Reversing a Payment & Unwinding Allocations

The Payment Reversal Flow (/payments/:hex/reverse) is the formal procedure to unwind a mistaken, duplicated, or misallocated repayment, restoring the borrower’s installment balances and posting an exact mirror accounting entry to the General Ledger.

1. Operational Rules & Permissions

  • Required Privilege: payments: reverse (strictly limited to Branch Managers and Executive Directors).
  • Invariance Rule: Only a payment in allocated status may be reversed. Payments that are already pending, reversed, or unallocated cannot undergo this flow.
  • Cash Handback Notice: The system reverses the software balances and accounting ledger; any physical cash handed back across the counter must be managed by the cashier through a verified cash-out voucher.

2. The 3-Step Reversal Rail

[ Step 1: The Payment ] ──► [ Step 2: Why ] ──► [ Step 3: Confirm ]

Step 1: The Payment Record (#payment)

  1. Locate the Payment:
    • Navigate to Payments (/payments) $\to$ Click on the target transaction.
    • Or open from the loan ledger (/loans/:hex) under the Payments tab $\to$ Click Reverse.
  2. Review Allocation Legs:
    • Displays the gross amount (e.g., KES 15,000), channel (cash, bank, mpesa), payment reference, date received, and recording teller.
    • Shows the exact breakdown of how the funds were distributed across installment legs:
      • Penalty leg: KES 500
      • Fee leg: KES 250
      • Interest leg: KES 3,250
      • Principal leg: KES 11,000

Step 2: Reason for Reversal (#why)

Financial auditors require an unalterable narrative before any accounting entry can be unseated:

  • Mandatory Justification: The Reason textarea requires a clear explanation of at least 8 characters.
  • Common Valid Reasons:
    • “Posted to wrong borrower account (intended for CLX882910 instead of CLX119283).”
    • “Duplicate entry: Teller entered cash receipt twice for the same transaction.”
    • “Safaricom customer recall: Borrower initiated M-Pesa reversal with Safaricom.”
    • “Erroneous overpayment amount keyed across counter.”

Step 3: Confirm & Mirror Journal (#confirm)

Review the three-fold impact of the reversal:

Reversal Financial Effect:
  1. Payment State:     allocated ──────► reversed
  2. Loan Ledger:       Balances fully restored on each affected installment
  3. General Ledger:    Mirror journal generated reversing revenue & cash debits

Mirror Journal Entries:
  Dr 40100 Loan Interest Revenue   (De-recognizes unearned interest)
  Dr 12100 Gross Loan Portfolio    (Restores outstanding principal debt)
      Cr 10100 Branch Cash Till    (Removes cash from cashier balance)
  1. Statutory Acknowledgment: Check the mandatory box: “This payment was wrong and the borrower’s balances are to read as before it.”
  2. Execute Reversal: Click Reverse the Payment.

3. Post-Reversal State

  • Payment Flagged: The payment displays an <span class="opt bad">reversed</span> status badge across all lists.
  • Installment Schedule Refreshed: The borrower’s loan repayment schedule immediately recalculates:
    • The principal debt increases back to its pre-payment balance.
    • Due dates and DPD counters update to reflect the reinstated arrears.
  • Audit Footprint: The action records the manager’s identity, timestamp, and explanation in sys.audits.