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Bank and Payment Reconciliation

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Posted on by 138
Hi. 
We have transactions in BC wherein the invoice amount and the received amount doesn't match because of an invoicing factor company. For example, the invoice amount that was processed to the client is $100, the invoicing factor company's fee is $2, then the amount received in our bank is $98. How do we reconcile and register the customer's payment? 
 
Currently, what we do is to manually match the application to the invoice amount in the payment reconciliation journal. This will give us the difference between the invoice amount and the received amount which is the fee. So, it means that the payment reconciliation journal, won't be closed as there's still a difference in the amount. On the purchase side, we created the invoicing factor company and processed the purchase invoices for the fees. 
 
THe sales invoices with the invoice amount is still showing on the overdue sales invoices amount. How do we close it? THank you. 
 
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  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Hi, Gavin.
    Thank you for sharing this. I followed the instructions and was able to close the transaction. Do you have a sample screenshots of how it appears on the chart of accounts? When I have posted everything, this is what I have. 
     
    On the Invoice Factor GL account, all the transactions are available. When I checked the Invoice Factoring Bank account I've created, there's no balance. 
     
    On the customer ledger entries, the full amount is available. Also, could you please provide the difference between the Original amount and the Amount fields here on the customer ledger entries? 
     


    Are all these posted transactions correct the way it should be done based on your work instructions? Thank you so much for your assistance. 
     
     
  • Gavin Profile Picture
    Gavin 2,331 on at
    Bank and Payment Reconciliation
    Hi,
     
    When I have setup this up in the past I've created two bank accounts. One for your actual bank account and one for the invoice factoring account.
     
    I use the invoice factoring account when posting the cash received from the customer and post manual journals to "draw down" the cash into the main bank account from the invoice factoring account. I also use a manual journal for any fees between the invoice factoring expense account and the invoice factoring account.
     
    The post below contains full details of this method however I appreciate there are probably several schools of though this.
     
     
    Thanks
    Gavin
     
     
  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Hi. May I request assistance on this, please? Thank you. 
    The goal is to record still the full amount since the client still pay the full amount of the invoice however before it hits our bank, a fee is deducted (by the invoice factoring company).

     
    The invoice amount of $8560 is booked to the general ledger account no. 4 (revenue) and on the balancing account type: bank account. 
    The fee will be booked to the GL Account no. 5.9.3. 
    The question now is the amount on the first entry which is booked to the Bank account GL account and the balancing account type which is Customer. How do we account for the full amount of the invoice since it's the total amount paid by the client? 

    Also, as you can see, the Amount that is booked to the Revenue G/L account is negative. Do you have an idea why it's negative? 
  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Hi, Manish. 
     
    The total invoice amount is $8,560 while the received amount is $8,400. The $160 is the fee taken from the invoice since we're using an invoice factoring company. Thank you. 
  • Suggested answer
    Jun Wang Profile Picture
    Jun Wang 3,614 Super User on at
    Bank and Payment Reconciliation
    first of all, bank rec is about to match leger entries under a bank account against the a bank statement from that bank. for example, user has a posted invoice of 100 and get a payment from customer of 100 which is shown under that bank ledger entry.
    later user gets a bank statement showing amount of 100, which could match up to the ledger entry and is able to be posted.
    for another invoice, where total amount is 100 but customer only pays 98, the bank ledger entry shows 98 as the payment. when user gets a bank statement, it shows 98 as well. in this case, even though, the invoice might be showing as closed (due to payment tolerance) or not closed, user is still able to reconcile the bank ledger entry with the bank statement and post the bank rec.
     
    the second scenario, if the invoice is still only with remaining balance of 2, user could close the invoice as needed by either
    create a credit memo of 2 dollar, apply against the opening invoice to close it.
    or 
    pursue the customer for the remaining balance and close the invoice in the future.
     
    there might be other ways to close the invoice, but this is a separate issue from the bank reconciliation one.
     
    the recommend method is to use payment tolerance, or user could manually modify some of the below fields as proper to close it
  • ManishS Profile Picture
    ManishS 6,578 on at
    Bank and Payment Reconciliation
    Can you clarify,
    1. What is the amount you have received in bank ?
    2. What is the total invoice amount ?
  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Hi ManishS. 
    THank you for your suggestion, We have tested it out and this is what we have: 
     
    The invoice amount of $8560 is booked to the general ledger account no. 4 (revenue) and on the balancing account type: bank account. 
    The fee will be booked to the GL Account no. 5.9.3. 
    The question now is the amount on the first entry which is booked to the Bank account GL account and the balancing account type which is Customer. How do we account for the full amount of the invoice since it's the total amount paid by the client? 

    Also, as you can see, the Amount that is booked to the Revenue G/L account is negative. Do you have an idea why it's negative? 
  • ManishS Profile Picture
    ManishS 6,578 on at
    Bank and Payment Reconciliation
    Can you try this in payment journal,
  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Hi, All. Thank you for all your responses. I have set up the Payment Tolerance however, upon posting the transaction, it seems that the revenue GL account where the invoice is booked, doesn't contain the correct amount. Please see the attached file for reference:
     
    On this example, the invoice amount is $40,000 and the received amount is $39,800 with the remaining amount of $200. The remaining amount is booked appropriately. THe only question is the first 2 entries. Since what we're trying to balance out is the invoice amount and the fee (which is in this case the remaining amount), how do we get the total invoice amount of $40,000 to be booked to the G/L Account 4 (Revenue) since the total invoice amount is considered as revenue? Thank you. 
  • Imari  Profile Picture
    Imari 138 on at
    Bank and Payment Reconciliation
    Thank you both for your responses. We don't use the payment tolerance feature at the moment. @Yun Zhu, how is the $2 banking fee manually adjusted in the General Journal? 
     
    What we have at the moment is a Posted purchase invoice for the banking fee (this is also a posted payment). However, the Sales invoice with the total invoice amount is still open and payment has not been registered yet. 

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