AR Reconciliation Mess

by Jose

Hello,

I enjoy this site very much. It's very helpful and practical. What I can't find however is a practical solution to an AR problem I run into from time to time.

Some businesses deposit a number of cheques through the bank machine; then dump their deposit slips (or not) along with their other receipts into a shoe box. You have to go by deposit slips or the bank statement itself to try to figure out who paid what accounts.

This is a very time consuming process and sometimes simply impossible. Sure you can contact all customers and ask for their statements to reconcile but again this is a very time consuming process and it simply doesn't look very good.

Does anyone have any practical solution on how to book these entries? Perhaps miscellaneous AR and then offset the balance against real AR less any bad debts? That's all I can think of. Any suggestions would be greatly appreciated.

Thank you.

Hi Jose,

In my opinion, it is all about training the business owner on how to prepare their records for the bookkeeper.

You need to emphasize that it costs them extra ... a lot extra ... when you have to sort, match and reconcile items due to sloppy record keeping.

If you are using QuickBooks, make sure you are utilizing the undeposited funds account.

These four articles in the forum might give you some ideas:

• Processing the Garbage Bag Filing System


• How to Deal with Unrecorded Bank Deposits


• Sorting Receipts from Multiple Years


• How to Deal with Incomplete Documentation

You might want to suggest they write out hand written receipts from a receipt booklet to track payments received, or list the cheques in a bank deposit book ... anything to make your job easier and to keep their processing costs down.

If I absolutely can't make a match of the Accounts Receivable to the bank deposit slip, then I:

... create a customer called "Unknown" or anything of your choice ... I don't like using miscellaneous as I think it becomes a dumping ground, and

... create an invoice for the amount so I can apply the deposit that doesn't have a match

... but only after I have entered in all my invoices and all my deposits and still haven't been able to make a match ... and ensuring the amounts were NOT from a source other than sales as discussed in the second article above.

The reason I take the time to book an an actual invoice is because of the next step ...

Then I have the client get in touch with each customer (I will do it if they ask but it costs extra) that has an amount outstanding to ask for payment. Any adjustments as a result of the contact are made ... and easy to do so, as I just go in and adjust where the payment was applied ... which I couldn't have done easily if I hadn't run the transaction through Accounts Receivable.

To me this is a conservative way of ensuring that I have not under booked sales revenue.

Disorganized business records means the business owner is going to pay too much tax as they will lose tax deductions due to sloppy paper work.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

I apologize to my readers ... but while converting this submission to upgraded software, I lost all comments associated with this posting. The post was originally submitted in late 2011 or early 2012. Lake