Check the GL Detail Yes Box 7. Click Save and Close. You will be returned to the Batch Log List. Page 13 of 30

8. Click on Batch Management. 9. Click on Create GL Detail Post to Accounting Page 14 of 30

10. Click OK 11. This process will create the data for the accounting reports (See CRM4M Events and Meetings Processing Guide for details about the daily batch reports.) 12. Note: if the batch you are manually closing contains Charge Card Transactions and you want them to have a separate capture ID from your daily batch complete the following: a. In the Navigation Pane, click CRM for Members, then click Accounting Manager Page 15 of 30

b. Click Credit Card Payment Delayed Capture Process The following screen will appear. If the batch contains credit card transactions it will indicate so. Click on OK Page 16 of 30

CANCELLATION FEES In either of the Transaction Guides, you learned to cancel a meeting registration or an exhibit registration. When you take those steps, the following screen appears: Page 17 of 30

If you choose Add a cancellation fee to this invoice, then all items related to the meeting (or exhibit) are cancelled and a payment is credited MINUS the cancellation fee you set up in your registration types. See this example where the balance is zero, but a cancellation fee was assessed. Page 18 of 30

CHECK REFUNDS Check Refunds are processed with the Transaction Code of Payments and Adjustments. Choose the payment type that is the refund. It will be your two digit code and REF NOTE: The credit balance of the invoice will default into the payment field. You have the option to override it. NOTE: The Credit Card/Ref is a required field. You can enter REFUND or even the check number you are writing for the refund. Page 19 of 30

The refund will now show on the invoice and you can cut your check to mail. Example: Page 20 of 30

CREDIT CARD REFUNDS This section revised 8/18/11, mi This is a brief overview of Credit Card refunds. Once you have your Merchant Account, you will know more. 1. The assumption is that you have already accessed the invoice and have processed the appropriate steps/action to make a refund necessary (canceled a registration, made a change to a registration, deleted a product, etc ). 2. Now Double-Click on the payment transaction line. Since it was originally paid via credit card, the following is automatically shown in the payment box that opens up: a. If the invoice was processed the same day and the transaction hasn t gone through the overnight Credit Card Payment Delayed Capture Process, you can simply void the payment. The screenshot below has an option to Void Payment. Page 21 of 30

Page 22 of 30 b. If the invoice has already settled through the overnight process, you will need to do actually credit the payment back to the charge card. The button will say Credit Payment. This actually refunds the credit card in ACA language it really means Credit the Credit Card.

Page 23 of 30 c. The pop up box will default to the full amount. Typically you will be refunding the full amount, but you do have the option of overriding that amount and only issuing a partial credit.

d. Make sure the appropriate amount is in the Credit Amount field, then click OK. (If you realize you don t want/need to issue a credit, just click the cancel button.) You should then see a Credit Transaction Line beneath the payment line. If you are crediting the full amount, you should see a zero dollar balance after issuing the credit. 3. Then, you will Save and Close. Page 24 of 30

CREDIT CARD PROCESSING BASICS This is generally information about credit card processing. You will have more specific information when you receive your merchant account. The Credit Card Processing System There are five main components or players in the credit card processing system. They are: 1. the credit card issuing bank 2. the consumer 3. the merchant services account 4. the acquiring processor/acquiring bank 5. the merchant bank The credit card processing system has been carefully set up to insure that all parties involved will be able to take advantage of this efficient way of doing business. The credit card authorization process is basically the same whether your business actually swipes the credit card through the credit card terminal, keys in the credit card on the pad of the credit card machine, or accepts the consumer's credit card over the Internet using online, real time credit card processing software. The main difference is the variable levels of security involved with the different ways to process credit cards. The following is a step by step explanation of how credit card processing works. Retail/Storefront Credit Card Processing Consumer goes to merchant's place of business, chooses goods and/or services, and gives the merchant his/her credit card for credit card authorization Merchant swipes the card on the credit card processing terminal and the credit card machine dials the acquiring processor for credit card authentication Acquiring processor sends credit card transaction to card association, which in turn sends the request for credit card authorization to the issuing bank Issuing bank accepts or declines the credit card transaction and sends message to the card association The card association contacts the credit card processor with the credit card authorization, and then the request to deliver goods and services is given to the merchant by way of the POS terminal Merchant sends the credit card processing company "fulfillment notification to permit settlement" meaning that the goods and services have been delivered or are ready to be shipped The capture takes place when the credit card authorization information is given to the issuing bank and the consumer's credit card is charged for goods and services requested/received ** This entire process takes place in less than ten seconds. Finally, when the merchant decides to settle batch, the acquiring processor finalizes the credit card transaction with the issuing bank and they transfer money into the merchant's bank Internet Credit Card Authorization Consumer goes web site, chooses goods and/or services, and fills out the merchant commerce application Consumer enters credit card information into a secured form that is sent over the Internet via Real Time Online Processing software (i.e.authorize.net), which then sends the Page 25 of 30

encrypted transaction to the acquiring processor for credit card authorization Acquiring processor sends transaction to card association, which in turn sends the request for credit card authorization to the issuing bank Issuing bank accepts or declines the credit card transaction and sends message to the card association The card association contacts the credit card processor with the credit card authorization, and then the request to deliver goods and services is given to the merchant by way of the online credit card processing software Merchant sends the credit card processing company "fulfillment notification to permit settlement" meaning that the goods and services have been delivered or are ready to be shipped The capture takes place when the credit card authorization information is given to the issuing bank and the consumer's credit card is charged for goods and services requested/received ** This entire process takes place in less than ten seconds. Finally, when the merchant decides to settle batch, the acquiring processor finalizes the credit card transaction with the issuing bank and they transfer money into the merchant's bank Mail/Telephone Order Credit Card Processing If the merchant is a mail order/telephone order company, either scenario can be used for credit card processing. If the merchant uses credit card processing hardware, instead of swiping the credit card through the credit card machine, they can key in the information into the credit card machine. If the merchant prefers to use software for credit card authorization, then this can be done using a virtual terminal. A virtual terminal will allow the merchant to process credit cards over the Internet by logging on to the secure socket of the gateway provider and imputing the credit card processing criteria manually. Next we will go into specific events in the credit card processing system such as credit card authorization, credit card deposits, credit card sales drafts, and balancing/reports. Credit Card Authorization The credit card authorization happens when the issuing bank approves the credit card transaction. A credit card authorization number is issued to the merchant services account and payment of goods/services is guaranteed as long as: A valid card has been used by the authorized cardholder The cardholder has signed the credit card sales draft The credit card transaction is not disputed by the cardholder Credit Card Deposits After the credit card authorization and the goods and services are rendered, a credit card deposit goes into the merchant's account and a debit to the cardholder's credit line is applied. With our credit card processing service, this will happen in no more than 72 hours. Usually the authorization and deposit happen at the same time, but if for some reason the goods/services are delivered at a later date then the merchant services account must conduct a separate deposit transaction. Credit Card Sales Draft Page 26 of 30

A credit card sales draft must be completed and imprinted for all credit card sales. The credit card sales draft is a legal and binding contract and serves to protect all of the parties involved in the credit card processing system. If your merchant services account swipes the consumer's credit card using a POS credit card terminal then your credit card printer should print out a hard copy of the credit card sales draft. If you are a mail/telephone order or Internet based company your credit card sales draft will be electronically produced. A manual imprinter should be used if: Merchant has to manually punch in the credit card number, expiration date, etc Merchant does not have a credit card printer The following should be on all credit card sales drafts: Retail/Storefront Credit Card Processing Credit Card Number Credit Card Authorization and Reference Number Customer Signature Expiration Date Date of Credit Card Sale Amount of Credit Card Sale Description of Goods and Services Balancing/Reports A credit card sales draft must be completed and imprinted for all credit card sales. The credit card sales draft is a legal and binding contract and serves to protect all of the parties involved in the credit card processing system. If your merchant services account swipes the consumer's credit card using a POS terminal then your credit card printer should print out a hard copy of the credit card sales draft. If you are a mail/telephone order or Internet based company your credit card sales draft will be electronically produced. Trust and the Credit Card Processing System The credit card authorization system is a system that is based on trust and is designed to protect everyone involved in a credit card transaction. The system protects: The Merchant- By guaranteeing that payment will be received for goods and services delivered to the consumer The Issuing Bank- Chargebacks will guarantee that the issuing bank will not lose money if the goods and services are not rendered The Cardholder- The cardholder's bank will issue money back from the merchant's bank if the goods and services are never received Chargebacks are rare, but they can be damaging to your merchant services account. Because of this we will now go into detail about how a chargeback works and exactly how it can affect your business. Chargebacks Why was my merchant services account sent a chargeback? A chargeback is presented to a merchant account by an issuing bank when the cardholder contests a charge made to their account. The cardholder has a right to contest credit card charges if: Page 27 of 30

A chargeback is presented to a merchant account by an issuing bank when the cardholder contests a charge made to their account. The cardholder has a right to contest credit card charges if: They were not satisfied with the goods or services that were charged to their credit card bill They never received goods or services that they were charged for on a credit card bill How does the chargeback process work? When a customer complaint about a particular credit card transaction is registered, the issuing bank will usually send a Retrieval Request to your credit card processing company. Your credit card processor will then send it on to your merchant services account. There are some cases in which a chargeback is automatically sent before the retrieval request, but again, that is rare. The retrieval request gives the merchant the opportunity, without being charged, to prove that goods and services were delivered. The best way that a merchant can prove that the customer has made a mistake is by presenting a signed credit card sales draft. If the merchant can produced the authorized signature then the complaint is usually dropped. If the merchant is not able to prove that the credit card transaction is legitimate, then a chargeback is issued. The card association/issuing bank takes the credit card transaction amount out of the merchant's bank and credits the customer's credit card account. All chargebacks are put on record at the merchant's bank. They can severely damage a merchant services account if too many occur. 1st Merchant Accounts notifies the merchant account as soon as a chargeback is issued, before the credit card transaction is removed from the merchant's bank. If the merchant services account is issued a chargeback but is able to prove that the transaction is legitimate, the money will be placed back into the merchant's account. If the customer issues yet another chargeback for the same credit card transaction, then a Type III chargeback occurs. This can lead to legal action if an agreement is not made concerning the credit card transaction in question. A merchant's reserve account cannot be used to pay for a chargeback. This account is put in place as a security issue for the acquiring bank and/or credit card processing company. The only protection that the credit card processing company offers the merchant services account against chargebacks is a notification of suspicious charges to a particular credit card. If the same amount has been charged to one credit card several times in a row, the credit card processor will not go ahead with the credit card authorization. The merchant services account will always be notified of such a situation. Because of the way in which the credit card processing system is set up, the merchant services account must be committed to doing all that is necessary to prevent questions of trust arising when a credit card transaction has taken place. In other words, it is the merchant's responsibility to protect themselves against chargebacks and/or fraudulent credit card users. Avoidance of Chargebacks and Credit Card Fraud There are ten basic things that merchants can do to protect themselves when it comes to credit card processing. They are: Make sure you're dealing with a legitimate cardholder. Always check for the authorized signature With telephone/mail orders, get the name and phone number of the cardholder and tell them that you will contact them before goods/services are delivered. (this is effective Page 28 of 30

because fraudulent users will not want to give out this information) Also, use a ground carrier that requires a signature for delivery and only ship to the cardholder's billing address. (a crook will not want the goods/services delivered to the same address as the cardholder's shipping address) If your credit card terminal has the AVS system, the billing address for the credit card used will be known. With Internet orders, the merchant should always make sure that their Internet software asks for or has: o Cardholder's phone number and email address (verification of a legitimate domain name) o Cardholder's IP address (can be used to track down a fraudulent credit card user) o Posted warning on the web site that the merchant prosecutes crooks o The ability to produce hard copies of credit card receipts saying that goods and services have been provided Try to know the cardholder. Use AVS-if the address verification fails on any level then the merchant services account can refuse the credit card transaction or can call the cardholder to verify a billing address. Get a signed receipt and signed proof of delivery. (can be used if issued a retrieval request) Merchants should be clear and consistent concerning warranties and return policies when it comes to credit card transactions Submit credit card deposit transactions only when goods/services have been delivered. Keep merchant id and terminal id secure so no one can make unauthorized credit card transactions, make sure transaction processing equipment stays at your place of business, make sure only authorized personnel have access to credit card equipment, and make sure the Internet software provider, when used, keeps id secure. Billing Information and Supplies Any fees for credit card processing or charges for supplies for credit card equipment will be debited to the merchant services account on a monthly basis. Also, each card association will send out a monthly statement. (Visa, MasterCard, American Express, or Discover) Description and Explanation of Discount Rates, Transaction Fees, and Other Fees The discount rate is a percentage of each credit card transaction that is charged to the merchant services account by the credit card processing company. The discount rate varies depending on each merchant services account. Higher risk merchant services accounts have higher discount rates. For example, there are swiped credit card rates and keyed credit card rates. Swipe rates are for storefront merchant accounts that physically handle the customer's credit card, swiping it through the credit card terminal. This form of credit card processing is less susceptible to fraud so it carries the least expensive discount rate. If a merchant account does credit card transactions through the mail, on the telephone, or over the Internet, the risk is higher because: Cardholder is not present at the time of the credit card sale Credit card could be illegally produced Credit card could be stolen Unauthorized use of the credit card The discount rate for this type of merchant services account, because of the risk involved, will be slightly higher. Page 29 of 30

Rates have declined over the years as technological advances have made credit card acceptance more efficient and less susceptible to fraud. The first credit cards issued were Diner's Club cards for use in New York City restaurants. Visa credit cards popularized credit card acceptance. In the beginning, there were no means of protecting merchants and issuers from fraud. A consumer would go into a place of business, present their credit card, and the merchant would go to a magazine-like publication to determine if that credit card account was legitimate. With the advent of the magnetic stripe and electronic data capture, the ability to detect fraudulent activity and delinquent or over limit accounts was greatly enhanced. As a result of this advancement, discount rates charged to merchant services accounts began to decline as the risk was reduced. The reason for the difference in rates is because the merchant services account receives payment from the credit card processing company before they receive anything. The credit card processor is taking a risk, trusting that the merchant will provide the goods and services that were promised when the credit card transaction took place. A merchant account's discount rate can be negotiable if the volume of credit card transactions warrants special attention. Also, please be aware that a lower or higher discount rate is not a good indicator of the quality of service from a credit card processor. Always investigate all aspects of a credit card processing company, and never go with someone just because they have low rates. The transaction fee is a separate charge from the discount rate, and it is $.35 per transaction. Other Fees: Your merchant services account will be charged a $5.00 monthly statement fee There will be a $30.00 monthly minimum for the merchant services account. In other words, if your monthly volume does not generate a minimum of $30.00 in discount fees and transaction fees, you will be charged this minimum in order to maintain your merchant services account and keep the merchant services account active. If your merchant services account is issued a chargeback, (again, this is a rare occurrence) there will be a $20.00 chargeback fee. If your merchant services account ever requires verbal authorization for a credit card transaction, there will be a $1.50 fee. Sometimes your credit card processing company will hold a percentage of each credit card transaction if you have a high-risk merchant services account. Page 30 of 30