Accounts Receivable: Cleaning Up
When determining how much customers owe I usually view the AR Aging Summary report in QuickBooks as it is a nice compact report and I can click into any amount if I need more detail. It is a good idea to view the Open Invoices report once in a while though as well. This report technically shows the same information, but it makes certain housekeeping needs stand out. If you have any unapplied payments, journal entries, or credits it will show clearly on this report. Scan through and look for any positive and negative duplicate numbers that should offset each other, but are not. Also, look for small positive and especially negative numbers.
Small Negative Numbers
These are likely customer overpayments that were left on account at the time the payment was received. If you can return the funds, do so. If it has been over a year and it is unlikely that the customer will order more services from you go ahead and write off the overpayment.
Before you go writing these off, make sure they are not deposits especially if they are large negative numbers. Large negative numbers, depending on your accounting practices, could be deposits on work not yet invoiced. As with any number on this report, double click for more detail. If you can find a payment screen indicating overpayment you are safe to write off the credit / negative AR balance to an income account.
Small Positive Numbers
A positive AR balance is the normal debit balance the account should have. If the amount is really small though it likely indicates the customer short paid the invoice by a small amount. If you aren’t going to go after the customer for the difference, write off the balance. Don’t just change the invoice amount! While that would technically solve your problem it doesn’t leave an accurate audit trail. Instead, write off the amount using a credit memo and a bad debt item.
Unapplied payments, journal entries or credits
If you see one line on the Open Invoices report stating $-200 and the line immediately above or below indicating $200 you likely have an invoice that did not have its related payment or credit memo applied to it. You might also see unapplied journal entries, checks, etc depending on the specific situation and how it was recorded at the time. This is the easiest irregularity to fix. For example, click into the payment and you can tick off the invoice that it applies to.
If you’re having these issues in your AR reports and have additional questions or want it taken care of for you just send us a message.