AR Customer Balances

I have a lot of background in PeopleSoft HR (15 years) as technical emphasis with quite a bit of functional knowledge as well with some exposure to Financials.  I'm just now moving over into the Financials area so my question I'm sure is pretty basic but the functional person I'm working with is new to their position as well.  Just giving my background as reference.

The situation is this.  We have a small set of customers (retirees, ex-employees) who prepay for their benefits for the entire year so they have a credit balance.  Then each month the montly premium needs to be billed/applied to their account and reduce their credit balance accordingly.  The balances aren't getting reduced doing what they currently do.  It gets applied to the GL but not the customers balances.  I'm pretty much 100% sure this is a business process issue and not a bug or system problem.  I need help in understanding the nuts and bolts of how to reduce the credit balance each