Accounts Recievable Holdbacks

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Posted on by Bill Campbell

Client is Plumbing Contractor and their clients (AR Customers) are sent invoices and when they make the payment can and will 'holdback' an amount.

In Payables we can control the amount we pay on a cheque, but how do you handle this on AR?

Do you simply record the payment and allow the unpaid amount to hang in the open?

Pretty sure that is what we have to do, but wondering if there is a better way to record this, as the client may not ever pay this, or may pay way out in the future.

Thoughts?

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Richard Wheeler 75,848 Moderator on at

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Bill, if your client is quite sure they will never receive payment in full they can simply write off the balance due. You do this on the cash receipt screen. If the balance due was $250 and the customer only pays $200 you would write off the $50. The other option is to leave the invoice open hoping you will get paid. If payment is never received you can enter a zero dollar cash receipt and then enter the remaining balance as the write off.

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Bill Campbell 12 on at

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This is what we had told them about 2 weeks ago - however they thought there had to be a better way - glad to get this confirmation - as this is how I wanted to handle it from the outset.

Thanks for the confirmation.

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Richard Wheeler 75,848 Moderator on at

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Well I sure would like to hear what they thought the better way was. The only other thing they could do is:

1) Void the payment

2) Void the invoice

3) Enter a new invoice for the amount they paid

4) Enter a new payment to match this new invoice

All the while needing to explain to their accountant why they choose to do it this way as opposed to writing off the amount they were shorted.

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Bill Campbell 12 on at

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Worse, they were going to void the sales document after sending to the client, calculate the amount of the hold back, enter invoice 1 as 90% of the original and then enter invocie 2 as the 10%. Then if the client paid the full amount, apply the payment to both. Works but, lots of work - we are not talking about 1 invoice a day.

Not sure they had considered how they were going to deal with the potential they would never get the hold back paid - that would have been interesting as well, I am sure that there accountant (external) whose wonderful idea this was - would have figured out a complicated way to force that back to being a problem that the software is not capable of solving.

Sounds like an accountant who is not going to have such a fat cash account when it comes to this 'now clean audit'

Just saying.

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soma 24,410 on at

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I would suggest them to enter return/credit memo and then apply to remaining invoice amount.

Hope this helps!!!

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