Reconcile receivables and payables

The general ledger is period-driven (MM/YY format). Individual transaction dates (MM/DD/YYYY format) arenot determinants of the accounting period affected. Rather, the “source” accounting period is controlled by the monthly cutoff of Accounts Receivable and Accounts Payable. If cutoff is not performed at the close of business on the last day of the month, transactions from other months may be included.

Be aware of the current system period when entering transactions for sales, cash receipt, purchases and cash disbursements

The following system processes have an immediate effect on the Accounts Receivable G/L account.

Accounts Receivable is not affected by the following:

• Point of Sale batch posting
• Miscellaneous cash receipts posting
• Clearing deposits on a bank reconciliation

Reasons A/R aging and A/R general ledger are out of balance:

• Bringing in the wrong opening receivables balance. The following must agree at go-live; otherwise the difference will carry forward:
• Opening journal entry
• Prior system aged receivables
• DDI Accounts Receivable Aging Report
• Making journal entries to Accounts Receivable. There should not be a need to make journal entries to this account, other than to open the system.
• Changing the A/R account in the G/L Control Table after Go-Live.
• Failing to produce the A/R Aging report as part of month end closing process. A monthly capture is needed to compare account detail with the balance in the A/R G/L account.
• Entering backdated transactions after monthly close. There is a flag to enable prior period A/R posting, but it should be used with extreme caution, especially if customers receive statements.

Corrective actions for A/R imbalances:

• Produce a monthly comparison to trace the difference back to its inception and determine if it is changing from month to month. If you have been capturing the A/R Aging Report as part of DDI’s recommended end of month closing process, it will be possible to trace the evolution of the difference, by making a monthly comparison between report and G/L account balance.
• Run a sales journal for the period and compare to the General Ledger source detail:
• Source SJ: Compare debits to A/R G/L account with the Sales Journal.
• Source CR: Compare credits to A/R G/L account with the Cash Receipts Journal. Keep in mind that the A/R credit does not factor in early payment discounts. Do not include Point of Sale Transactions because they do not flow through Accounts Receivable.
• If the numbers don’t balance, look for postings to other accounts using the same source codes.

The following system processes have an immediate effect on the A/P G/L account.

Accounts Payable is not affected by the following:

• Issuance of Non-Vendor checks
• Clearing checks on bank reconciliation

Reasons A/P aging and A/P general ledger are out of balance:

• Bringing in the wrong payables opening balance. The following must agree at go-live; otherwise the difference will carry forward:
• Opening journal entry
• Prior system aged payables
• DDI Accounts Payable Aging Report
• Making journal entries to accounts payable. There should not be a need to make journal entries to this account, other than to open the system.
• Changing the A/P account in the G/L Control Table after Go-Live.
• Using the Accounts Payable G/L for erroneous purposes in other functions. The A/P G/L account should not be used for any other purposes except to temporarily hold balances due to vendors. If a loan or note payable is established, it should run through a separate liability account.
• Changing the Liability account in A/P invoice entry – this is preset and should not be changed. If you are using a credit card to “hold” the liability, make sure the Credit Card is set as the “Remit-To for the Vendor. A detailed process sheet is available for handling credit cards.
• Failing to produce the A/P Aging report as part of month end closing process. A monthly capture is needed to compare account detail with the balance in the A/P G/L account.
• Entering future dated A/P invoices. This is perfectly acceptable accounting practice for items such as property taxes which are paid several pre-determined times per year. However, these items must be considered when reconciling an A/P Aging Report (which contains the items) and the current month’s G/L balance (which does not yet).
• Entering prior dated A/P invoices to a period after its monthly close. To accommodate processing of vendor invoices, a company master flag allows an invoice to be assigned to an accounting period after it has been closed.

Corrective actions for A/P imbalances:

• Produce a monthly comparison to trace the difference back to its inception and determine if it is changing from month to month. If you have been capturing the A/P Aging Report as part of DDI’s recommended end of month closing process, it will be possible to trace the evolution of the difference, by making a monthly comparison between report and G/L account balance.
• Run a Purchase Journal for the period and compare to the G/L source detail:
• Source AP: Compare credits to A/P G/L account with the Purchase Journal.
• Source CD: Compare debits to A/P G/L account with the Cash Disbursements Journal. Keep in mind that the A/P debit does not factor in early payment discounts.

• The A/R and A/P Aging Reports used to reconcile must be produced at the time of monthly close. Neither report will return an accurate value if produced for a previous date. Data captured by these reports is a snapshot of a moment in time, not a report of activity over a date range. When there is a question of which figure is correct (report vs. G/L), always defer to the report value.
• If your system is set to allow backdating of A/P and or A/R invoices (go to File > Company > Master > Accounting > Allow Period Change in A/P to find out), you can determine your balancing status by comparing the G/L with the Aging as soon as you run the report. In this way, backdated invoices don’t get a chance to affect the G/L.
• If you have experienced an out of balance condition for several consecutive months, it is helpful to trace the evolution of the difference and to determine if it changes from month to month. A sample spreadsheet is included in this document.
• If one or more Aging Reports are missing, use the following process to “back in” to a past Accounts Payable balance.

Example: The 12/31/16 A/P Aging Report was “accidentally” not archived. To back in to the balance:

• Run an A/P Aging report for the current date (3/1/17).
• Run a Cash Disbursements Journal for a date range beginning on the day AFTER the missing report and INCLUDING the current date (1/1/17 through 3/1/17).
• Run an A/P Purchase Journal for same time period (1/1/17 through 3/1/17).

Make this calculation:

Previous A/P Aging = Current A/P Aging (negative value) + Purch Journal – Cash Disb Journal

For receivables, the calculation is:

Previous A/R Aging = Current A/R Aging (positive value) – Sales Journal + Cash Rcpt Journal

It is common for users operating the A/P module to enter invoices to a period after the End of Month process has been completed. DDI strongly recommends closing the A/R and A/P modules together rather than leaving A/P open to accommodate additional invoices. A Company Master flag called “Allow Period Change in Accounts Payable Entry” can be set to allow the user to selectively change the accounting period assigned to invoices belonging in the recently closed period.

Please contact DDI Support atCustomer Care if you would like a support analyst to walk you through the production and use of this report.

Following is a sample report specification for identifying items assigned to an accounting period after the period close has been completed.