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advance payments and bank reconciliation

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Posted on by Atahualpa

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Hello Friends:

Payroll for our organization gets taken from our bank account on the last day of the month and hits the employee's account on the first day of the month. The invoice and payment for (say) November payroll is posted as Nov 1, but it shows on our bank statement as Oct 31. So what is the best way to do bank account reconciliations in such a case?

So, should I handle these as prepayments and set up prepayment accounts and generate prepayment invoices? Or is there some other way of treating this as an advance?

Thanks in advance for any help you can give!

Wes Baker

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Dallefeld 211 User Group Leader on at

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Why is this not an October expense?

Anyway, You could credit the bank and debit a prepayment account for the total deducted from the bank account, which will give you want you need for bank rec. And then your Nov 1 entry will credit the prepayment account and debit/credit all the other associated accounts for payroll.

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Atahualpa 113 on at

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Payroll is paid in advance at the beginning of the month (not sure why).

Is there an issue with setting prepayment % at 100? The MS documents page for this has a special note saying:

We recommend that you do not use a prepayment percentage of 100 in the following cases:

If you are located in North America. Due to how taxes are calculated, a prepayment percentage of 100 can lead to issues with prepayment invoices.

In all regions, if you manually deduct a payment discount from the invoice. A prepayment percentage of 100 will not automatically leave an amount from which to deduct the discount.

Also, when you're using prepayment percentage of 100, Business Central might need to create off-setting rounding entries. When that happens, you will need to choose a G/L account in the Invoice Rounding Account field on the Customer Posting Groups page. This is true even if you have not turned on the Invoice Rounding toggle on the Sales & Receivables Setup page. If you do not specify an account you you will not be able to post prepayment invoices.

Thanks for your help!

Wes Baker

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Vinita_Kas 336 on at

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HI
I am not sure why is this a prepayment?
Prepayment is when you have done the payment for advance and the goods are yet to be delivered incase of vendor
In your case when the services are already done you are doing the write thing by raising an invoice on Nov1 and when you do a bank reconciliation you can add the statement date

and clear the filter on the Posting date and system would allow you to match it to a transaction on oct 31

Other things I believe you can do is

1. Ideally you should ask your Contractors to raise the invoice on 28th of each month so this issue is sorted

2. Oe when you pay the invoice you can still create the invoice on 1st but put the posting date as 31st ?

Regards
Vinita

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Atahualpa 113 on at

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Thanks for your help!

It's prepayment because our 1099 employees are paid in advance. So they get paid on Nov 1 for the month of November. But in order for the money to hit their account on Nov 1 the bank takes it from our account on Oct 31.

Outside of the obvious options of paying at the end of the month or paying on Nov 2 (neither of which the organization wishes to do), I can't think of another option other than debiting the pre-payments on Oct 31 to the and then on Nov 1 credit that prepayment account and debit/credit all the other associated accounts for payroll.

If there is a better option I would love to learn of it.

Thanks!

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Dallefeld 211 User Group Leader on at

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Wes, I think you've defined your solution. And though not as automated as you would like, it meets your requirements.

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