Flow of Processing – Accounts Receivable

Overview

Flow of Daily Processing

Simple Invoice Processing

Processing Cash Receipts

Converting Existing Invoices

Modifying Invoices

Processing Period End

Performing Period End Updates

Processing Checklist

Overview  (return to top)

The Flow of Processing section helps you learn how to operate the software for the first time and provides guidelines to use in operating the Accounts Receivable module after it is installed. Study this section in conjunction with the individual operations listed in this online help.

 

The Accounts Receivable module is designed to record daily transactions as well as those generated by the Sales Order Processing module. It is tied very closely to the Sales Order Processing and Sales Analysis modules, though it may be installed as a stand-alone if desired. You should understand how other modules work to obtain a complete picture of how orders/invoices are processed.

 

Flow of Daily Processing  (return to top)

Daily processing refers to the procedures performed each day when using the Accounts Receivable module. Daily processing may involve invoice data entry, modification or adjustment of invoice information, cash receipts processing and Simple Invoice generation (optional). Three major processes are covered in this section: Simple Invoice Processing, Cash Receipts Processing, and Converting Existing Invoices, all of which may be used on a daily basis. Information on modifying updated invoices in also included in this section. Period End Processing is detailed following the daily processing section.

 

Simple Invoice Processing

Use the Simple Invoice Entry, Simple Invoice Printing, and Simple Invoice Register tasks for the entry, printing and updating of detailed accounts receivable invoices when an interface to the Inventory Control module is not required. Simple Invoice processing is ideal for professional service billings or other types of “letter format” billings where detailed descriptions are required.

 

Simple invoice processing refers to the billing capability provided in the Accounts Receivable module. This is to distinguish it from the comprehensive order entry and invoicing function of the Sales Order Processing module that interfaces with the Inventory Control and Sales Analysis modules.

 

There are several uses for simple invoicing, as it is adaptable to many types of businesses. In addition to being used as a self-contained billing system, you can also supplement the billing capabilities of the Sales Order Processing module.

 

Preparing for Invoice Entry

Because the body of the simple invoices contains description lines for services or products, it is useful to have an “invoice worksheet” or “billing form” from which data entry is performed. This provides a way to collect and verify billing information before entering it into the system. You may already have billing forms or you may want to design one to suit your needs. A sample billing form is provided at the end of this section that includes all the information required by the Simple Invoice Entry task. You may use it as-is or have it modified and printed with your own logo. See your AddonSoftware reseller for assistance.

 

Assign invoice numbers. For control purposes, it is usually best to let the system assign invoice numbers. This is because billing forms coming from several different tablets make it impossible to control the numbering sequence. It also saves time during data entry.

 

Entering Invoices

Use the Simple Invoice Entry task to create or modify invoices for your customers. A distribution code and terms code is assigned to every invoice. Detailed line items may be entered, each having a separate general ledger revenue account, service date and up to 30 characters for a description.

 

The quantity and price are automatically multiplied together to determine an extended price. If quantity and price are not meaningful for the invoice, simply default through those fields to the Extension field and enter the total for each line.

 

Printing Invoices

Use the Simple Invoice Printing task to print your invoices. Invoices may be printed on single or multiple part forms. If single part forms are used, specify the number of original copies in response to the Number of Copies field before beginning printing. If multiple part forms are used, it is a good idea to have each part a separate color in order to distinguish the original from the various file copies you require.

 

The restart option allows you to restart invoice printing in the event of a printer malfunction or paper jam. You may restart at any point (usually where the printing was interrupted) and reprint invoices as many times as necessary.

 

Updating Invoices

Use the Simple Invoice Register task to print a register of your invoices. Run the register after all invoices are printed. Check the totals and general ledger accounts for accuracy. The Simple Invoice Register serves as a daily sales register for all invoices in a particular batch. It must be printed before the invoice update process can be run.

 

Up until the time the update is run, you may return to the Simple Invoice Entry task and make adjustments, followed by reprinting. When the information on the register is accurate, proceed with the update keeping in mind these three points:

 

1.  Invoices are updated to the Customer Open Invoice file.

2.  The associated general ledger postings (revenue and sales discount accounts) are updated to the General Ledger Daily Detail file. When the Daily Detail Report is run and updated, the amounts are posted to the general ledger accounts

3.  The update does not interface with the Sales Analysis, Sales Commission or Monthly Sales Journal files.

 

After the update, file the Simple Invoice Register in a folder marked AR Simple Invoice Register under the correct month.

 

Processing Cash Receipts  (return to top)

Several vital tasks within the Accounts Receivable module are used for processing cash receipts. These tasks enable the entry and posting of payments on customer accounts. Adjustments and customer deposits can also be processed. In addition to posting customer payments to specific invoices, processing also enables you to apply cash received “on-account” for a customer, record customer deposits, apply credit memos to existing invoices and post cash received directly to general ledger accounts, if required.

 

A thorough understanding of the cash receipts process is essential to the proper operation of the Accounts Receivable module. A working knowledge of basic accounting, including the handling of debits and credits is required to achieve this understanding.

 

Preparing for Cash Receipts Entry

As checks are received, endorse the back of the checks and date the check stub. If actual cash is received, take special care to record the transaction. When a batch of checks is collected, prepare for cash receipts entry and for deposit to the bank.

 

Determine the cash receipts code for the transaction. This code is used for determining which general ledger account cash and terms discount will be posted as part of the cash receipts update. Refer to the Cash Receipts Code Maintenance task for a list of all the cash receipts codes and their definition.

 

Make a note of whether cash or a check was received or of the reference number, if making an adjustment or applying funds already on-account.

 

Determine if cash is to be applied to a customer invoice, on-account or to a specific general ledger account. Additional information required includes:

 

1.  If applying cash to a customer invoice, determine if it should be applied beginning with the oldest invoice on file or to specific invoices.

2.  If posting cash directly to general ledger accounts, identify and verify the accounts before making any entries.

3.  If applying existing credit memos as payment toward invoices, identify the amounts and numbers to be applied.

 

NOTE: Because most businesses make bank deposits as soon as possible after money is received, the cash receipts process is usually performed every day. Sometimes, however, it is not possible to do the cash receipts data entry before going to the bank for the daily deposit. When this is the case, make a photocopy of the checks and a worksheet for the cash and any other adjustments. This information may be used for cash receipts data entry after the bank deposit is made. Filing this information by customer also provides a record of customer payments.

 

Entering Cash Receipts

Before entering the cash receipts into the system, make an adding machine tape of all cash totals, all check totals, all adjustments and the actual deposit total. Use the Cash Receipts Entry task to enter the receipts. Mark each check stub “Posted to Computer” as it is entered.

 

When you are using on-account or credit memo funds, different entries are required. Checks returned due to non-sufficient funds also require special handling.

 

Updating Cash Receipts

Use the Cash Receipts Register task to print a register of entered cash receipts.

The task prints all cash receipts and adjustments entered into the batch. Balance the tape totals to the register. If anything was entered incorrectly, make the corrections using the Cash Receipts Entry task again.

 

When the Cash Receipts Register is in balance with the tape totals and all other information is correct, proceed with the update and keep in mind the following:

 

1. Cash receipts and adjustments are updated to the customer open invoice file.

2. The associated general ledger postings are updated to the General Ledger Daily Detail file. The General Ledger Daily Detail Register form must be printed before updating is allowed to the general ledger transaction file.

 

After the update, file the Cash Receipts Register in a folder marked AR Cash Receipts Register under the correct month. Stamp “Paid” and record the date and check number on customer invoice copies in the customer files. Keep these items on file for as long as required by your accountant for audit purposes.

 

NOTE: If the bank deposit has not already been made, a copy of the Cash Receipts Register may be used to compare the bank deposit ticket for verification.

 

Converting Existing Invoices  (return to top)

This invoicing function is used primarily during the data conversion time when the module is first installed. Thereafter, invoices are normally generated by the Simple Invoice task included in this module or through the Sales Order Processing module. However, you may want to convert an existing invoice into the system. Conversion Invoice Entry task allows for the entry of customer invoices when entry “after the fact” is required.

 

Preparing for Invoice Conversion

As invoices are created from outside the module, collect copies for entry into the Accounts Receivable module. Put these documents into a folder marked “Accounts Receivable Invoices to be Entered.” After a batch of invoices is collected, prepare them for entry. Three important preparation considerations are: how to distribute the invoice to the general ledger, what the invoice dates are and the type of invoice.

 

Determine the general ledger distribution. Refer to the Distribution Code Maintenance task to obtain a list of codes and their associated general ledger accounts.

Determine the invoice date, invoice due date and (if applicable), discount due date for each invoice.

 

Invoice Date... This date is used to determine the invoice due date and the date to post the invoice to the general ledger.

 

Invoice Due Date... This date is used to determine when the invoice should be paid before it becomes delinquent. The invoice due date is calculated automatically based on the terms code though it may be overridden at data entry time.

 

Discount Due Date... This date determines when the invoice must be paid in order to be eligible for a discount. The discount date will be calculated automatically based on the terms code assigned to the invoice.

 

Determine the invoice type. There are three types of invoices: sales, returns and finance charges. Sales invoices are those generated for goods sold or services rendered. Return invoices record the return of merchandise, serve to write off a customer balance or make a similar adjustment to a customer’s account. Finance charges are a special type of invoice that records an amount in addition to a regular invoice that may be imposed because of a delinquent balance or other credit related information.

 

When collecting batches of invoices for input, a “cut-off” date should be established so that the accounts receivable are posted to the proper period. This cut off date is usually the last day of the month.

 

Entering Invoices for Conversion

Before posting the invoices, make an adding machine tape of all invoice totals and discounts. Enter invoices using the Conversion Invoice Entry task. Mark each source document “Posted to Computer” immediately after it is entered.

 

Updating Converted Invoices

Use the Conversion Invoice Register task to print a register of entered invoices. This register shows all transactions that were entered in the batch. Balance the tape totals to the register. Pay special attention to dates and general ledger account numbers. If anything was entered incorrectly, make corrections using the Conversion Invoice Entry task. Reprint the register and check the totals again. If you print more than one register for a batch, keep and file only the most current.

 

When the Conversion Invoice Register is in balance with the tape totals and all other information is correct, proceed with the update and expect these results:

 

1.  Invoices updated to the Customer Open Invoice file.

2. The accounts receivable and revenue accounts posted to the general ledger, if requested at the start of the update process.

 

After the update is complete, file the source documents appropriately (e.g. customer file, sequential invoice file, etc.). File the Conversion Invoice Register chronologically in a folder marked AR Conversion Invoice Register under the correct month. Keep these items on file for as long as required by your accountant for audit purposes.

 

Modifying Invoices  (return to top)

After invoices are updated to the Accounts Receivable Open Invoice file, the invoice dates and/or terms may only be corrected or changed using a special process. Correcting invoices that have already been updated must be done in a timely fashion or an invoice may be paid by the customer before it has been corrected in the Accounts Receivable module.

 

NOTE: If adjustments are required to invoice balances, they must be made through the Cash Receipts task, which also allows for the adjustment of the associated general ledger postings.

 

Preparing for Invoice Modification

As invoicing mistakes become apparent or invoices need to be changed, make a notation on a change form and file it in a folder marked “Invoice Date Modifications to be Entered.”

 

When a batch of changes has accumulated, prepare them for entry. Determine the invoice to be corrected, the proper terms code and the correct invoice date, due date and discount due date.

 

Modifying Invoices

Enter changes using the Invoice Date Modification Entry task. Mark each change form “Posted to Computer” immediately after it is entered.

 

Updating Modified Invoices

Use the Invoice Date Modification Register task to print a register of the entered invoices. The register prints all date changes entered in a batch. Check the register for accuracy using the change forms for reference. Use the Invoice Date Modification Entry task to make any corrections.

 

When the Invoice Date Modification Register is correct, proceed with the update. The update will effect the Customer Open Invoice file by changing previously entered invoices to include the new terms and dates. The next time the Accounts Receivable Aging Report is printed, it will re-age all open balances for this customer.

 

File the change forms appropriately for future reference.

 

Processing Period End   (return to top)

Period End Processing refers to the operations performed at the end of each accounting period to close that period. Period End Processing for Accounts Receivable includes printing of monthly reports, such as the Aging Report, entering finance charges, printing customer statements, purging zero balance invoices and closing the accounting period. These steps are the same for each period in the fiscal year, including the last period.

 

As part of the period end processing, the Current Period is incremented; when closing the last period of the year, the Current Year is also incremented. Also, the month-to-date sales and cost figures in the Customer Master File are set to zero as part of Period End Processing.

 

The year-end closing of Accounts Receivable is accomplished in one step during the last period of the year. With that step, the year-to-date sales and cost of goods sold figures replace the prior year figures and the current year figures are reset to zero. If these figures are important to you, be careful. Do not run the period end process again. Normally, you would not close a period twice unless you run the Parameter Maintenance task and reset the period. However, there should be no reason to do this as part of the regular system operation.

 

The Accounts Receivable module’s period end must be closed before the General Ledger module’s Period End Processing can be run for the corresponding period. In actual operation, it is not uncommon for the General Ledger to be several periods behind the Accounts Receivable. This does not impair operation of either module due to the design of the software.

 

Reviewing Accounts Receivable Activity

Review all accounts receivable processing for the month prior to closing. Make sure all invoices are entered and updated for the month, whether from Conversion Invoice Entry and Simple Invoice Entry tasks or from the Sales Order Processing module. Have all date modifications been entered and updated? Have all cash receipts and adjustments been posted and updated?

 

Running the Aging Report

Run the Accounts Receivable Aging Report based on the ending date of the accounting period. Balance the report to the amount in the General Ledger’s Account/Report Maintenance task’s Accounts Receivable account of the same date.

 

NOTE:  Make sure that the General Ledger’s Daily Detail Register is printed and updated so that all postings are recorded in the general ledger monthly transaction file. This is essential to obtaining an up-to-date general ledger. Make any adjustments required using the proper transaction entry tasks. When the report balances to the general ledger account, file the report in a folder marked “Aging Report” for the proper month.

 

Creating Finance Charges

When the Finance Charge checkbox is marked in a customer’s masterfile record (refer to Customer Maintenance), finance charges can be created and assigned to that customer. You can automatically apply finance charges on any past due amounts accrued by the customer. For customers with this parameter set, finance charges can be applied to all customers at once or on an individual basis.

 

Entering Finance Charges

Use the Generate Finance Charge task to automatically enter finance charges against your customer accounts. You enter the number of overdue days that indicates a finance charge is necessary. You also set a minimum dollar amount past due to qualify for finance charge application and a minimum finance charge to apply. A distribution code and terms code are assigned along with a finance charge percentage.

 

Also use Finance Charge Entry to add or delete a finance charge to/from an individual customer’s account. You can reference an existing invoice or create a new one. When you enter individual finance charges, the amount of the charge is entered as a dollar figure.

 

Updating Finance Charges

Print the Finance Charge Register and review for accuracy. If adjustments need to be made, try re-running Generate Finance Charge with different options. This will make changes to the entire set of customers selected for finance charges. Use the Conversion Invoice Entry task to make changes to individual customer finance charge calculations before the update is run. Reprint the register discarding the previous version. This method is used to change the finance charge information for only a few customers.

 

Update the Finance Charge Register. Finance charge invoices are updated to the Customer Open Invoice file as type FC invoices. Optionally, postings are made to the General Ledger’s Daily Detail File for the newly created finance charges. After the update, file the Finance Charge Register in a folder marked AR Finance Charge Register under the correct month. Keep these registers on file for as long as is required by your accountant.

 

Note that invoices for finance charges are designated type ‘F’ by the system rather than type ‘S’ (sales). When finance charges are calculated, type ‘F’ invoices are not included in the past due amount.

 

Printing Customer Statements

A statement may be sent to customers who have the Statements? checkbox marked in the Customer Master File. (Refer to Customer Maintenance). Invoices with a zero balance do not appear on customer statements.

 

Prepare Customer Statements

In preparing to send statements of account to your customer, first determine the statement date, which is generally the ending date of the period being closed. Identify the aging status that will determine whether or not to print a statement for each customer (i.e. all open invoices, 30, 60, 90 or 120+ days). Evaluate whether the statements will calculate a customer’s aging based on the invoice due date or the invoice date.

 

If desired, compose a message to print on the customer’s statements.

 

Printing Customer Statements

If a preliminary customer statement is needed, print the AR Aging report or the statements to review on screen or on hard copy as desired.

 

If using special paper for statements, load it into the printer, otherwise proceed with statement printing. Check the statements to be sure they printed correctly.  Remember to load regular paper back into the printer, as needed, when statement printing completes.

 

Cash Receipts Journal

The Monthly Cash Receipts Journal provides a numeric sequence list of all cash receipts updated in the module. Depending on whether records have been deleted, it can be printed using a specific date, making it a perpetual cash receipts journal.

 

Performing Period End Updates  (return to top)

 

CAUTION: All activity for the period must be completed, and all reports/statements must be printed, before beginning the update. Once the update is complete you cannot go back and run reports/statements for the same activity period again.

 

When all processing for the period is complete, proceed with the period end update. The update closes the Accounts Receivable module for the selected accounting period and increments the period by one. Month-to-date sales and cost of sales figures are cleared from the Customer Master File. If you are closing the last period in the fiscal year, the current year indicator is incremented. The year-to-date sales and cost of sales figures in the Customer Master File file are moved to the prior year column and the year-to-date figures are reset to zero.

 

After the update is complete,

 

  1. File a copy of the customer statements appropriately (e.g. in the customer file, by date)

  2. Send the statements to the customers. Use either windowed envelopes or print customer-mailing labels, and adhere them to regular envelopes.

 

 

Processing Checklist  (return to top)

Daily Processing

____ Conversion Invoice Processing

____ Invoice Date Modification

____ Cash Receipts Processing

____ Simple Invoice Processing

Period End Processing

____ Accounts Receivable Aging Report

____ Customer Finance Charge Generation (optional)

____ Print Customer Statements (optional)

____ Print Monthly Cash Receipts Journal

____ Period End Update

 

Simple Invoice Billing Form


Note:
Date format (MM/DD/YY) may be different depending on how system setup)


________________________________________________________________________________

 

Invoice Date ________________ (MM/DD/YY)

Customer No ________________

Name ________________________________________________

Dist Code ________________  Terms Code ________________

 

________________________________________________________________________________

 

GL Number _____________________ Date ________________(MM/DD/YY)

Memo _______________________________________________________

Quantity_______ Price ________________  Extension _________________

 

________________________________________________________________________________

 

GL Number _____________________ Date ________________(MM/DD/YY)

Memo _______________________________________________________

Quantity_______ Price ________________  Extension _________________

 

________________________________________________________________________________

 

GL Number _____________________ Date ________________(MM/DD/YY)

Memo _______________________________________________________

Quantity_______ Price ________________  Extension _________________

 

 

 



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