While the Publishing module allows you to carry out most of the daily distribution activities, the Accounting module is where you handle the financial side of newspaper circulation.

There are two very different aspects to circulation accounting: the account side (e.g., carriers and dealers), and the subscriber side. It is important to understand that these are handled separately in Circulation.

Accounts:

• Are billed in groups (known as “bill sources”) at regular intervals.

• Are usually billed for past charges and credits.

• Are independent contractors. With carrier collect subscribers, the carrier “buys” the paper wholesale (the account bill) and “sells” it retail (collecting from subscribers). With office pay subscribers, the carrier still buys and sells the paper, but the payment is received at the newspaper office. The wholesale is deducted from the retail, and the difference is credited to the carrier.

• Use account rates, both for charges and credits. Subscriber rates do not affect account rates, unless the account rates are specifically based on a subscriber rate code.

Subscribers:

• Are sent renewal notices individually, according to their own expiration dates.

• Pay in advance for future services (except in the case of grace owed).

• Are customers who “buy” the newspaper from the carrier.

• Use subscriber rates. If the subscriber is carrier collect, a rate may or may not be assigned (according to Business Rules).

Although accounts and subscribers do not directly influence one another, Circulation follows the same accounting steps for both:

• Rating is used to determine account draw charges and office pay credits, and subscription rates for subscribers. Other charges and credits (such as tax) are also taken into account. This takes place (for accounts) in account billing processing and (for subscribers) subscriber payment processing.

• Account bills or subscriber renewal notices are printed.

• Account and subscriber payments are entered into the system.

• Transactions are interfaced to the GL, either automatically or by printing reports. A transaction will either debit or credit a GL account. Any payment, charge and/or credit will have an offsetting entry (i.e., a transaction will debit one account and credit another).

These topics are discussed further in the following sections.

Payments made by subscribers and carriers/dealers are often by credit card. To process the credit card payment and insure that the credit card information is valid, payment authorization is typically done using a third party authorization vendor such as Braintree, Payway Complete or Cybersource. The vendor authenticates the card information with the financial institution issuing the card and, when the payment is accepted, posts the credit card charge or refund. Authorization is usually done in real time so that the user knows immediately whether the payment has been authorized. The text of the authorization messages that display in Customer Service and iServices during this process can be defined in .

To avoid compromising sensitive data, credit card numbers associated with payments are typically not accessible in Circulation. Instead, a token provided by the authorization vendor is displayed, along with the last four digits of the card number. This is known as tokenization. Most tokenized environments also feature off-site credit card storage where the full credit card numbers are not stored in Circulation at all. In environments where credit card numbers are not tokenized and off-site, NAVIGA strongly recommends encrypting the numbers in the database (see in the Setup Manual).

An additional level of security is offered if you use Circulation’s Hosted Order Page (HOP). With a HOP solution, no credit card information is actually entered in Circulation or iServices, even through the user interface. Instead, the HOP is called from the credit card authorization provider’s system and entered in a separate browser window. Using a HOP places Circulation out of scope for compliance with PCI (Payment Card Industry) standards. Circulation supports credit card entry via a HOP for Braintree, Payway Complete, Cybersource and other vendors.

The Payment Authorization Service

Most real time payment authorization solutions use Circulation’s Payment Authorization Service (PAS), a web service that communicates between Circulation and the authorization vendor. (The exception is viaWarp.) To use the PAS, the Business Rule— Which product integration is used for real-time payment authorization? (Payment Auth - Account and Payment Auth - Subscrib sections) should be set to “DTI”.

Business Rules in the Payment Auth - Account and Payment Auth - Subscrib sections determine the host name, URL, payment authorization vendor and other parameters for the Payment Authorization Service. See Tech FAQ #13 for information in installing the Payment Authorization Service.

Credit Card Tokenization

In a tokenized environment, full credit card numbers are typically not stored in the Circulation database, even in encrypted form. Instead the PAS sends back a token, also known as a vault ID, which is the ID of the record where the number is stored in the vendor’s credit card vault. In this environment a masked credit card number is stored in Circulation for display purposes. A masked credit card number will typically be displayed as ************0123, with only the last four digits visible to the user. See in the Setup Manual for more information.

The diagram below illustrates how credit card numbers are tokenized by the credit card vendor, and a token returned via the PAS.

Business Rules in the Payment Auth - Account and Payment Auth - Subscrib sections determine the host name, URL, merchant ID, public and private keys, and other parameters used by the PAS with a payment authorization vendor. They are specific to the vendor (Braintree, Cybersource etc.).

If you currently store credit cards in Circulation but are moving to a tokenized solution, see Circulation FAQ 105 for the steps involved in encrypting and vaulting your current numbers. Additional Circulation FAQs detail the steps needed to implement a specific solution, such as Braintree or viaWARP.

The Hosted Order Page

Circulation’s HOP uses the credit card tokenization process described above for credit card authorization and storage, but it also removes data entry of credit card information from Circulation. It does this by displaying a separate third party browser window when entering a payment in Customer Service, Batch Payments or iServices. An example of a HOP is shown below.

Once the credit card information is entered, the rest of the payment can be completed within Circulation or iServices. A token (and typically a masked credit card number) is returned to Circulation, as with other tokenized solutions. The architecture of the HOP is illustrated below.

If using a HOP solution, the Business Rule Which off-site credit card storage and authorization service do you use? (Pymt Auth - General) must be set to “Hosted Page”. The HOP vendor is configured by another Business Rule in the same section, Which hosted page credit card authorization service do you use?

As with tokenization, additional Business Rules in the Payment Auth - Account and Payment Auth - Subscrib sections determine settings for specific hosted page vendors. Circulation FAQs are available for most vendors, detailing the specific setup needed.

Accounts (carriers and dealers) are rated based on their draw. Rates may be copy rates (a rate per paper) or period rates (a rate per subscription or single copy equivalent). If using a copy rate, the draw charge for a month would be the total draw for that month times the copy rate. If using period rating, Circulation would use the formula:

Period rates may (based on Business Rules) vary by day of the week. In vary-by-day rating, each day of the week has its own period rate. For example, you could have a monthly rate of 4.00 per subscription for all Sundays in the month, 1.50 per subscription for all Mondays, 1.50 for all Tuesdays, etc. The above formula would still be used, but for each weekday separately.

Account rates can change based on draw type, delivery schedule, day of week, or (if allowed by Business Rules) the rate code of the subscriber being delivered. So, a single account may receive different rates for different types of draw. See Account Rates in the Setup Manual for more information.

This section shows account and subscriber rating side by side. The two examples illustrate how accounts and subscribers influence each other in the GL, even though they are not directly related.

Example #1:

An office pay subscriber pays a discounted 29.20 for a flat rate 3-month subscription beginning January 1, 2007. The expiration date is April 1, 2007. The full cost for three months is 30.10. The newspaper uses a single copy rate.

The copy rate is calculated as the subscription amount paid divided by the actual number of copies the subscriber will receive. Assuming a 7-day subscription (and every day is a publishing day), the copy rate would be 29.20 / 90 days (31 days in January and March, plus 28 days in February), or 0.324444. In addition, Circulation calculates the average discount rate (0.90 / 90 days) as 0.01.

Assuming no changes (i.e., new payments or renewals), the unearned revenue at the end of January would be 19.14 (or 59 days * 0.324444). The total earned revenue would be 29.20 - 19.14, or 10.06. The discount earned would be 0.31 or 0.90 - 0.59 (59 days times 0.01 average discount rate).

On the account billing side, the account is charged and then credited for delivery to office pay subscribers. Assuming that the account is rated per copy, and the rates are 0.29 charge and a 0.39 credit, at the end of January the account would have earned 3.10 from this subscription.

The general ledger entries would be as shown below.

Example #2:

A carrier collect subscriber begins a 7-day subscription on June 1, 2007. Being carrier collect, it is up to the individual carrier to set the rates and collection periods (the newspaper may have rating guidelines or have other policies, but they are not reflected in Circulation).

This account has a monthly period rate that varies by day. Sundays are 4.00 per month for this subscription. Wednesdays are 1.75 per month, and all other days are 1.50 per month. So, for this month, the account would be charged 4.00 + 1.50 + 1.50 + 1.75 + 1.50 + 1.50 + 1.50 = 13.25 for this subscription.

The general ledger entries would be as shown below.

This section explains how account and subscriber accounting impacts the general ledger. For more information about the GL, see Introduction in the Accounting section of the Setup Manual.

Because there are some crucial differences between the two, we present GL accounting for carrier collect and office pay billing methods in separate sections. For simplicity, assume that one of your carriers has only carrier collect subscribers, and another has only office pay.

Carrier Collect

With both office pay and carrier collect subscribers, it is important to realize that subscriber billing and payment functions independently from account billing and payment. The newspaper might have a promotional discount for its subscribers, but the carriers will receive the same amount for delivering the paper (unless the account rates are specifically tied to the subscriber rate code).

With carrier collect subscribers, the carrier delivers the papers, collects the money, and then is billed by the newspaper for the wholesale value of the papers delivered. The carrier’s revenue is what is collected (retail value) minus what is paid to the paper (wholesale value).

In regard to the general ledger, two major actions take place:

• Draw Charge. The bill the carrier receives for the papers contains draw charges. This is what the newspaper charges the carriers for papers they receive, and so it is credited to Account Revenue. Since the money is due but not yet paid, it is debited from Accounts Receivable. Other charges and credits, such as return credits and miscellaneous charges (rubber bands, etc.), also show up on the carrier’s bill. They debit or credit their own GL accounts.

• Account Payment. When the carrier sends in the payment, Accounts Receivable is credited, thus balancing it out. The Cash in Bank Account or the Credit Card Account (depending on method of payment) are debited. The net effect of the draw charge and account payment is that money has moved from Cash in Bank or Credit Card to Account Revenue.

Office Pay

With office pay subscribers, the GL accounts are a little more complex. The carrier delivers the papers, but the subscriber pays directly to the newspaper. Since this payment is usually for papers that have not yet been delivered (18 weeks into the future, for example), it is unearned revenue. As the papers are delivered, the revenue becomes earned. Earned revenue is typically calculated at the end of each fiscal period in Circulation (see Unearned Revenue).

While revenue is being earned, the carriers are earning credit. This credit, called office pay credit, is the difference between the (retail) rate the carriers are given for delivering the paper and the draw charge (wholesale value) of the paper. It is equivalent to the money the carrier collect carrier receives directly from the subscriber.

In regard to the GL account, four major actions take place with Office Pay subscribers:

• Subscriber Payment. Since the subscriber payment is for future goods and services, the Unearned Revenue Account is credited (if part of it is grace owed, however, that part is credited to the Subscription AR Account). Since the money is on its way to being revenue, the Cash in Bank Account or Credit Card Account (depending on the method of payment) are debited for the same amount.

• Earned Revenue. As the papers are delivered, the Unearned Revenue Account is debited, and the Subscriber Revenue account is credited. Subscriber Revenue reflects money earned from subscribers. Some of that money will, of course, go to the carrier.

• Draw Charge. The draw charge for the office pay carrier is the same as for the carrier collect carrier, above. The Revenue Account is credited, and the Accounts Receivable Account is debited.

• Office Pay Credit. To pay the carrier, the Delivery Expense money is debited, and Accounts Receivable credited. This might make it look like the carrier isn’t getting any money at all, but don’t worry: the money debited from Accounts Receivable is less than the money credited to it. The difference is what the carrier earns, his or her office pay credit. This amount will eventually go to Accounts Payable (where a check will be cut) or be deposited directly into a carrier bank account.

The net effect of these debits and credits is that money is being taken out of the Cash in Bank or Credit Card Accounts and going to Subscriber Revenue. Money (for office pay credits) is also being taken out of Delivery Expense and going to Account Revenue and Accounts Payable. At most newspapers, Subscriber Revenue and Delivery Expense will roughly cancel each other out, and so the true net effect will be that money is going from Cash in Bank or Credit Card to Account Revenue (newspaper share) or Accounts Payable (carrier share).

If the carrier has both office pay and carrier collect subscribers, the total draw charge for the carrier collect and office pay subscribers is subtracted from the office pay credit. If the credit exceeds the charges, a carrier will receive a check from the newspaper; if not, the carrier will have to make a payment.

Merchants sometimes add a small surcharge percentage to payments made by credit card, to help recoup the processing fees from the credit card company. Circulation can assess a surcharge percentage on subscriber credit card payments, based on the product and credit card type.

The surcharge is based on the total payment amount, including the term cost, tip, tax and cash adjustments. When a surcharge applies to a payment, a cash subscriber payment adjustment is created for the surcharge amount.

Setup for Credit Card Surcharges

In order to add a surcharges to credit card payments, you must:

• Activate “CreditCardSurcharge” add-on in Add On Activation.

• You can allow certain users permissions to waive the credit card surcharge using the “CCSurchargeOvrd” security item in Transaction Security setup.

• Define a subscriber payment adjustment code for credit card surcharges. This code should be set up as a cash adjustment that does not update the expire date or the wallet. Once defined, the new payment adjustment code should not be used for any other purposes outside of credit card surcharges.

• Select the new payment adjustment code for the Business Rule— What is the subscriber adjust code used for storing subscriber credit card surcharges? (Subscriber Payments section).

• You may also wish to define a separate credit GL account for storing surcharge revenue (the debit GL account will be Cash).

• In Credit Card Account setup (see Credit Card Account in the Setup Manual), set the actual surcharge percentage for the applicable products and credit card types. You can also specified whether the surcharge amount is taxable.

Entering Payments with Surcharges

Credit card surcharges can be applied to payments entered in Customer Service, the Customer Service API, or the Circulation API, as well as credit card auto renews. Payments added in Batch Payments in the Accounting module or in iServices Subscriber do not currently qualify for surcharges.

When a credit card payment is entered in Customer Service for a publication and credit card type flagged for surcharge in Credit Card Account setup, a warning message displays when accepting the payment, listing the surcharge amount. The user can click Yes to continue, or No to cancel the payment (if the user has credit card override permissions in Transaction Security and clicks No, the payment will still be entered, but without the surcharge).

If you accept the surcharge, the surcharge amount will be added to the total payment amount. The surcharge information can be displayed by viewing the payment transaction and clicking on the Adj button to the right of the Adjustment field.

If a subscriber is on credit card auto pay for a publication and credit card type that has a surcharge defined, the surcharge amount will automatically be calculated and added to the payment during Auto Payments processing. This includes subscribers who started or changed to credit card auto renew in iServices Subscriber.

If surcharges apply to credit card payments brought in via Lockbox Processing or the Subscriber Activity Import, you can import the surcharge as a payment adjustment (the surcharge must be calculated outside of Circulation). Place the total surcharge value (surcharge amount plus surcharge tax, if applicable) in the Adjustment Amount field. The file map used must be set up to assign the subscriber payment adjustment code used for surcharges to the Adjustment Amount field.

Credit card surcharges will display on the Subscriber Payment Journal as subscriber payment adjustments. The journal also has an adjustment recap. If you import credit card payment authorizations/declines and apply surcharges, the Tran Amount should include the surcharge amount.

Surcharge Examples

Some examples below illustrate how surcharge amounts are calculated and added to payments.

Example 1

Assume:

• Publication Taxable: Yes

• Surcharge: 3%

• Surcharge Taxable: No

• Payment amount = 48.00

• Tip amount = 2.00

• Tax = 6%

In this example:

• The payment amount entered for the credit card would be 50.00 (48.00 term amount plus a 2.00 tip)

• The surcharge would apply to the entire initial payment amount of 50.00. 3% of 50.00 = 1.50

• The final payment amount would be 51.50 (a 50.00 payment with a 1.50 surcharge)

• The tax would be 6% of 48.00 = 2.88

• The total payment amount applied towards the subscription would be 48.00 - 2.88 = 45.22

Example 2

Assume the same scenario as Example 1, but with Surcharge Taxable = Yes. In this case:

• The payment amount entered for the credit card would be 50.00

• The surcharge would apply to the entire initial payment amount of 50.00. 3% of 50.00 = 1.50

• The surcharge would be taxed. 6% of 1.50 is .09

• The total surcharge would then be 1.50 + .09 = 1.59

• The final payment amount would be 51.59 (a 50.00 payment with a 1.59 surcharge)

• The tax on the subscription would be the same as before: 6% of 48.00 = 2.88

• The total payment amount applied towards the subscription would still be 48.00 - 2.88= 45.22

Refunding Surcharges

If you wish to refund the surcharge amount during a permanent stop, you will need to override the default refund amount to add back in the surcharge value. Note that the Business Rule— What is the maximum variance from the calculated amount that an operator may enter for the refund paid? will govern the maximum amount you may manually override the refund.

General Ledger Entries for Surcharges

When a credit card surcharge is assessed for a payment, the credit GL account specified in Subscriber Payment Adjustment setup will be credited for the surcharge amount. The GL account specified for the publication and credit card type in Credit Card Account setup will be debited for the amount (along with the term payment and tax amount).

The credit/debit entries for a typical payment with a surcharge are shown below. Assume a payment for $100 term, county tax is 10%, surcharge on credit card payment is 1.5%, and surcharge is not taxed.

Account (carrier/dealer) and subscriber accounting lifecycles are described below.

Account (Carrier/Dealer) Accounting Procedure

In order to print account invoices and enter account payments, you must:

• Enter any papers returned or draw adjustments made for the account. Also, enter any miscellaneous charges (for rubber bands, for instance) or credits for the account. This is an ongoing process; the account bill for a period will reflect all of the returns, adjustments and charges dated in that period.

• Before you start a billing run, make sure there are no suspended account payment batches by printing the Batch Audit Journal. Also, check the Publishing Run Status to make sure the last day’s run is completed, and print the Summary Age Analysis.

• Calculate any interest and bond charges.

• Select the bill sources or individual carriers you want to bill (for example, home delivery carriers).

• Process the billing. Draw charges and delivery credits are automatically calculated by Circulation and added to the returns, draw adjustments, miscellaneous charges, etc. Recurring charges are also calculated automatically.

• Print the Billing Journal to check the billing. If corrections need to be made, undo and process the billing again.

• Print invoices and, if desired, deposit slips for the accounts.

• When all errors have been corrected for the billing run, and the invoices have been run, close the billing.

• After the bills are sent out, payments will be received from the accounts either by cash, check, credit card (payment entry), or direct deposit into a bank account (lockbox processing). These payments must be entered into Circulation and then transferred to the general ledger.

• If some payments are not applied to an invoice during payment entry, you must apply the unapplied amount to an invoice or balance later (if Business Rules allow).

• Accounts with office pay credits in excess of their draw charges must be paid. You can do this by direct deposit, interfacing with accounts payable software, or printing out the Credit Journal and manually entering the credits in accounts payable.

Accounting Procedure for Subscribers

In order to print subscriber renewals and enter subscriber payments, you must:

• Print renewals for subscribers. You can also e-mail renewals, or export renewal information to a file so that the renewal notices can be generated outside of Circulation.

• Enter payments when they arrive. Process auto payments for auto renew subscribers, and do lockbox processing for subscribers who make payments directly into a bank account.

• Print the Batch Audit Journal to make sure there are no suspended batches, and the Payment Journal to check for errors in the payments.

• Process the payments.

• Some customers may be entitled to refunds. If so, enter them in batch refunds and print the Refund Journal. You can do refunds independently of subscriber payments.

• Some subscribers who have a credit to their account may stop delivery and not claim their refund; other subscribers may have delivery stopped while in grace. Both refunds and grace can to be written off for these subscribers, if desired.

Subscribers receive rates based on subscription period (for example, 18.00 for 3 months). To do subscriber accounting, however, Circulation must boil down these period rates into a copy rate. This is a simple rate per day for the subscription. For example, with a flat 3-month rate at 18.00, assuming there are 90 days in the period, the copy rate would be 18/90, or 0.20 for each paper. The copy rate is used in calculating Unearned Revenue and in other places.

Copy Rate by Day

You may, depending on rating setup, have your copy rates vary by day (for example, charge more for your larger Sunday paper than for other days of the week). This may be important in cases where the subscription is extended for things such as missed delivery. With a single copy rate, an extra day is simply added to the subscription period. So, if a subscriber misses the Sunday paper, it is very likely she will end up receiving an extra Wednesday paper or Monday paper. But if the copy rates vary by day, the subscriber can be credited appropriately for missed day. Perhaps Sunday costs 0.40 and the other days cost 0.20—so our subscriber will receive two extra papers during the week or an extra Sunday, depending on what days the subscription is extended.

The following examples illustrate how Circulation calculates the copy rate for a varying weekly rate and a varying monthly rate.

Imagine a rate “1week” was set up to vary by day, as follows:

Circulation would calculate a total of 1.63 for this weekly rate. If a subscriber with this rate made a payment of 20.00, he would be able to buy 12 weeks, and have 0.44 left over. Thus, an extra Sunday or two extra non-Sunday days could be added to the subscription.

Now imagine another rate, “3month”, is set up to vary by day. With monthly, quarterly, and yearly rates that vary by day, the days are weighted by percentages, rather than amounts. Let’s say the total period rate is 18.00, and the percentages are entered as:

Circulation would calculate the copy rate for each day using the following formula:

where “average aggregate days” is the average number of times each day of the week appears in the period, weighted by percentage. We get this figure by multiplying the number of times each day appears by the percentage for that day. So, if our example 3-month rate started October 7, 2005, the average aggregate days would be as follows:

So our copy rates would be: