Plastic (Credit Cards) and Draft Issues 0911-03 ZZfwi

                                TO:   All Interested Onliners                                                                 FROM: Jim Bramer. Retired CPA-Auditor
                                                                                                                                                     FILE:  0911-03/fwi

                                RE:  Plastic and Draft Issues                                                               Originated in July 2001

    The "Ax to Grind" subject this time has to do with the use of Drafts, as explained below, while you prudently buy with Plastic, or  Debit (eChecks)  and/or Credit Cards.  First, let me share ......

     These comments are especially applicable to those of us who struggle with regard to Righteous Personal Finance,  or RPFin,   and to small struggling Churches, Schools and publicly supported Ministries.   Plus to all who need to buy prudently and to bookkeep timely and efficiently.  Christians please note the resource when you  Go Here.

Everyone is familiar with Plastic, or credit cards provided by Visa, MasterCard, etc; plus applicable Department Store Credit Cards etc.  When Credit Cards are mentioned to someone, all too often we associate it with a "tyrant" situation  ... but our emphasis here is that it can be a "tool" and a blessing -- especially when you go Online and pay the balance weekly or monthly, etc.    Righteous use of Plastic, or Credit Cards, can be evidence of being a good steward.  Please Click Here   as to the use of the  Debit Card   (eChecks) option where you use Plastic to in essence write a check, etc.

  But Drafts are probably new to you. A  Draft is a check written now but cashable at a later date.  To give you a Draft - or posted check " flavor,"  here is a way the Draft process could work if you are a Parent owing money to a Christian School or Day Care Center:

  1> Since you received a financial incentive to do this, you have agreed to provide, at the time of registration, a series of monthly Drafts (or post-dated Checks) for the total amount of the annual Tuition.  If it was $1,800.00, you provided 9 Drafts for $200.00 each, but each has a future date as to when the Tuition is due.  The Draft becomes a Check at that future date and the school processes it and informs you that you have paid $200,00 in this manner on your account.  Please Go Here  or more details about this process at a School.

  2> Or the situation is like that shown above, except that the total amount of both Tuition "plus Fees" at month end is unknown.  So you leave the amount of the 9 Drafts open and the School fills in the month end unpaid amount. Let's suppose that the total amount is $275.00 for the first month and so you pay only $270.00 ... the financial incentive is $5,00 per Draft processed.  The next month the total amount is $290.00, but you have decided that you did not care for this method and your unused Drafts are all returned to you for voiding. You would then timely pay the entire $290.00 in another manner.

    OK, what does this have to do with Plastic Draft Management?   Well, you now should have a feel for how Drafts work .. namely, that you produce a Draft now and it becomes a Check at it's indicated future date, etc.

    So let me lay some more foundations:

FEATURES AND/OR TRUISMS of this system include:

    1> It is prudent stewardship to buy very little using GREEN STUFF.  Why: because it can easily be stolen
         plus it is not conducive to good buying record keeping;

    2> Therefore, it is important that your method of buying include a good record of "who, when, why,
          and the amount;"  

    3>  An example is to buy from a local vendor and charge it, and then monthly pay each of these
           vendors on time.

    4>  It is better yet, to buy at these local vendors and charge it to one debtor, or Plastic Company,
          like VISA
, etc.  This way your monthly payment is to one debtor (VISA) rather than to each
          individual vendor, etc.

    5>  Plus it is good stewardship to use the "Buffer or Float factor";
namely, buy something now but
           timely pay for it later, etc. No way do you pay for Plastic Finance charges.

    6>  It is essential that your system provide ways to control your personal spending or the spending
         at a Ministry by Staff, or Volunteers, for authorized expenditures. A Ministry does not have the
         best control when they permit Volunteers or Staff to spend their own money and seek reimbursement.
         Buyers MUST know their current spending status -- especially in relationship to what has been authorized.

    7>  This purchase is then booked into your accounting system so it can be reported and managed.

Enter Plastic Draft Management--

    OK, how do Drafts and Plastic fit together?  Note the following process....

   A>  Authorized buyers make weekly Plastic purchases (Click here for more details) and you make it easy for them to retain Plastic Receipts --- usually very small pieces of paper. Look into using weekly envelopes that includes both the OK and it has recap capabilities on the face of the envelope, etc.

  B>  Using this
Plastic Draft Management  system, you do not have to book these individual Plastic Receipt purchases into the Plastic Payable accounts, 

  C>  You produce a weekly Draft (see above) from this recapped Plastic Receipts info and charge it to respective expense accounts.  These Drafts can have the current date but you do NOT yet send to the Plastic company..... see F> below for their disposition.

  D>  Since these weekly purchases are now in your accounting system,  you know if you are staying within your buying boundaries (Budget).

When the Monthly Plastic Statement comes, you subtract the above weekly draft amounts from the total amount due and write a check for the difference. And distribute this amount to the applicable Budget areas.

  F>  You then send all
four checks (previously Drafts, but now they are all Checks) as payment for the total amount due shown by the Plastic monthly statement. The Plastic Company probably is not too pleased in processing 4 checks rather than 1, but they are timely getting what is due to them, etc.        

that appear within this Online Document include: 

                    CREDIT or DEBIT CARDS = Same as Plastic below
                        DRAFT= A post dated check; at the future date the Draft becomes a check
                        GREEN STUFF = 'green'  dollar bills or coins, etc. 
                        FINANCE CHARGES = Interest or such assessments as charged by the PLASTIC company
                        PDM= Plastic Draft Management
                        PLASTIC =Credit or Debit Cards of all types and their prudent use for purchasing
                        RPFin = Righteous Personal Finance

K E E P   L O O K I N G   U P !!

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UPTD: June 08, 2012