How to Tidy Up Old Payables in Your Bookkeeping Records
Hello fellow financial guardians!
Managing the books for a long-standing small business often feels like stepping into a time machine, doesn’t it? With years of history, you’re bound to encounter some peculiar entries—especially if the business has had its fair share of bookkeepers with varying levels of diligence. I know the feeling all too well. With a year under my belt in my first Bookkeeping role, I’m on a mission to polish our books to a shine.
When I first tackled our Accounts Payable, it took up a cumbersome 18 pages. After some serious book-cleaning magic, I’ve managed to whittle it down to just two. Yet, to my boss, “pristine” means eliminating every last irrelevant entry. So, let me share my plan to resolve these peculiar outliers, and perhaps, it could help you too!
Dealing with the Dimes: The 2010 Invoice Underpayment
Let’s start with a tiny headache: an invoice from 2010 that’s off by a mere 50 cents. It’s tempting to simply erase this minor discrepancy, but accuracy matters. Instead, think about creating a correcting journal entry that adjusts for this discrepancy. This way, your ledger remains balanced while the pesky half-dollar disappears from your unpaid list.
Insurance Invoice Anomalies: Tracking the Untracked
We have a cluster of insurance invoices originally entered in full for monitoring purposes but never adjusted after processing the payments. To clear these up, I’ll use our tried and true method: offsetting them by writing a “check” out of a specialized account that’s used solely for clearing such discrepancies. This approach keeps the record clean and ensures I have the necessary backup to show each invoice was indeed settled via credit card.
The Mystery of the $60 Credit: Return of the Memo Merchandise
Finally, there’s the enigmatic $60 credit originating from a “return of memo merchandise” in 2019. To resolve this, I plan to delve deeper into any supporting documentation available. If it turns out to be legitimate and requires no further action, a journal entry could once again do the trick by offsetting the credit while maintaining proper records.
Final Thoughts
Whether you’re using an industry-specific software or a popular program like QuickBooks, tackling these obsolete payables can seem daunting. However, by implementing thoughtful approaches for each type of entry, like those I’ve outlined, you can achieve a squeaky-clean Accounts Payable report. Consulting
One response
Hi there!
Tackling ancient payables can indeed be a bit challenging, especially when dealing with historical entries that have accumulated due to mixed Bookkeeping practices over the years. It’s fantastic that you’ve already significantly reduced the accounts payable report. To make it pristine, as your boss desires, here’s a structured approach you might find helpful:
1. Analyze and Categorize Entries:
– Start by categorizing the entries. You’ve already identified an underpayment, insurance discrepancies, and merchandise returns. Make a list of these categories as each may require different actions.
2. Investigate Each Item:
– Underpayments (e.g., $0.50): For trivial amounts that truly have no bearing on your financials, it’s often acceptable to write them off. Check your company’s Accounting policy or consult with a supervisor or an accountant to confirm that this approach is permitted. Create a journal entry to clear such amounts properly by debiting accounts payable and crediting a miscellaneous or write-off account.
Insurance Invoices: If you’re sure these were paid and merely entered incorrectly, making record adjustments similar to the clearing method you’ve mentioned is smart. The important part here is retaining detailed backup documentation. This correctly reflects that payments have been made and why adjustments were necessary.
Credits and Returns (e.g., $60 credit): Investigate the nature of this credit. If it is indeed a return or a valid credit from a supplier, ensure it was applied correctly to any subsequent invoices from that supplier. If it’s an orphaned credit without any future applicability, discuss with management about writing it off.
3. Adjust and Communicate:
– Documentation: For each write-off or adjustment, thoroughly document the rationale behind these actions. This may include notes, email correspondence, or confirmations from vendors or insurance companies about the settlements or credits.
Approval Process: Before making adjustments, ensure you have a documented approval process. Your boss or the company’s accountant should approve write-offs for transparency and compliance.
Communications: Consider reaching out to vendors for ambiguous, old items to confirm their records match yours. This is particularly important for credits or returns that might have future impact.
4. Regular Maintenance:
– Going forward, establish a routine review process for your A/P to prevent future accumulation of stale entries. Monthly reconciliations can help in catching discrepancies early.
**5. Software Consider