A/R issue when reconciling bank

SarahFlo · ‎November 11, 2023

Hello, I am fairly new to QB and made several errors in the first few months. We have many customers that pay on account after I generate statements monthly. When I received their payments I didn't use "Undeposited Funds" but rather used the bank account. Later someone else took the checks and cash to the bank. You see the problem. As I don't have a detail of who paid with what, what is the best way to clear this up? Journal entry? Thanks for the help.

Rainflurry · ‎November 12, 2023

@SarahFlo

I would ignore any posts from QB employees on this. As you can tell by @Jelayca V 's response, they do not have the experience to fix this. They just post canned responses.

Just to clarify, it isn't that you used Undeposited Funds, it's that you didn't use Receive Payments, correct? If you had used Receive Payments, at least you would know who paid what and it would just take a little extra work reconciling the bank statement to group the deposits. I just want to confirm that I'm understanding that correctly.

At this point, you don't have a lot of options. For cash payments, if you didn't use Receive Payments, there's no way to determine where the cash came from short of contacting customers. If they were checks, I think your only option is to look at images of the cleared checks online and match the names on the checks to your customers.

To clear A/R balances, you need to assign an A/R credit to each customer. That happens automatically when you use Receive Payment. Or, you can assign A/R to the deposits you recorded. Each customer needs their own A/R credit line on a journal entry or deposit. There's no way to clear A/R balances other than by doing it by individual customer.

View solution in original post

Rainflurry · ‎November 21, 2023

@SarahFlo

OK, got it. So, there are two separate issues IMO. The first is that you recorded the payments in such a way that does not allow you to clear the receivables. The second is that you have deposits that are causing your cash (and another account) to be overstated.

Let's start with the first issue. You mentioned "The mistake I made was receiving the payments in QB and using "Deposit to checking" instead of "Undeposited funds." When you say "receiving the payments", what do you mean? Did you use Receive payments (New > Receive payments) or ??? If you used Receive payments, you are required to select the customer and the A/R balance for each customer should have cleared. But, since you also stated that you have uncleared receivables, something's off. If you can find those payments and assign them to A/R for each customer, then you can clear the open receivables. There are a few ways to do that.

In regard to the second issue, if your cash is overstated because you added the deposits through bank feeds, then whatever category is assigned to those bank feed deposits is also overstated. Let's say, for example, the category is Sales (income). That means that both your cash and Sales are overstated by the same amount. To fix this, you can either find those transactions and delete them or you can create a journal entry to reverse them. If there's only a few of these and you haven't closed out that month, I would delete them. Deleting them will reduce the bank account and Sales as of the date of the bank feed transaction. If you can't delete them, create a journal entry: debit Sales and credit the bank account for the total of the overstated cash. If you make a journal entry, the next time you reconcile the bank account, you will need to clear the bank feed deposits against the journal entry.

Let me know how much of this I'm not understanding...

View solution in original post

Jelayca V · ‎November 11, 2023

Thank you for reaching out your concern to us, @SarahFlo.

Considering your current situation, where the origin of cash payments is unclear, and for check payments, matching names to customers might be the only feasible option. It's an unfortunate circumstance, and we acknowledge the challenges it presents.

Although creating journal Entries (JE) can help correct errors during payment processing, provide better control over financial records, and aid in accurate balancing of the general ledger, they should be approached cautiously and preferably used as a last resort. It's important to keep in mind that JEs may not provide the same level of clarity as the "Receive Payments" feature and exercising diligence is crucial to avoid potential discrepancies.

While we offer guidance, we highly recommend that you contact your accountant for further assistance. They can provide you with expert advice and help you with your reconciliation. If you're not affiliated with one, you can find one here: https://quickbooks.intuit.com/find-an-accountant/

For future reference, you may visit this article guide for more information about invoice and payments in QBO:

Please reach out to us if you have further questions regarding invoices in QBO. We're always here to help you. Have a good one.

Rainflurry · ‎November 12, 2023

@SarahFlo

I would ignore any posts from QB employees on this. As you can tell by @Jelayca V 's response, they do not have the experience to fix this. They just post canned responses.

Just to clarify, it isn't that you used Undeposited Funds, it's that you didn't use Receive Payments, correct? If you had used Receive Payments, at least you would know who paid what and it would just take a little extra work reconciling the bank statement to group the deposits. I just want to confirm that I'm understanding that correctly.

At this point, you don't have a lot of options. For cash payments, if you didn't use Receive Payments, there's no way to determine where the cash came from short of contacting customers. If they were checks, I think your only option is to look at images of the cleared checks online and match the names on the checks to your customers.

To clear A/R balances, you need to assign an A/R credit to each customer. That happens automatically when you use Receive Payment. Or, you can assign A/R to the deposits you recorded. Each customer needs their own A/R credit line on a journal entry or deposit. There's no way to clear A/R balances other than by doing it by individual customer.

SarahFlo · ‎November 20, 2023

Thank you for your reply. You have it mostly right. Please let me clarify. I created invoices and sent them out. The clients paid the invoices, sometimes only partially, and someone at the register would write a receipt in triplicate and give me copies of them once a week. Someone else is responsible for taking the cash and checks to the bank. The mistake I made was receiving the payments in QB and using "Deposit to checking" instead of "Undeposited funds." Therefore, the cash is overstated because the deposit was accepted through the banking feed. When making the deposit, the cash and checks were totaled without a detailed slip stating who paid what. Deposits were done every few days. I'm fairly new to QB and didn't know about the "Undeposited funds" option.

I did go back and "undo" the catagorized deposit on some of them where I could piece together who made what payments but not for all deposits. So my check register is showing uncleared receivables and my register shows too much cash. We stopped using QB for invoicing at the end of June as we installed a proper POS system. BTW this is for a hardware store. All of the QB invoices have been paid at this point. I somehow need to make the register right and of course fixing that will make the P&L right. Would journal entries be the best way to get the register right since we know that each client has paid?

Since this fiasco I have been working my way through the QB online training. I truly appreciate your time helping me with this. You're a gem!

Alli

Rainflurry · ‎November 21, 2023

@SarahFlo

OK, got it. So, there are two separate issues IMO. The first is that you recorded the payments in such a way that does not allow you to clear the receivables. The second is that you have deposits that are causing your cash (and another account) to be overstated.

Let's start with the first issue. You mentioned "The mistake I made was receiving the payments in QB and using "Deposit to checking" instead of "Undeposited funds." When you say "receiving the payments", what do you mean? Did you use Receive payments (New > Receive payments) or ??? If you used Receive payments, you are required to select the customer and the A/R balance for each customer should have cleared. But, since you also stated that you have uncleared receivables, something's off. If you can find those payments and assign them to A/R for each customer, then you can clear the open receivables. There are a few ways to do that.

In regard to the second issue, if your cash is overstated because you added the deposits through bank feeds, then whatever category is assigned to those bank feed deposits is also overstated. Let's say, for example, the category is Sales (income). That means that both your cash and Sales are overstated by the same amount. To fix this, you can either find those transactions and delete them or you can create a journal entry to reverse them. If there's only a few of these and you haven't closed out that month, I would delete them. Deleting them will reduce the bank account and Sales as of the date of the bank feed transaction. If you can't delete them, create a journal entry: debit Sales and credit the bank account for the total of the overstated cash. If you make a journal entry, the next time you reconcile the bank account, you will need to clear the bank feed deposits against the journal entry.

Let me know how much of this I'm not understanding...

FritzF · ‎November 28, 2023

Hi, Rainflurry.

Thank you for always sharing your knowledge here in the Community. This will surely help other users as well in the future.

Stay safe and have a good one.

SarahFlo · ‎December 01, 2023

Thank you for your feedback. You have it right. I accepted payments against the invoices AND accepted the deposits in the bank feed so yes my cash and sales are overstated. It sounds like the best thing to do at this point is to do journal entries to correct the issue. I really do appreciate your help with this!

Thanks, Alli

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A/R issue when reconciling bank