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Cathy Cakebread Consultant NorCal OAUG Training Day 2009 Copyright © Cathy Cakebread1
Introduction Cash Application ◦Setup ◦Processing Transactions ◦Setup ◦Processing Adjustments ◦Setup ◦Processing Close and Reconciliation Separation of Duties Copyright © Cathy Cakebread2
Note: Bank Accounts Are Usually Shared With Accounts Payable Ideal To Use A Slightly Different GL Account (e.g., Subaccount) for Cash Than AP Uses for Reconciliation Purposes Watch Accounts You Use!! ◦Can Cause Serious Issues Copyright © Cathy Cakebread3
Setup Receipts Receipt Classes Copyright © Cathy Cakebread4
Cash – Should Be The Only Field That Uses A Real Cash Account Receipt Confirmation – For Credit Cards And Automatic Receipts – Should Be A Unique Account Remittance - For Credit Cards And Automatic Receipts – Should Be A Unique Account Bank Charges – Should be An Expense Account Copyright © Cathy Cakebread5
Unapplied Receipts – Should Be A Unique Account (Not AR Or Cash Account!) Unidentified Receipts – May By The Same As The Unapplied Account But Better If Different (Not AR Or Cash Account!) On Account Receipts – Ideally Unique Account = A “Liability” - (Not AR Or Cash Account!) Unearned Discounts – Unique Expense Account (Receivables Activity) Earned Discounts – May Be The Same As Unearned But Ideally Unique (Receivables Activity) Copyright © Cathy Cakebread6
Debit Cash (Receipt Class) Unapplied Cash (Receipt Class) Note: 4 Sided Entry Credit Unapplied Cash (Receipt Class) AR (Based On The Invoice You Are Paying) DEBIT Cash (Receipt Class) Discount (Receipt Class - Based On Whether Earned Or Unearned) Unapplied Cash (Receipt Class) Credit Unapplied Cash (Receipt Class) AR (From The Invoice) Apply Receipt Immediately to An Invoice Apply Receipt Immediately to An Invoice With A Discount Copyright © Cathy Cakebread7
DEBIT - Cash (Receipt Class) CREDIT - Unapplied Cash (Receipt Class) DEBIT - Unapplied Cash (Receipt Class) CREDIT - AR (Based on the Invoice(s) You Are Paying) DEBIT - AR (From the Original Invoice That You Are Unapplying - Unapplied Cash (Receipt Class) CREDIT - Unapplied Cash (Receipt Class) - AR (Based on New the Invoice(s)) Leave As Unapplied Apply Unapplied Amount Unapply and Re-Apply Copyright © Cathy Cakebread8
Ideally: ◦Include Both Invoice Number AND Amount From Customer Remittance Advise Can Take Months To Establish With Your Bank “Auto” Lockbox Is Not “Automatic” Receipts ◦Considered To Be Manual Work With Bank To Improve Quality Of Data Received ◦Provide Examples Complete Batches Only! ◦Consistent With Bank Batches Allow Payment of Unrelated Invoices? Never! Copyright © Cathy Cakebread9
Closed Batch – Eek! ◦Meaningless!!! Only Use On Account If It Truly Is “Cash In Advance” Or Prepayment Resolve Unapplied And Unidentified ASAP Prompt Payment Discounts?? May Be An Issue Again With Current Economy Non-AR Cash (Miscellaneous Cash) ◦Process All In AR ◦Predefine As Much As Is Possible ◦Watch Account Controls Re-Enter In New Period (e.g., for Reverse and Re-Enter) ◦Use Special Day E.G., Sunday Copyright © Cathy Cakebread10
Naming Conventions ◦Batch Names Deposit Date – Bank boa ◦Lockbox Batch Names Deposit Date – Bank boa Reverse Receipts: ◦Debit Memo Vs. Re-open Invoice Debit Memo Rewards Them For Bouncing A Check New Due Date Utilize Controls for Cash Received In House Copyright © Cathy Cakebread11
Always Protect Customer Credit Card Numbers! ◦Only Show First 4 or Last 4 Auto Schedule Processes – Available In Quickly Resolve Items Stuck In Confirm And Remit Status Use Cash Management To Clear Using Actual Bank Data (If Possible) Pre-Authorize? Re-Auth Time Frame? Verify That All Transactions Were Actually Passed from the Service Provider Copyright © Cathy Cakebread12
Copyright © Cathy Cakebread13 ActivityDebitCredit Create ReceiptConfirmation Account (AR Trade Credit Card Clearing?? Use New Unique Account!) AR (Based on the Invoice) Remit ReceiptRemittance Account (Use the same account for Remittance and Confirmation?) Ideally – Use a Different Account) Confirmation Account (Offsets the Confirmation Account) ClearCashRemittance Account (Offsets the Remittance Account) Note: The invoice is marked as closed when the receipt is created, not when the cash is deposited!
Setup Transactions Transaction Types Copyright © Cathy Cakebread14
Natural Application Only!! Allow Overapplication – Never!! Use Meaningful Names ◦Especially First 4 Characters ◦E.G., PIGI – Palo Alto International Government Invoices ◦Selection Tool For Standard Reports And – Numbering ◦Noticeably Different From Sales Order Numbers With Enough Numbers to Extend Into the Future At Least One Transaction Type Per AR Account Primary Driver For Accounts Used In AutoAccounting Utilize Chargebacks? Deposits? Copyright © Cathy Cakebread15
Setup Transactions AutoAccounting ACCOUNTING FLEXFIELD SEGMENTS AUTO INVOICE CLEARING FREIGHTRECEIVABLEREVENUETAXUNBILLED RECEIVABLE UNEARNED REVENUE (Possible Default Sources) -Salesreps* - Standard Lines -Transaction Types - Salesreps - Standard Lines -Transaction Types -Salesreps -Transaction Types -Salesreps -Standard Lines -Transaction Types - Salesreps* - Standard Lines* - Taxes -Transaction Types -Salesreps* -Standard Lines -Transaction Types -Salesreps* -Standard Lines -Transaction Types Company Transaction Types Division Transaction Types Standard Lines TaxesStandard Lines Department Transaction Types Standard Lines TaxesStandard Lines Account Transaction Types Standard Lines TaxesStandard Lines Subaccount Transaction Types Standard Lines TaxesStandard Lines Special useAutoInvoice - where revenue not = qty * price - Bill in Arrears - Guarantees - Bill in Advance - Guarantees - Deposits Copyright © Cathy Cakebread16
AutoInvoice Frequency? ◦Clear Exceptions ASAP – Have Process In Place ◦Deal With Credits For Closed Invoices? Approvals for Imported Credit Memos? Manual Items ◦Debit Memos – Proper Controls? ◦Credit Memos – Approvals? Are the Actual Forms Locked up? Have All Interfaced Items Made It? ◦How do You Know? Who is Responsible? Copyright © Cathy Cakebread17
Revenue Recognition ◦SOP-97, 98 - AICPA – Statement of Position ◦SAB 101 – SEC - Staff Accounting Bulletin Do You Have Items Where Revenue Can’t Be Recognized Upon Shipment? Does the Person Entering the Order Know When the Revenue Should Be Recognized? ◦When Do You Know? How? ◦What Determines When Revenue May Be Recognized? Do You Have Standard Payment Terms? ◦Do You Ever Have Exceptions? Do You Have a Return Policy? e.g., Full Money Back in 30 Days? Copyright © Cathy Cakebread18
Do You Use “Arrangements” With Your Customers (Where the Revenue for One Invoice May Not Be Recognized Until the Subsequent Items Ship)? How Do You Deal With “Revenue” for Invoices Where You Don’t Expect to Receive Payment? Do You Use Standard Pricing? ◦How Do You Deal With Variable Pricing and Revenue Recognition? How Do You Handle Discounts With Bundled Products? Do You Sell ‘Beta Products’? ◦Or ‘Future’ Products How Does Revenue Recognition Impact Your Accounting for Cost of Goods Sold? Copyright © Cathy Cakebread19
Define Applicable Accounting Rules ◦Cover Your Bases ◦Create As Many as Are Necessary ◦Tie to Items Where Possible Utilize Revenue Recognition Wizard and/or Release 12 “Revenue Recognition Release” Copyright © Cathy Cakebread20
Setup Receipts Receivable Activity Copyright © Cathy Cakebread21
Define Proper GL Accounts ◦Should Never Be Your AR Account (It Is Already Offset Automatically) Adjust ◦Select Proper Type Invoice, Line, Tax, Freight, Charges Un-adjust ◦Use Same Accounts As Used With Original Adjustment Use Limits and Approvals! Check for Lots of Small Adjustments on Single Invoice Copyright © Cathy Cakebread22
Close Checklist Close Schedule Pre-Process As Much As You Can Reconcile ◦AR To Aging ◦AR To GL Activity Insure AR Only Uses “AR Accounts” Insure Proper Controls Are in Place Create Month End Packet ◦Retain as Needed Copyright © Cathy Cakebread23
Copyright © Cathy Cakebread24
Journal Entries Report – Summary By Category ◦Verify That No Illogical Entries (AR Vs. No AR In Category) Transaction Register (Split By Company And Currency) ◦Invoices, Debit Memos, Credit Memos, Commitments ◦Credit Memo Total Should Be Negative ◦Watch Bottom Total In – Includes ALL Currencies Applied Receipts Register – ◦Add Totals And Multiply By -1 ◦Result May Be Negative Or Positive ◦Note That Total Does Not Include Discounts In ◦Note: Cash Received Does Not Equal Amount Applied! Adjustment Register (May Be Negative Or Positive) Invoice Exceptions Report (Items Not Aged) Copyright © Cathy Cakebread25
Copyright © Cathy Cakebread26
GL Account Starting Balance +/- Current Period Manual Journal Entries +/- To Date Manual Journal Entries GL Account Ending Balance Ending Balance Should Equal: ◦ Ending Aged Trial Balance by Account Potential Issues: ◦ Other Applications Using “Our” Accounts ◦ Manual Journal Entries Copyright © Cathy Cakebread27
Who Can Add, Change, Inactivate? Who Controls Credit Limits? Who Can Change Names? What Are Your Controls for Adding New Customers? Addresses? Inactivating? Define and Use Order Holds – Leverage! ◦New Customers ◦Credit Issues Copyright © Cathy Cakebread28
Utilize Processes With Best Audit Trails ◦Tie To Original Activity – Whenever Possible Control Customizations ◦Access ◦Process Capabilities Limit Who Can Perform Which Functions by User/Role ◦Reports Too! Copyright © Cathy Cakebread29
Use External Lockbox Don’t Allow Collectors to Adjust (Either Without Approvals or Not at All) Use Credit Memo Approvals ◦Restrict Ability to Create CM Use Adjustment Approvals ◦With Manager as Approver Check for Multiple Small Adjustments Different Folks to: ◦Apply Cash ◦Create Invoices ◦Collect Copyright © Cathy Cakebread30
Cathy Cakebread Consultant For More Papers (650) AR List Server Copyright © Cathy Cakebread31
Cathy Cakebread Consultant NorCal OAUG Training Day 2010 Copyright © Cathy Cakebread.
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