Unclaimed Payment Allocation

[timazisqua]

Hi there
I need some advice
so this is the scenario
We have unclaimed payments that was deposited into our company's bank account, the reference is untraceable, and the person/company that made this payment is also untraceable.
We have tried tracing the payee through the bank but can't find enough info to contact person for refund.
Does the obligation to request refund not lie on the payee and not the received of the funds?

So we have payments from 2022/2023 lying unallocated in my books
Can one use such payments to write off other accounts which was deemed as "bad debt" accounts or liquidated companies?
Is there a specific time period that needs to pass in order to do this

Or what would be the correct procedure to deal with these payments?
To me - it would make sense to use money that was paid to us, if not claimed or refunded in a specific time frame to be used for company expenses?

Any advice would be appreciated
Regards

[JohnMasumba]

Sounds like a classical scam. My advice would be careful, and invoke the services of the FIC.

[Uriely]

This is scam. Don't fall for it. Trade carefully.

[Dave A]

I don't see the scam at all. In business, receiving unidentifiable deposits into one's bank account is a genuine problem that arises and I have experienced personally.

Typically the client has mixed up the reference, using what was intended to be their own internal reference rather than a reference that we as the supplier is familiar with as the payment reference for the recipient. The puzzle is only unlocked when the client sends a confirmation of payment where one can see the mistake, or the client queries why you haven't allocated the payment to them, or haven't acted on the receipt of payment.

Occasionally none of this happens and you sit with a payment received that I handle by placing it in an Unallocated Payments account.

Like the OP, I am also interested in what is the strictly correct way to handle these moneys should the payee not ever be correctly identified.

[timazisqua]

Hi Dave
Thanks, seems like you understand what I meant with my post.
Yes, that is basically what Is happening, the customers due to incorrect reference or accidental payments are not following up or claiming them.
This is the same is also what we are currently doing, putting it in un allocated payments account, but yes, I would like to know what is the legal and sensible allowed time to keep these payments unallocated before It can be used to write off bad debt accounts or use towards other expenses in the company. As some are lying for more than 2 years unallocated, so if by then a person or company has not figured out that they made a mistake then it is their own loss

[Mike C]

It would be very interesting to hear from a lawyer what the legal requirements/implication would be for this. As a rule of thumb any money put into your or your business account "by accident or error" does not belong to you and you need to return it. But if it cannot be allocated or traced what to do? I see that some municipalities have issued policies that say that they must do everything possible to find out who the money belongs to, and if not then they hold on to it for a period of (and here it differs) about 3 years before becoming part of their "funds". One had a rather good idea of keeping a separate record of such moneys so that if something arises at a later stage it could be traced via that record. I don't seem to be aware any "general rule" to follow about this.

I must say that after 3 years (and presumably after books having been audited each year) the donor of the money will probably never be aware of their mistake.

[timazisqua]

Thank you, I agree, i think 3 years seems a reasonable time to wait - think we will do this going forward - Thanks Dave/Mike

Now another thing:
In the case that we do have an idea of the payee, are they obligated to provide proof of payment in order for us to allocate/refund their account?
So example
I have a client who made a payment in 2022, bank traced the payment to the company name which I recognize and deal with regularly,but my accounts department is asking that they supply proof of payment from their bank for the transaction. As this is a 2022 transaction it gets considerably harder to do so the further back it goes.
I can understand if getting proof of payment is a high value, but considering I have a record of payments from this client with the company details, it should be just straightforward?
What do you think?

[Dave A]

Asking for proof of payment is a CYA move that removes all possibility of comebacks in that situation.

That said, if the payment is over two years old, the client provides in writing the date and quantum of the payment, it all matches up and no-one else has claimed the receipt, personally I do accept the claim.
I see it as pretty low risk and good for goodwill with the client.

[dellatjie]

I attended a seminar a few years ago where the presenter stated that after a certain period (I think it was a year) you have to declare the amount as income. I have not been able to find any reference confirming this, but I think a year is reasonable.