Closing and Reconciling AR Cathy Cakebread Consultant NorCal OAUG – January 2007.

Closing and Reconciling AR

Cathy Cakebread Consultant

NorCal OAUG – January 2007

Copyright @ 2007 Cathy Cakebread 2

Agenda Sarbanes Oxley and Your Close The Close Formal Close Schedule Period Close Activities to Do In Advance Close Checklist Reconciling AR to the Aging Document Your Account Activity Reconciling AR to GL Improve Your Close Process


Sarbanes Oxley and Your Close CFO, CEO Certify Financial Report Accuracy

(302) Document and Disclose Internal Controls and

Procedures (302) Insure That Company Transactions Are Properly

Reported and Controlled (404) Establish and Maintain Proper Internal Controls

and Procedures (404) Timely Financial Reporting


The Close Visibility Too Much to Do Not Enough Time STRESS!STRESS!


Relieve The Stress! Brevity! Accuracy! Control!

Suggestions: Take advantage of a Close Schedule Use a Close Checklist Create Standard Reconciling Procedures


Use A Formal Close Schedule

Clear Cut-Offs / Deadlines Defined In Advance Consistency

Useful For: Bank Deposits Shipments Inter-company Activity Miscellaneous Cash Other Interfaces Avoiding the “Just One More Thing”

Syndrome


Period Close Activities – Complete in Advance

Accept/Reject Adjustments Complete/Delete Incomplete Transactions Resolve AutoInvoice Rejects Clear Lockbox Exceptions Transfer Data to the General Ledger Run Revenue Recognition Process Enter Miscellaneous Cash Apply Unapplied Cash


The Actual Close

Complete All Interfaces Enter Final Transactions Clear Exceptions Verify Accounting Entries Transfer to General Ledger Close the Current Period Open the New Period


Use a Close Checklist

See What You Need to Do And, The Sequence To Do Them

Know What is Done And, What is Left to Do


Close Checklist - Sample

TASK DESCRIPTION PROCESSED BY

1. Complete manual payments and adjustments for the period and cleanup of “Out of Balance” batches

2. Complete final Projects Streamline Process

3. Complete final Receivables Interface from Order Entry

4. Complete manual invoices and credit memos

5. Run your final AutoInvoice process

6. Correct all AutoInvoice rejects and re-run


Reconcile AR to the Aging

AR Reconciliation Report (11i) and Starting Aged Trial Balance

Transaction Register Applied Receipts Register Unapplied Receipts Register Adjustment Register Invoice Exceptions Report Currency Gains/Losses Report

Ending Aged Trial Balance


Reconcile AR to AgingACTIVITY SOURCE

Starting Balance Aged Trial Balance - Old

Invoices Transaction Register

Debit Memos Transaction Register

Credit Memos ( ) Transaction Register

Transaction Register Subtotal

Applied Payments ( ) Applied Receipts Register (Applied Amount Total)

Discounts Taken ( ) Applied Receipts Register (Earned Discount + Unearned Discount)

Unapplied Activity ( ) Unapplied Receipts Register (On-Account Amount + Unapplied Amount) * -1

Adjustments Adjustments Register (may be + or -)

Items Not Aged ( ) Invoice Exceptions Report

TOTAL

Ending Balance Aged Trial Balance - New

Difference Should be 0 (Total - Ending Balance)


A Few Tips

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 11.5.9 – 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 11.5.9) Note: Cash Received Does Not Equal Amount Applied!

Adjustment Register (May be Negative or Positive) Invoice Exceptions Report (Items Not Aged but they appear on the

Transaction Register)


Reconciling Items? Inconsistent Use of Dates

Always Use First Date to Last Date Use of Wrong Sign Buggy Version of a Report Improper Entry on Spreadsheet More Than One AR Period Open at a

Time Watch Currency and Company


Document Accounting Activity

Key AccountsAR, Cash, Unapplied Cash…

What Does AR Say? Journal Entries Report

What Does GL Say?Account Analysis Report

Are There Differences?


Reconcile AR to GLACTIVITY Balance to Journal Entries AR1 AR2 Cash1 Cash2 Unapplied

Aging Report Totals

Starting Balance

InvoicesDebit MemosCredit MemosCM - ApplicationApplied PaymentsDiscounts TakenUnapplied ActivityAdjustmentsItems Not Aged

Manual - Journal Entries

Cash-ARCash-Misc.Unapplied Cash

NEW BALANCENEW REPORT TOTALSDifference

Current JE'sJE's To DateTOTALATB- By AccountDifference

Note - Unapplied activity impacts ATB but is included in the applied receipts total when posted to GLNew Report Totals = The New Aging and The Account Analysis Reports (gray areas are from the Account Analysis Report)Add NEW BALANCE to JE's (current and to date) - should = ATB by Account totals


Tie AR to GL

GL Ending Balance +/- Current Period Manual Journal

Entries +/- To Date Manual Journal Entries

Should Equal: Aged Trial Balance by Account (at the

end of the period)


Differences Between AR and GL?

Why Are There Differences? Account Usage From Other Sources Manual Journal Entries Journal Import Not Completed Successfully Changes to Standard Accounts, e.g., Unapplied

Cash Improper Setups Unposted Items


Balancing CashMay Be Included in the Process Above - or SeparateAccounts Shared with Accounts Payable?Keep Batches CleanReconcile With Bank Deposits Deposited Cash Reports Cash Management

Have Procedures for Re-Entry of Prior Period DataWhat About Credit Card Receipts?


Improve Your Close Process

Resolve Inappropriate Usage of Accounts

Reduce Manual Journal Entries Suggest Process Improvements Get In the Habit of Pre-Doing as

Much As You Can Create and Use a Close Schedule Use a Close Checklist


Good Luck!Cathy CakebreadConsultant

See www.cathycakebread.com for more papersFor this paper: www.cathycakebread.com/close

[email protected](650) 610-9130

Closing and Reconciling AR Cathy Cakebread Consultant NorCal OAUG – January 2007.

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