· Web viewTaking customer orders: When receiving customer orders, order data is received on a sales order document that can be filled out and received in the store, by mail, by

FNSACC312

Administer Subsidiary Accounts and Ledgers

Learner Guide

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TABLE OF CONTENTSThis is an interactive table of contents. If you are viewing this document in Acrobat, clicking on a heading will transfer you to that page. If you have this document open in Word, you will need to hold down the Control key while clicking for this to work.TABLE OF CONTENTS.....................................................................21. THE BASICS.................................................................................7

2. Documentation and Spreadsheets.....................................................28

2.1. Checking and Verifying Documentation.........................................28

2.1.1. Checking processes for source documents...............................28

2.2. Spreadsheets..................................................................................32

2.2.1. Significant spreadsheets...........................................................32

2.2.2. Spreadsheet controls.................................................................33

2.3. Types, Features and Uses of Spreadsheets....................................36

2.4. MYOB – Microsoft Excel Templates...............................................37

2.5. File documentation in accordance with organisational policy and procedures.............................................................................................38

2.5.1. Document Management............................................................39

3. OVERARCHING PURCHASES AND ACCOUNTS PAYABLES......413.1 The Purchasing Process..................................................................41

3.2. Clarifying Responsibilities and Focusing Resources......................43

3.3. Settling Dues on Time....................................................................44

3.4. Policies on Costs and Expenses......................................................45

3.5. Operational Issues and Key Practices on Internal Control............47

3.5.1. Operational issues.....................................................................47

3.5.2. Key practices on internal control..............................................48

3.6. Authorisation and Payment Methods.............................................48

3.7. Disputing an Invoice.......................................................................49

3.8. Recording and Settling Supplier Debits.........................................50

4. MYOB – ACCOUNTS PAYABLE...................................................534.1. MYOB – Linked Accounts...............................................................53

4.2. MYOB – Viewing Bills.....................................................................54

FNSACC312 Learner Guide Version No. 1.1Page 2 Australian College of Business and Accounting

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4.3. MYOB – Adding a Supplier.............................................................55

4.4. MYOB – Setting Up Electronic Payments.......................................59

4.5. MYOB – Creating, Editing, and Deleting Bills................................59

4.6. MYOB – Paying Bills.......................................................................62

5. OVERARCHING SALES AND ACCOUNTS RECEIVABLES..........655.1. The Selling Process........................................................................66

5.2. Clarifying Responsibilities and Focusing Resources......................68

5.3. Knowing, Defining, Setting, and Measuring Goals........................70

5.3.1. MYOB reports............................................................................71

5.4. Establishing Credit and Collection Policies...................................72

5.4.1. Credit analysis (who gets credit and how much credit is issued)....................................................................................................74

5.5. Billing Procedures and Customer Accounts Procedures................78

5.6. Operational Issues and Key Practices on Internal Control............80

5.7. Collection Options..........................................................................82

5.8. Resolving Invoice Disputes and Customer Deductions..................82

6. MYOB – ACCOUNTS RECEIVABLE............................................876.1. MYOB – Linked Accounts...............................................................87

6.2. MYOB – Setting Up Sales...............................................................88

6.3. MYOB – Adding a Customer...........................................................90

6.4. MYOB – Entering a Sales Invoice...................................................93

6.5. MYOB – Changing or Deleting a Transaction.................................97

6.6. MYOB – Setting Up AccountRight for Customer Payments...........99

6.7. MYOB – Receiving Payments........................................................103

6.7.1. To record payments against invoices......................................103

6.8. MYOB - Partial Payments.............................................................105

6.9. MYOB – Printing Payment Receipts.............................................106

6.10. MYOB – Preparing a Bank Deposit.............................................107

6.11. MYOB – Printing a Bank Deposit Slip.........................................108

6.12. MYOB – Deleting or Changing a Bank Deposit..........................109

6.13. MYOB – Finding a Transaction...................................................110

6.14. MYOB – Customer Overpayments and Double Payments..........117


6.15. MYOB – Finance Charges Paid by Customers............................120

7. MONTH-END PROCEDURES – AGEING AND RECONCILIATION.....................................................................................................121

7.1. Ageing of Payables.......................................................................121

7.2. Ageing of Receivables..................................................................121

7.3. MYOB – Monthly Ageing of Invoices............................................123

7.4. MYOB – Running the Company Data Auditor...............................124

7.5. The Reconciliation Process...........................................................129

7.6. MYOB - Reconciliation of Accounts Payable................................130

7.7. MYOB – Reconciliation of Accounts Receivable...........................132

7.8. Understanding Bank Reconciliation.............................................134

7.9. MYOB – Recording Bank Interest and Charges...........................135

7.10. MYOB – Reconciling Bank Accounts..........................................136

7.11. MYOB – Doing an Initial Bank Reconciliation............................139

7.12. MYOB – Resolving Out of Balance Bank Reconciliations...........141

7.13. MYOB – Sending Customer Statements.....................................143

8. REVIEWING YOUR REPORTS..................................................1478.1. MYOB - Reviewing Purchases Information..................................147

8.2. MYOB - Reviewing Purchases Information..................................149

8.3. MYOB – Producing a Bills Reconciliation Report.........................152

8.4. MYOB – Producing a Sales Reconciliation Report...............153

8.5. MYOB – Producing Banking Reports............................................153

8.6. Purchases and Bills Reports.........................................................154

8.6.1. Purchases – Items....................................................................155

8.6.2. Purchases – Suppliers.............................................................155

8.6.3. Purchases – Purchases Register..............................................156

8.6.4. Purchases – Other reports.......................................................158

8.6.5. Purchases – Recurring transactions........................................158

8.7. Accounts Payables Reports........................................................159

8.7.1. Payables – Aged accounts........................................................159

8.7.2. Payables – Payments...............................................................160

8.7.3. Payables – Transaction Journals..............................................161


8.7.4. Payables – To Do List...............................................................161

8.8. Sales Reports................................................................................162

8.8.1. Sales – Items............................................................................162

8.8.2. Sales – Activity........................................................................163

8.8.3. Sales – Customer.....................................................................163

8.8.4. Sales – Salesperson.................................................................166

8.8.5. Sales – Sales Register..............................................................167

8.8.6. Sales – Other Reports..............................................................168

8.8.7. Sales – Transaction Journals...................................................169

8.8.8. Sales – Recurring Transactions...............................................169

8.8.9. Sales – To Do List....................................................................170

8.9. Accounts Receivables Reports......................................................171

8.10. MYOB - Exporting Reports.........................................................172

8.10.1. To export reports...................................................................173

9. DEBT COLLECTION AND RECOVERY.....................................1759.1. Measures to Collect Monies.........................................................175

9.2. Legal Systems...............................................................................176

Enforcement options where no consideration for a debtor’s financial position is given by the Court:..................................................176

Enforcement options where there must be consideration of a debtor’s financial position by the Court:................................................176

9.3. Legal Procedures..........................................................................177

9.4. Methods of Identifying Bad and Doubtful Debts..........................179

9.5. Write-off Conditions......................................................................182

9.6. MYOB – Accounting for Bad Debts...............................................184

9.7. Escalation of Recovery Actions - Internal....................................186

9.8. Using Outside Agencies................................................................188

9.8.1. Community legal centres...........................................................188

9.8.2. Legal Aid Commissions..............................................................188

9.8.3. Small Claims Tribunals and Lower Courts................................189

9.8.4. Other Courts - County Court, District Court, Supreme Court. .190

9.8.5. Private legal advice...................................................................190


9.8.6. Collection agencies....................................................................191

9.9. Escalation of Recovery Actions – External...................................191

9.9.1. Independent external dispute resolution schemes....................191

9.9.2. Legal action and procedures.....................................................192

ANSWERS TO ACTIVITIES..........................................................194


1. THE BASICS This unit covers the administration of subsidiary accounts and ledgers and addresses two (2) key areas, consisting of accounts receivable and accounts payable. Throughout the guide, examination of the accounts and how they are affected by different transactions and how the ledgers are used in a software platform will be addressed.

Firstly, a review of the subsidiary ledgers has been provided which will aid in understanding the more complex functions within each subsidiary ledger.

1.1. Accounting Systems

An accounting system is the system employed by a company to manage its income and expenses as well as other financial activities. It can be incorporated into in a manual or computerised platform.

An accounting system is usually comprised of manual or computerised records of financial transactions for recording, classifying, summarising, and analysing timely financial information. An accounting system must be systematic and well-structured to facilitate compliance in all facets.

The accounting system used in this unit is the computerised accounting software known as MYOB.

1.1.1. Key features of an accounting system

It is important to understand the key features of an accounting system including the fundamental principles which are applied.

Basis of Accounting: Cash vs accrual basis The main difference between these two lies in the timing of

recognition of revenues and expenses. A cash basis of accounting only recognises income when there is an actual inflow of cash, and expenses when there is an actual outflow of cash.

With the accrual basis of accounting, income is recorded regardless of when it is received, and expense is recorded regardless of when it is paid. The accrual basis of accounting thus gives rise to accounts receivable and accounts payable. Accrual basis is the more common method used by businesses.

Entry System of Bookkeeping: Single-entry vs double-entry bookkeeping. The single-entry method of bookkeeping maintains records in

which a single entry is made for every transaction. The entry


contains only one account and primarily keeps track of the movement of cash. There is no full record-keeping in accordance with the Generally Accepted Accounting Principles (GAAP). A reconciliation of accounts is not possible using this method, and the possibility of errors and fraud are very high.

The double-entry method of bookkeeping, on the other hand, records transactions based on the principle of duality; that is, for every journal entry credit there is an equal journal entry debit. It fully records the effects of every transaction in the accounts in the chart of accounts, making reconciliation possible, and agrees with GAAP. It is the method most businesses adapt.

Debits and credits

Debits and credits have the following roles in accounting systems:

Debit

o It is an entry that marks an increase in an asset

o It is an entry that marks an increase in an expense

Credit

o It is an entry that marks an increase in a liability

o It is an entry that marks an increase in an equity

The following are some key features of debits and credits:

Debit

o Debits are always entered on the left side of the ledger

o Commonly abbreviated as DR.

Credit

o Credits are entered on the right side of the ledger

o Commonly abbreviated as CR.


1.1.2. Types of systems to record transactions

There are manual and computerised systems which can be utilised to record transactions with the latter being the most prominent with the availability of technology.

The following table outlines the key differences between a manual and computerised accounting system:

Manual ComputerisedDefinition Transactions are recorded

and kept in physical registers of journals and ledgers.

Transactions are recorded digitally using appropriate software.

Calculations and errors

Calculations are done manually and are vulnerable to human error.

Calculations are done using the computer system, and errors are minimised.

Ledger Accounts and Financial Statements

Manual posting is done to properly classify accounts. Financial statements can only be generated after the preparation of a trial balance.

Posting is automatically done after the transaction entry. Trial balances and financial statements are automatically prepared by the system.

Cost Relatively cheaper than a computerised system.

Initially, more expensive than a manual system.

Table 1: Types of systems to record transactions

1.2. Accounting Principles

The underlying principles of accounting help us to understand why and how transactions are recorded. These fundamental assumptions include the following:

Historical cost: This is also known as the cost principle. It requires that assets, liabilities, and equity investments be recorded at their original purchase cost. Recorded historical costs require adjustment over time.

Going concern: It is assumed that a business will continue to exist and carry on its operations for an indefinite period of time. This is the basis for recording assets and liabilities at their historical costs. The earning capacity of a business is emphasised rather than its costs.

Accrual basis of accounting: This principle recognises that income is earned regardless of when collected and expense is


incurred regardless of when paid. All transactions are recorded despite the possible absence of cash inflow or outflow. Accruals include sales and purchases on credit, interest, rent, wages and salaries, and taxes. This principle also gives rise to accounts receivable and accounts payable.

Economic entity: A business entity is separate from its owners with its own position and financial status. Partnerships and corporations are classified as artificial persons.

Periodicity or time periods: The life of a business is divided into time periods (annually, quarterly, monthly, etc.) to provide reliable and relevant information.

Monetary unit: Transactions and events are measured in terms of money (the local currency is the monetary unit of measure).

1.3. Accounting Practices

Accounting practices are the procedures and controls enforced by a department or company to create and record relevant transactions. These must be consistent to ensure reliable records. Accounting practices must be routinely examined, updated and installed to ensure that they improve and adapt to industry needs over time.

Key accounting practices which should be implemented include:

Timely updating of General Ledgers.

Hiring an external auditor to conduct reviews of a company’s ledger.

Prompt filing of quarterly tax returns.

Using a payroll system to streamline salary processing and payments.

Accurately recording deposits.

Complying with tax requirements.

Further Reading

For more examples of good accounting practices, access this checklist published by CPA Australia for small businesses.


Good Practice Checklist for Small Business

1.4. Accounting Books and Financial Reports

Accounting is a cycle that incorporates activities to record transactions and produce financial statements. To facilitate this cycle, accounting ledgers and financial reports are used to represent the financial health and performance of a business. It is important to take note of the following:

Journals and ledgers: Journal: A subsidiary ledger in which all transactions are recorded for the first time. The process of recording transactions chronologically (sequentially) is known as ‘journalising.’ The journal is also called the book of original entry. A journal can be a general journal or a special journal.

A general journal is used to record non-routine transactions such as depreciation, bad debts, sale of an asset, etc. A special journal is used to record routine transactions such as sales, purchases, cash disbursements, or cash receipts.

Ledger: A principal ledger which enables the transfer of all transactions into separate accounts. The process of transferring entries in analytical order (account-wise) from the journal to the ledger is known as ‘posting.’ The ledger is also known as the book of final entry. A ledger can be a General Ledger or a subsidiary ledger. (The next subsection examines differences between the two.)

Financial reports (or Annual Report) According to CPA Australia’s A Guide to Understanding Annual Reports, financial reports provide information on the financial performance and position of a company to people interested in said company, such as shareholders, lenders, analysts, and employees. Financial reports allow company directors to advise stakeholders on how the company has performed during the year. Financial reports also provide shareholders with information on how the directors have fulfilled their responsibilities.

In this context, financial reports consist of four (4) primary financial statements. These statements cover the current financial period and the comparative (previous) financial period, the notes to the financial statements, and the directors’ declaration.

The four primary financial statements are as follows:

1. A statement of income;


https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/business/good-practice-checklist-small-business.pdf

2. A statement of financial position;

3. A statement of changes in equity;

4. A statement of cash flows.

These financial statements contain information relevant to the current financial year and comparative figures for the previous year to illustrate the changes in the company 's financial performance and position.

The notes in a financial report supplement the individual statements and explain the accounting policies used in the preparation of the financial report and provide additional information. The notes also provide financial information not included in the primary financial statements, such as information on the company's uncertainties that comply with the definition of contingent liabilities and leasing obligations.

The main purpose of the financial statements is to assist current and prospective shareholders and other capital providers in their decisions on resource allocation.

The statement of income (or profit & loss statement) provides details of the operating performance (incomes and expenses, including non-cash items like depreciation and provisions) during the time. It provides a complete picture of the company's performance by reporting the total monetary measure of all events that have changed the value of the interest of the owner in the company, other than events with owners acting as owners.

The statement of financial position (or balance sheet) reports the financial position of the business unit. It records a business’s assets and liabilities at current values. It shows the monetary measure of all the resources controlled by a company, and all the obligations due at one point in time - classified as current or non-current or in order of liquidity.

The statement of changes in equity reports all changes to shareholders’ interests or stakes during the financial period.

The statement of cash flows shows historical cash inflows and outflows from operational, investment and financing activities during the financial period.

Notes support the content of the four statements. Financial statements are prepared in accordance with the Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB). The standards and interpretations govern the accounting and disclosure of transactions and events.


It is not a legal requirement for all businesses to prepare financial reports as outlined above with the four reports in accordance with Australian Accounting Standards. Most smaller businesses do not have regulatory reporting obligations such as those imposed by the Australian Stock Exchange (ASX) or Australian Securities and Investments Commission (ASIC). These businesses must still prepare some form of financial statements. One example would be so that the business can lodge activity statements and income tax returns with the Australian Taxation Office (ATO)

(Source: CPA Australia Ltd A Guide to Understanding Annual Reports )

1.5. Subsidiary Ledgers and their Importance

If a business with several hundred sale transactions (with credit customers) maintains all the transactions for these customers in only one General Ledger account – Accounts Receivable – there would be chaos. The determination of the outstanding balances of each customer at any time would be very cumbersome. The same applies to a single Accounts Payable account in the General Ledger.

To ease the tracking and monitoring of individual balances, most companies use subsidiary ledgers with the General Ledger account summarising all the detailed data from the subsidiary ledgers.


Figure 1: Subsidiary General Ledgers

https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/reporting/guide-to-understanding-annual-reporting.pdf

Wiley describes a subsidiary ledger as a group of accounts with a common feature (all accounts receivable, for example). It is an addition to the General Ledger and an expansion. The subsidiary ledger releases the General Ledger from the details of the balance sheets.

(Source: HigheredBCS.Wiley.com:Special Journals and Methods of Processing Accounting Data)

For example, a receivable subsidiary ledger (the subsidiary ledger of the customers) includes a separate account for each customer making credit purchases. In this subsidiary ledger, the combined balance of each account is equal to the balance of accounts receivable in the General Ledger.

(Source: Houghton Mifflin Harcourt:Subsidiary Ledgers )

Posting a debit or credit to a subsidiary ledger account and to a General Ledger control account does not infringe the rule that total debit and credit entries must be balanced because subsidiary ledger accounts do not form part of the General Ledger account; they are additional accounts that provide details to support the balance in a control account.

There are two (2) common subsidiary ledgers, and these are as follows:

1. Accounts receivable (customers) subsidiary ledger

2. Accounts payable (creditors) subsidiary ledgerCompanies generally organise alphabetically individual accounts.

At the end of the accounting period, each balance of the General Ledger control account must be equal to the composite balance of each account in the corresponding subsidiary ledger.

(Source: HigheredBCS.Wiley.com:Subsidiary Ledgers )

Advantages of subsidiary ledgers The following table outlines some of the key advantages of maintaining subsidiary ledgers:

1.6. Mirroring – Accounts Receivables and Accounts Payables


http://higheredbcs.wiley.com/legacy/college/weygandt/111800423X/txtapp/appf.pdf

https://www.cliffsnotes.com/study-guides/accounting/accounting-principles-i/subsidiary-ledgers-and-special-journals/subsidiary-ledgers

http://higheredbcs.wiley.com/legacy/college/kieso/0470374942/gate/Expanded_Discussions/Ch03_Expanded_Discussion_Special_Journals/special_journals.html

The activities involving accounts payable will mirror the activities involving the accounts receivable.

The revenue cycle is to accounts receivable and the expenditure cycle to the accounts payable.

The Revenue Cycle The Expenditure Cycle

1. Sales order entry 1. Purchase order entry

2. Shipping 2. Receipt of goods

3. Billing 3. Approval of supplier (vendor invoice)

4. Collection or cash receipt 4. Cash disbursement

Table 2: Mirroring accounts receivables and accounts payables

The same principle applies to the documents for both cycles.

1.7. Transactional Analysis - Accounts Receivable

Accounts receivables reflect the resources of a company that arise using the accrual basis of accounting. They are promises or pledges made by customers to pay within an established time frame (credit or payment


Figure 3: Revenue and expenditure documents

terms) for products sold or services rendered to them. They are money ‘to be received’ by a business from a client or customer.

Accounts receivable is money earned, but which has not yet been received, therefore, pending cash inflows.

Since accounts receivables are normally collected within a company’s normal operating cycle (12 months), as per the accounting equation, they are classified as current assets. Liquidity-wise, accounts receivables come after cash and appear on the balance sheet.

Initial entryThe pro forma journal entry to record accounts receivable is as follows:

Accounts receivable $ XXSales or service revenue

$ XX

CollectionIf a customer pays, the journal entry to record the receipt of cash is as follows:

Cash $ XXAccounts receivable

$ XX

Sales returns and allowances For merchandising companies which allow the return of products purchased on credit based on their return policies, the entry to record this is as follows:

Sales returns and allowances

$ XX

Accounts receivable $ XX

Sales discounts To encourage early payment, companies offer cash discounts. The seller reduces the amount owed by the buyer by a small percentage or a set dollar amount as laid down in the terms of the transaction. The entry to record the sales discount is:


Sales discounts $ XXAccounts receivable

$ XX

1.8. Transactional Analysis - Accounts Payable

Accounts payables are obligations of a company that arise using the accrual basis of accounting. They are promises or pledges made by the company to pay within an established time frame (credit or payment terms) for products sold, services rendered to them, or expenses incurred during operations. They are money ‘to be paid’ by your company for a product or service provided by a vendor, therefore, pending cash outflows.

Since accounts payable are typically collected within a company’s normal operating cycle (12 months), as per the accounting equation, they are classified as current liabilities. Accounts payables appear on the balance sheet.

Accounts payable include pending purchase orders, unpaid bills, or services rendered by an outside contractor on which payment is, for some reason, pending.

Initial entryThe pro forma journal entry to record accounts payable is as follows:

Purchases/Expense Account

$ XX

Accounts payable $ XX

Payment If the company pays, the journal entry to record the disbursement of cash is as follows:

Accounts payable

$ XX

Cash $ XX

Purchase returns and allowances


For merchandising companies which allow the return of products purchased on credit based on their return policies. The entry to record this is as follows:

Accounts payable $ XXPurchase Returns and Allowances

$ XX

Purchase discounts To maximise float and to take advantage of discounts offered by creditors or suppliers, a company should take cash discounts given that the benefits outweigh the costs. The seller reduces the amount owed by the buyer by a small percentage or a set dollar amount as laid down in the terms of the transaction. The entry to record the purchase discount is as follows:

Accounts payable

$ XX

Purchase discount

$ XX

1.9. Related Legislation

Listed in the following sub-sections are the relevant legislative, regulatory and industry compliance requirements as well as the codes of practice which ensure that a business meets the compliance requirements when maintaining financial information.

The key legislation which impacts on the administration of subsidiary accounts and ledgers is the Australian Competition and Consumer Commissions (ACCC) and the Australian Securities and Investments Commission (ASIC).

The following legal requirements have been sourced from A Guide for Business Debt Collection Guideline.

Commonwealth consumer protection laws The Australian Consumer Law (ACL), which is a schedule to the

Competition and Consumer Act 2010 (Cth) (CCA). The ACL is jointly enforced by the ACCC and state and territory consumer protection agencies.

Part 2, Division 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), which is enforced by ASIC.


National Consumer Credit Protection Act 2009 (Cth) (NCCP) which includes the National Credit Code (NCC) as Schedule 1 to the NCCP, which is enforced by ASIC.

The NCC applies to credit contracts entered on or after 1 July 2010 where the following applies:

The lender is in the credit business.

A charge is made for the credit.

The debtor is a natural person or a corporation of strata.

Credit shall be provided for personal, domestic or household purposes or for the purchase, renovation or improvement of residential property for investment purposes or for the refinancing of credit previously granted for that purpose.

Other laws A New Tax System (Goods and Services Tax) Act 1999 (Cth). A valid

tax invoice or recipient-created Tax Invoice must be provided for all sales of goods and services over $82.50 (including GST) where GST is charged.

Commonwealth privacy laws, which are enforced by the Office of the Australian Information Commissioner (OAIC).

Part III A of the Privacy Act governs the processing by credit reporting agencies and credit providers of credit reports and other creditworthiness information concerning individuals. Some requirements include what information can be stored on a credit report, how long it can be included and to whom and under what circumstances access is permitted.

The APPs also regulate certain private sector entities in their dealings with personal information. Where applicable, these provisions of the Privacy Act govern the collection, use and disclosure of personal information and impose obligations on organizations to maintain accurate, complete and up - to - date records and to enable individuals to access or correct information held about them.

The OAIC has published guidelines to assist with the interpretation and implementation of the APPs.


The Information Commissioner has registered and enforced the Privacy (Credit Reporting) Code 2014 (version 1.2). A breach of the Code is a breach of the Privacy Act.

Various laws on fair trade between the State and the Territory, which include prohibitions on conduct that reflect those of the Commonwealth consumer protection laws and are enforced by consumer protection agencies of the State and the Territory.

The ACL is applied as a Commonwealth law and as a law of every state and territory. However, the Australian Consumer and Fair Trade Act 2012 (VIC) also prohibits certain conduct, including undue harassment and coercion. The Victorian provisions also allow debtors to seek compensation of up to $ 10,000 for the humiliation and distress caused by debt collection.

Most State and Territory jurisdictions have occupational licensing requirements for a variety of people involved in debt collection activities. These laws impose certain obligations on licensees and lay down grounds for refusing to grant or cancel a licence by the relevant authority. Licensed commercial agents in Queensland are subject to a compulsory code of conduct for the industry: the Code of Practice of the Commercial Agency. Conduct requirements may be imposed in other jurisdictions under the law itself.

Each State and Territory set limitation periods on debt recovery actions. These bar the creditor a remedy if a defense is filed which calls for the expiry of the limitation period. In the case of simple contracts (including the majority of debts referred to for collection), the limitation period is normally six years (although a three-year period applies in the Northern Territory). In some jurisdictions, the payment or acknowledgement of the debt resumes the limitation period even after the original period has expired Limitation laws also govern the enforcement of court rulings.

The Bankruptcy Act 1966 (Cth) (Bankruptcy Act), which is enforced by the Australian Financial Security Authority (AFSA, formerly the Insolvency and Trustee Service Australia (ITSA)).

Under the Bankruptcy Act regulated by the Australian Financial Security Authority, the acceptance of a debt agreement under Part IX or the execution of a personal insolvency agreement prevents a creditor from taking further action against a debtor in respect of its proven debts. After discharge from bankruptcy


or when all obligations under the debt agreement are fulfilled, a debtor is released from these debts. A personal insolvency agreement may allow the debtor to be relieved of proven debt. Most debts that are unsecured can be proven.

Tort law. Creditors or debt collectors engaged in extreme behavior may be exposed to civil action by a debtor. Depending on the circumstances, there may be an action for infringement, assault, deliberate mental injury, nervous shock and defamation (amongst others).

Criminal law. Creditors or debt collectors engaged in extreme behavior may be accused of criminal offenses, including attacks and threats. A collector who refuses to leave the property of a person may also be accused of infringement.

Other obligations. Debt collectors who are unsure of their obligations under any of the above-mentioned laws, binding codes and other arrangements should obtain legal advice or ask the relevant regulator for more information. Creditors and debt collectors should be aware of the requirements of any applicable voluntary industry code of conduct and of the rules of any association or professional body concerned.

ASIC’s regulatory index: Financial reporting – Chasing debtors. By law, there are things you may or may not do to encourage debtors to pay. If the debtor does not pay, you can contact them by letter, telephone or in person to request payment. You must not threaten, harass or physically intimidate the debtor during normal business hours.

Consider negotiating a payment plan and do no more work or supply the debtor with more products until the outstanding invoice has been paid.

You may not take or sell any property of the debtor unless you have an order from the court.

ASIC’s regulatory index: Financial reporting – Record-keeping for tax purposes. By law, you have to keep certain records and explain all the transactions for your company. These records should contain all the records you use to determine your revenue and expenses. You must keep the following records for five (5) years:

Receipts for supplies, acquisition and other expenses;

Wages records.


Other receipts for supplies, including credit card dockets (copy of the merchant) and cash register tapes, must be kept for 1 month if reconciled with actual sales, or for 5 years if not reconciled.

1.10. Industry Compliance Requirements

The following are the requirements you need to know about compliance related to debt collection and the ability to recover outstanding money from the customer.

Australian Privacy Principles

Contains the Australian Privacy Principles that all organisations must adhere to.

ASIC Report - Collecting Statute-Barred Debts

The Australian Securities and Investments Commission's Report 55 attempts to clarify how each State and territory in Australia regulates the collection of statutory debts.

ACCC Research into the Australian Debt Collection Industry

This report from the ACCC aims to provide a greater insight and understanding of the industry.

ACCC and ASIC’s Guide to Debt Collection

These guidelines have been produced by the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission.

The guidelines below may be useful for:

Collectors (including collection agencies, debt buy-out services, corporate and government departments' internal collection departments, attorneys and others).

Creditors using external collection agencies to collect debts or sell or assign debts to third parties to understand the application of consumer protection laws by the Commonwealth.

Centrelink Code of Operation

Department of Human Services guidance on overdrawn savings


http://www.humanservices.gov.au/corporate/publications-and-resources/

http://www.humanservices.gov.au/corporate/publications-and-resources/

http://www.asic.gov.au/


https://www.accc.gov.au/

https://www.accc.gov.au/



accounts for debtors and financial institutions.

Code of Banking Practice

The Code sets out the key commitments and obligations of the banking industry to customers with regard to standards of practice, disclosure and principles of conduct for their banking services. The code applies to the customer of personal and small business banks.

Competition and Consumer Act

The code applies to just about every aspect of business including the following:

Advertising Price setting Consumer transactions Business transactions

Credit Reporting Code of Conduct

The Code requires, among other things, credit providers and credit reporting agencies to:

Deal promptly with individual requests for access and modification of personal credit information

Ensure only permitted and accurate information is included in the credit information file of an individual

Keep adequate records regarding any disclosure of personal credit information

Adopt specific procedures in the settlement of credit reporting disputes

Provide training of staff on data protection requirements

Credit and Investments Ombudsman (COSL)

An external dispute resolution provider, the Credit and Investments Ombudsman, operates under terms of reference which can be found on its website.

Table 3: Debt collection guidelines


http://www.cio.org.au/


http://www.oaic.gov.au/privacy/privacy-act/credit-reporting

http://www.oaic.gov.au/privacy/privacy-act/credit-reporting

http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/

http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/

http://www.bankers.asn.au/Home

http://www.bankers.asn.au/Home



(Source: Debt Collection Compliance )

1.11. Industry Codes of Practice

Codes of practice are developed and monitored by industry associations, professional bodies, regulatory authorities and a range of other government departments.

The codes of practice which are relevant to this unit include:

Mortgage & Finance Association of Australia (MFAA)

The Mortgage & Finance Association of Australia (MFAA) Code of Practice is intended to set professional standards for its members in dealing with their customers and to promote ethical and fair business practices.

The MFAA Code of Practice binds its members to the rules laid down in the entire document.The MFAA is an industry professional association for mortgage and financial brokers, mortgage managers, lenders, aggregators and a variety of other financial services professionals and providers.

Financial Planning Association (FPA) Code of Professional Practice

The Code of Professional Practice of the Financial Planning Association includes general standards of conduct to be observed by financial planners. These include integrity, objectivity, competence, and fairness standards.

The Australian Financial Planning Association is an expert financial planning body.

The FPA members' subscription is subject to the FPA code of ethics.

Customer Owned Banking Association Code of Practice

The Code of Practice for Customer Owned Banking (COBCOP) is the code of practice for the credit unions, mutual banks, and mutual building societies in Australia.

Finance Brokers Association of

The Code of Practice of the Australian Finance Brokers Association (FBAA) is a


https://www.fbaa.com.au/


http://www.customerownedbanking.asn.au/



https://fpa.com.au/

https://fpa.com.au/

https://fpa.com.au/

https://www.mfaa.com.au/



http://www.lcollect.com.au/Client/resources/debt-collection-compliance

Australia (FBAA) voluntary code of self - regulation that sets standards of conduct, accountability and record keeping for its members.

The FBAA is an industry body for financial brokers, mortgage brokers and business finance professionals, amongst others.

Centrelink Code of Operation

Under the Centrelink Code of Operation with Participating Financial Institutions, the financial institution must allow the recipient of the Centrelink to access up to 90% of its future Centrelink benefits (until the account is overdrawn) unless otherwise agreed.

Privacy (Credit Reporting) Code

Before credit is granted to a person by a credit provider, it is normal practice for the credit provider to check the credit report of the applicant. Credit reporting agencies submit reports to credit providers detailing the applicant's requests for credit, whether they have failed under a credit contract, whether they have received judgments in court and whether the applicant is currently bankrupt or has previously been bankrupt.

Credit reporting is subject to the Privacy Act 1988 (Cth). The Act sets out what information a credit reporting agency can or can not record, and one of the primary functions of both the Act and the Credit Reporting Code of Conduct is to ensure that only authorized and accurate information is included in the file of a person.

Any organisation wishing to access the credit reporting system must sign up to the code of conduct on credit reporting. The Code is legally binding on subscribers.

ePayments Code The ePayments Code lays down rules for the operation of electronic payment transactions. Companies may choose to sign up to the code. If they do, in their dealings with you, they


http://www.asic.gov.au/epaymentscode

http://www.oaic.gov.au/


http://www.centrelink.gov.au/

http://www.centrelink.gov.au/


must follow the code.

The ePayments Code replaces the Electronic Funds Transfer Code (EFT Code) with the transition from 20 September 2011 to 20 March 2013 of companies to the ePayments Code.

Electronic payments, including credit card transactions, ATM transactions, EFTPOS transactions, online payments, Internet and mobile banking, and BPAY are subject to the ePayments code.

The ePayments Code: Requires subscribers to provide

consumers with terms and conditions, information on changes to terms and conditions (such as increases in fees) and receipts and statements.

Establishes rules that specify who pays for unauthoried transactions.

Establishes a recovery regimen for incorrect Internet payments.

ACCC/ASIC Debt Collection Guidelines

The Debt Collection Guidelines, which are jointly published by the Australian Security and Investment Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC), set out the obligations of debt collection organisations.

The guideline provides guidance on what creditors and debt collectors should and should not do to minimize the risk of infringement of the law.

Australian Privacy Principles

The Australian Privacy Principles comprise 13 principles to be observed by companies. Some of these relate to the following:

Collection

Use and disclosure

Data quality

Data security




http://www.accc.gov.au/business/treating-customers-fairly/debt-collection



Openness

Access and correction

Electronic Funds Transfer Code of Conduct

The EFT Code lays down rules and procedures for the relationship between users and accounting institutions in electronic funds transfers involving electronic access to accounts and rules for value stored and stored value transactions for consumers.

Financial Ombudsmen Service (FOS)

The Financial Ombudsman Service operates as an external dispute resolution provider under the terms of reference available on its website.

Financial Planners Code of Ethics and Rules of Professional Conduct

A Code of Ethics complied with by the Australian Financial Planners Association, including integrity, objectivity, competence and equity.

MFAA Code of Practice

The Australian Code of Practice' Mortgage and Finance Association provides professional standards that advocate ethical and fair business practices.

Mutual Banking Code of Practice

Provides 10 key promises that mutual members will deliver to always put their customers first.

National Consumer Credit Protection Act

The legislation surrounding Consumer Credit including requirements on the issue of Default Notices, Notices of Postponement, etc.

ACDBA Code of Practice- Communication

This Code of Practice is developed by the Australian Association of Collectors and Debt Buyers. It is a set of guidelines that help association members conduct their business in an ethical and responsible manner.Table 4: Industry Codes of Practice

(Source: Related Practice Codes & Guidelines )


https://www.cio.org.au/members/related-practice-codes-guidelines.html

http://www.acdba.com/images/acdba/ACDBA-Code-of-Practice-Mar16.pdf



http://www.austlii.edu.au/au/legis/cth/num_act/nccpa2009377/



http://www.customerownedbanking.asn.au/consumers/cobcop

http://www.customerownedbanking.asn.au/consumers/cobcop

http://www.mfaa.com.au/default.asp?menuid=513

http://www.mfaa.com.au/default.asp?menuid=513

http://www.fpa.asn.au/default.asp?action=article&ID=23054



http://www.fos.org.au/



http://asic.gov.au/regulatory-resources/financial-services/epayments-code/



1.12. Key Requirements of Organisational Policy and Procedures

When maintaining the subsidiary ledgers it is important to adhere to all organisational policies and procedures which include:

Credit policy: Ensure the terms of credit are clearly defined and explained which reflect industry standards. These terms must be complied with uniformly from the beginning of the relationship with your customer.

Compliance: Must be compliant with relevant legislation, standards and codes of practice, and must be aligned with the business goals and objectives.

Frequency of reconciliation: Bank accounts are reconciled on a regular basis, at least every fiscal year. Ideally, they should be reconciled at the end of every month.

Quality and composition of information: Ensure financial information is accurate and reliable. All bank account and bank account equivalents are reconciled.


Activity 1

1. True or False.

a. The single-entry method of bookkeeping is now widely used by businesses.

b. Accounts receivable is a liability of the business whereas accounts payable is an asset.

c. The ‘going concern assumption’ is otherwise known as the ‘periodicity assumption’.

d. Subsidiary ledgers are only used for accounts receivable and accounts payable.

e. For information to be classified as personal, it should be true and sensitive.

2. Describe two (2) instances when a customer’s personal information can be disclosed?

1.a. b. c. d. e.

2.

To view the answers to this activity, click here.


2. Documentation and Spreadsheets

2.1. Checking and Verifying Documentation

Source documents are used to enter transactions in journals and ledgers as well as data entry in accounting software such as MYOB. They are the first documents used in the bookkeeping process making it essential to ensure that the information within the source documents is accurate. This involves ensuring the accuracy of the information recorded in the document and the validity of the document itself.

The information below is adapted from information published by the NSW Department of Education.

When you check the accuracy of any source document, consider the following:

Is the date in the document correct?

Are the supplier or customer details correct?

Is the document correct mathematically? Are the calculations right?

Are there other apparent errors? These may include price or quantity and description of goods or services.

The document's validity should also be verified. Verification could include the following:

Does a valid transaction represent it? Is the invoice, for example, the goods or services received by the organisation? This includes cases where goods or services may not be supplied in their entirety.

Has this document been previously received and/or processed?

(Source: NSW Department of Education:Check invoices against source documents and identify any errors)

2.1.1. Checking processes for source documents

Different source documents may require specific processes for checking and are described below.

Invoices: The invoice details should be checked by quantity, price and description against the original order. They should also be inspected against delivery dockets to ensure that the goods are in good order and in good condition.

Receipts: For receipts, information such as receipt methods (e.g. cash, cheque or credit card) must be recorded.


https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjPl-rW3cPVAhUDObwKHfzABFMQFgglMAA&url=http%3A%2F%2Flrrpublic.cli.det.nsw.edu.au%2FlrrSecure%2FSites%2FWeb%2F6290%2Fdocuments%2F4673_01.doc&usg=AFQjCNFl7PS2WqnBg37OBUDfS6ei1HSk6g

Cheques: Although it is the cheque butt that is the source document, the details on the cheque are also important. We discuss the importance of authorisation in relation to cheques elsewhere in this guide. The information recorded on the check must however be the same as the information recorded on the check stub (or counterfoil). It should also be in agreement with the details of the license document from which the check was prepared. One of the key control procedures for checks should be performed by the person who signs the check. You must ensure that the check, check butt and permission are all agreed before you sign the check.

Reporting errors: Errors from the checking process can be identified. While all errors should be resolved as soon as possible, the reporting processes may differ depending on the organization's policies and procedures.

If the action required goes beyond the normal job description and the duties of the person who found the error, the matter should be referred to their supervisor in accordance with the policies and procedures of the organization.

Authorising source documents: The document requires authorisation in accordance with the policies and procedures of the organisation to complete the process of recording a transaction for a source document.

The authorisation of a check may include a check request signed by the person applying for the check. If this person is not authorised to make such a request, the request may be signed with the appropriate level of authority by another person. Additional supporting documentation, such as authorisation to order the goods or services (authorized order form) or an invoice from the supplier that has already been checked, may also accompany the request for check.

Authorisation of a receipt document requires the signature of the person who issued the receipt.

The approval of an internal memorandum requires the signature of the transaction requester.

It is important that the accounting section checks that the authorising person has the authority to submit such a request. The record of the level of authority of each person is normally included in the policy and procedures manual or in a special authorisation manual in larger organisations.


(Source: NSW Department of Education:Check invoices against source documents and identify any errors )

The following provides an example of how to identify and resolve a discrepancy within source documentation:

Examples of discrepancies in source documents


https://education.nsw.gov.au/


Example 1: Resolving a discrepancy between a delivery note and invoice – 1/2

Example:Case 1:

SYDNEY SUPPLIESABN: 48 738 838 102

72 Lincoln RoadMINT NSW 2679

Delivery docket no 00601 Date: 14 June 2017Order no: 589To: Olivia Reins Dental Group226 Beaulake St, Southbridge 6008Quantity Description Total

10 bottles Alcohol (500ml)5 boxes Gloves Goods received complete and undamaged.Signature: O. Reins Date: 14.6.2017

SYDNEY SUPPLIESABN: 48 738 838 102

72 Lincoln RoadMINT NSW 2679

Tax Invoice No: 589 Date: 14 June 2017

To: Olivia Reins Dental Group226 Beaulake St, Southbridge 6008QTY DESCRIPTION RATE TOTAL10 bottles Alcohol (500 ml) $3.00 $105.0010 boxes

Gloves $10.00 $100.00

$205.00

GST $20.50

Total $225.50

TERMS: 1.25% if paid within 28 days of statement


Example 2: Resolving a discrepancy between a delivery note and invoice – 2/2

Example (continued):What should you do if an invoice has a discrepancy with a delivery docket?

The discrepancies in the source documents above are highlighted in green. In such cases, you should do the following:

Send an internal memo to inform the supervisor of the section concerned of the error;

Ask the supervisor to obtain a tax adjustment note from the supplier to rectify the problem.

Example 3: Resolving a discrepancy between an invoice and a cheque – 1/2

Example:Case 2:

Olivia Reins Dental GroupTax Invoice:

ABN 84 158 523 623Gold Card No. 750788226 Beau Lake St, SouthbridgeREID ACT 2627TO: Matt Kiln

1 1Alpine StGold Act 2617

ENTEREDDATE & INITIALS

Date: 23 June 2017 Terms: Net 7

Description Total ex GST

Tax Code

Comprehensive Oral Health Care $8,000.00 FRE

TOTAL including GST $8,000.00

Northpac BankWiretown Sydney 4344 001200

Date: 23 July 2017Pay Olivia Reins Dental Group OR BEARERThe sum of eight thousand dollars

$8,000-00DRAWERMatt KilnNOT NEGOTIABLE

M. Kiln

‘001400 ‘021’‘001: 4512739’(continued on the next page)

Example 4: Resolving a discrepancy between an invoice and a cheque – 2/2

Example (continued):What should you do if a cheque is post-dated?

The discrepancies in the source documents above are highlighted in green. In such cases, you should do the following:

Ask the issuer of the cheque to change the date and to initial the change.

2.2. Spreadsheets

Spreadsheets are an integral component of the information and decision-making framework that support financial and business operations. This is due to the ease, flexibility and efficiency with which spreadsheets enable end users to fulfill a wide range of business needs without the involvement of the traditional IT organization.

The use of spreadsheets can usually be divided into three categories::

1. Financial reporting: Spreadsheets are used to directly determine the amounts or balances of the financial statement transactions posted to the General Ledger, to generate or support financial reports and disclosures, or to act as a key control in the financial reporting process, e.g. balancing and/or reconciliation of major accounts.

2. Analytical: Spreadsheets are used to support management’s decision-making processes.

3. Operational: Spreadsheets are used to simplify workflow tracking and monitoring to support operational processes such as open claim listing, unpaid invoices or other information.

2.2.1. Significant spreadsheets

Determining the importance of the use of spreadsheets requires management judgment and typically involves both quantitative and qualitative risk assessments.

A significant spreadsheet is a key spreadsheet within the financial reporting process with a heightened level of complexity. Key spreadsheets are those spreadsheets that:

Directly impact or provide support in the initiation, authorisation, recording, processing, and reporting of financial transactions and disclosures.

Impact or support directly in those financial reporting processes which are in scope.

Spreadsheets with a heightened level of complexity are those spreadsheets that are:

Complex computational models used to calculate financial statement amounts using formulas and based upon several inputs (e.g. reserves, valuations, etc.).


Record systems used as a system to record and process transactions.

Data carriers used as a type of middleware to transport transactional or financial data between systems, between persons or between systems and persons (e.g. Used on the General Ledger to 'upload' transaction data). If the subsystems are reconciled independently with the General Ledger, this can be regarded as a lower/moderate risk).

2.2.2. Spreadsheet controls

The policy on spreadsheet controls covers two (2) categories of controls for the overall risk assessment of the spreadsheet depending on the use, significance, complexity and management. The two categories which need to be considered are as follows:

1. Control standards: These controls are like those in place within a general information system control environment. Control standards are encouraged for all spreadsheets and required for all significant spreadsheets, and are based on management’s overall risk assessment as follows:

Management’s Overall Risk Assessment of

Material ErrorControl Standards Required

High

o Input/output Validation Controls

o Version/Logic Documentationo Restricted Accesso Data/Security Integrity Controlso Change Controls & Testing

Low 1,2, and 3 above

Minimal N/A - Significant spreadsheets are considered at least low risk.

Table 5: Spreadsheet control standards

2. Best practice guidelines: These are encouraged for significant spreadsheets and all other spreadsheets.


Control Standards RequiredAs part of the control measures, there will be specific standards which need to be maintained when preparing a spreadsheet with significant data which includes:

Input/output validation: Spreadsheets should have documented controls built-in to ensure that data is entered completely and accurately, either manually or through system interfaces, by carrying out tests such as reconciliations, batch totals and using foot and cross-foot total formulas.

Printing the input cells of the spreadsheet and checking for accuracy can validate data effectively. The output validation controls of a spreadsheet user may include multi-period analytical comparative reviews of account balances generated from the spreadsheet with any unusual or unexpected fluctuations investigated, corroborated and documented.

Version/logic documentation: Spreadsheets should include a documentation sheet that identifies its purpose, name, location, owner, version, date last modified, description of its logic and fundamental calculations/results, operating instructions and summary description of built-in controls. For each hard copy printing, standard headers and footers should be used that identifies the current name, version, date, and time.

Restricted access - In contrast to a personal hard drive, spreadsheets should be placed on a secure corporate server and access to the spreadsheet should be restricted to those individuals with a legitimate business need to access the file. Password protection can also provide additional security for high-risk or sensitive content.

Data/security integrity: Spreadsheets should lock and protect all key cells that calculate, summarise or contain a non-changeable formula. This applies also to any standard data used in the present calculations.

Change controls and testing: Changes to the logic of spreadsheets should be logged, described, tested and documented separately. The change log should describe why it has been changed, what has been changed, and refer to the current spreadsheet version number. With each significant change in logic or formula, the spreadsheet and a formal sign-off by an independent person should be tested and documented that the


change in logic works as intended before it is moved into production.


Additional Spreadsheet Guidelines include: Structure/design

Separate calculation and outcome inputs. The separation of inputs, calculations and results on the same table or on multiple tablets makes it easier to understand or reduce the risk of overlooking inputs or overwriting calculations with data.

Separate the data input areas into two (2) sections: data you change regularly and data you change irregularly. Use colours or shading cells that contain data input. Input area should not contain formulas.

If the sum function is used, ensure that the summary range always contains a blank cell at either end of the range. This ensures that the formula preserves its integrity when rows or columns are added.

When a critical value is contained in a formula in one or more cells (e.g. interest or tax rate), put it in a separate cell and refer to this cell in the formula.

Try to avoid complex formulae. Break complex formulae into smaller components to make it easier to understand, change, or edit.

Use each column for the same purpose throughout the spreadsheet. Spreadsheets should have a consistent layout.

Use only one formula for each row or column. This will result in quicker development, more effective testing, and better documentation.

Training Managers should ensure that all users of spreadsheets

participate in a training course covering both the basic and moderate control functions set out in the standards and additional guidelines set out in this policy.

General Keep a catalogue of spreadsheets in use in your department.

At a minimum, a catalogue of significant spreadsheets should be kept and updated regularly.


Develop a consistent convention for naming spreadsheets for each department. Whenever you change the logic of a spreadsheet, change the name to reflect the change and remember to save a copy of at least the two (2) previous versions.

Before using a spreadsheet to develop a new, highly complex application for financial calculation, engage the IT department to discuss and evaluate the benefits of developing your new tool in an application system with a more formalized information technology control environment.

(Source: American Association of State Compensation Insurance Funds (AASCIF):Example Spreadsheet Policy )

2.3. Types, Features and Uses of Spreadsheets

A spreadsheet is a large sheet which arranges data and information in rows and columns. Microsoft Excel and Google Sheets are widely used spreadsheet applications and are useful in entering, editing, analysing, and storing data.

Arithmetic operations, classification, and arranging data are easily completed in spreadsheets. Spreadsheets in Excel can be migrated or integrated into MYOB, and MYOB reports can be exported to Excel for further analysis.

Below is a list of most-commonly used spreadsheets with an overview of each one’s features:

Programme Features

Microsoft Excel Extensive formula selections. Variety of common templates. Allows limited collaboration. Pivot tables. Flash Fill: Learns your input

patterns and fills out the next boxes with the appropriate information.

Quick Trend: Shows trends or patterns in your data.

Inquire and Compare: Scans your spreadsheets for errors, broken links, and missing


http://www.aascif.org/uploads/AuditStats/spreadsheet%20policies%20and%20procedures.doc

data.

Google Sheets Excels in collaboration as multiple users can access and edit the same document in real time.

Accommodates IM conversation within the spreadsheet.

Saves and backups to Google Drive automatically every few seconds.

Limited to a handful of traditional chart types.

Limited formula repository.

LibreOffice Calc Open source, so it’s free and does not have any licensing restrictions.

Desktop-based. Numerous templates that can

be added if needed. Extensive library of more

than 500 formulas. Scenario Manager: Provides

advanced situational analysis and what-if forecasting.

DataPilot: Lets you pull raw data from compatible databases.

Lacks live chat, email, and telephone support.

Active online community.

Apple Numbers Real-time collaboration. Improved downloading. Wide colour gamut image

support. Enhanced keyboard

navigation and additional keyboard shortcuts.

Live-stock info.


Simplified data entry. Touch ID. Highly-stable centric

workflow. Print preview.

2.4. MYOB – Microsoft Excel Templates

When exporting a report to Microsoft Excel, AccountRight uses its own Microsoft Excel templates to format and lay out the report. The templates are saved in one of the following locations depending on the accounting software you are using.

c:\Users\<username>\Documents\MYOB\AccountRightOR

c:\Users\<username>\Documents\AccountEdge\201x.x\Reports\Spreadsheet

(Source: MYOB Help:Microsoft Excel Templates )

2.5. File documentation in accordance with organisational policy and procedures

Every company should have its own records and document management policy, and the following is an example:


Example 5: Document management policy

Example:This policy establishes the framework under which official records and documents of the company are created and managed. It lists the responsibilities of staff, and articulates the principles underpinning the processes outlined in the records and document management guidelines.

The intent of this policy is to ensure that business areas have the appropriate governance and supporting structure and resources in place to enable them to manage their records and documents in a manner that is planned, controlled, monitored, recorded and audited, using an authorised system.

This policy states the key strategic and operational requirements for adequate recordkeeping and document management throughout the organisation to ensure that the business needs for evidence, accountability and information about business activities are met.

This policy is applicable to all staff and to all official corporate records and documents, in any format and from any source. Examples include paper, electronic messages, digital documents and records, video, DVD, web-based content, plans, and maps.

http://help.myob.com/wiki/display/ar/Microsoft+Excel+templates

2.5.1. Document Management

When we talk about ‘document management’, we are addressing three (3) very important aspects of any records system:

The meanings of these three words are quite broad. For different applications, the interpretation can be quite different.


Figure 4: Three aspects of a document management system

ConfidentialityMost organisations regard data security and confidentiality of information to be of utmost importance. Everyone granted access to electronic and/or hard copy data holds a position of trust and should preserve the security and confidentiality of the information to which they are granted access to.

Therefore, it is usual for organisations to develop Privacy and Confidentiality policies which cover not only the operation of computer systems but also the action of employees and contractors.

Further Reading

Review ‘AIM Privacy Policy and Collection Statement’ at the Australian Institute of Management:

http://www.aim.com.au/privacy

IntegrityFor management to be comfortable with the staff in charge of their documents, they must be carefully chosen to have a high level of integrity: the qualities of being morally sound and honourable in all their dealings.

Accountants and the records they generate must have these qualities because of the significance of the information to individuals who rely on it for making important financial decisions.

AvailabilityWith the emerging global economy, organisations of every kind and in all parts of the world are becoming increasingly dependent on their IT systems. The trend is clear. We all depend on reliable access to computer systems always.

Since companies and organisations rely heavily on computer systems to conduct their business, there is a strong demand for IT systems that are available almost continuously.

Availability means that a system is online and ready for access.



3. OVERARCHING PURCHASES AND ACCOUNTS PAYABLESSuppliers or vendors provide a business with inventory and other supplies. It is therefore imperative to maintain good relationships with suppliers and pay bills on time.

In this way, suppliers will work together with the business, suggesting suitable products and offer the most appropriate trade credit terms.

Suppliers and businesses work hand in hand to ensure timely deliveries and meet the requirements stated within their respective policies. This contributes to a business’s efficiency and elicits trust between the company and its suppliers.

The most common form of an account payable is a purchase made on credit, via a purchase order (or equivalent), to a supplier. Not all invoices will have a purchase order such as utility bills. The supplier subsequently expects payment of the debt within the agreed credit terms. Some suppliers offer discounts to incentivise early payment.The purchasing organisation usually receives an invoice from the supplier (creditor). Following a number of checks undertaken by the ordering department, such as the goods ordered match the goods received, the agreed price/discounts have been applied, and the invoice is arithmetically correct, then it will be approved for payment by the budget holder. The supplier record will be updated by the finance department (purchase ledger) to show the amount owed as a creditor balance within the accounts payable ledger (until the debt is paid).

(Source: Chartered Institute of Internal Auditors:Accounts payable )


Figure 5: Choosing a vendor

https://www.iia.org.uk/resources/auditing-business-functions/finance/accounts-payable/

3.1 The Purchasing Process

The purchasing process applied in the business will be specific to the needs of the business but will, however, have standard accounting principles and practices which need to be applied.

(Source: Asuru, Asuru and profile, 2018)

When purchasing goods and services the following needs to be addressed:

1. The need: You need to identify that the inventory or stock needs to be updated. You may also need an ad hoc product or service.

2. Specify: You have to decide how much and when to deliver products or services.

3. Requisition or order: This is when you enter the purchase order or order.

4. Financial authority: Before the order can be placed; it usually requires authority for its purchase. With some purchase orders, this is reasonably automatic. With a large order that will be put out to tender, it could be multi-staged.

5. Research suppliers: Repeated orders usually have suppliers set, although sometimes it doesn't hurt to review the options. Other orders must either be placed on the market or there will be a selection of suppliers.

6. Choose supplier: The supplier is now chosen.


7. Establish price and terms: In a large company, many suppliers will be contracted with a Master Agreement where prices and terms are set for a defined period. For other orders, now is the time to negotiate terms and prices.

8. Place order: At this stage in the purchasing cycle, the order is placed, and this becomes a contract between the business and the supplier.

9. Order received and inspected: The goods are delivered, inspected and placed in the warehouse. Shortages and breaks are reported to the supplier for the corresponding credits.

10. Approval and payment: Usually within 30 days, the invoices are received and paid.

11. Update of records: The purchasing ledger and stock records are updated. This is automatically done by many purchasing computer systems.

(Source: Purchasing & Procurement Center:Steps to Purchasing Cycle – Standard & Tender Process )

3.2. Clarifying Responsibilities and Focusing Resources

Employee Accountability

Requestor Responsible for checking on available inventory and requesting for needed items.

Requisition Checker

Responsible for checking requisition details.

Purchasing officer

Responsible for preparing the company’s purchase orders, seeking approvals, and sending purchase orders to vendors.

Treasurer Responsible for reviewing documents, preparing checks, and remittance


Figure 6: Responsibilities and resources

Inventory Control

Department

Requisition Checking

Requisition

Purchasing

Department

Commodity Approval and PO

Creation

Purchase Order

Receiving Departme

nt

Receiving and

inspection of goods

Receiving Report

Packing Slip

Accounts Payable

Department

Record in purchases journal and subsidiary

ledger

Reconcilia-tion of all

documents

Supplier’s Invoice

Cash Disburse-

ment Voucher

Cash Disburse-

ments

Prepare cash

disburse-ments and record in the check register

Payment Processed -

Check Issued

General Ledger

Post and reconcile

in the General Ledger

Journal Voucher

http://www.purchasing-procurement-center.com/purchasing-cycle.html

advice.

Receiving personnel

Responsible for matching goods received with a blank purchase order.

Accounts payable personnel

Responsible for preparing voucher set.

IT personnel Responsible for improving the efficiency and effectiveness of the accounts receivable process.

Internal auditor Responsible for comparing copies of remittances with validated deposit slips and bank statements.Table 6: Responsibilities and resources

3.3. Settling Dues on Time

When it comes to liabilities, the goal is to make only necessary purchases and expenses and pay them on time without negatively impacting on the liquidity of the business. It is vital that the business maintains an untarnished credit reputation through dutiful compliance and cognizant negotiations.

Days payable outstanding Days payable outstanding (DPO) indicates how long it takes to pay invoices received from vendors or creditors. It is calculated as follows:

DPO = (Average Accounts Payable/ Cost of Goods Sold) x Days

Formula 1: Days payable outstanding

The shorter the DPO, the more expensive it is for the company because cash is not readily available and there is the possibility of borrowing just to settle obligations. In contrast with the day’s sales outstanding (DSO), the DPO should be for as long as possible.

Maximising cash floatWhen a cheque is written or deposited, the transaction takes time to process before cash is received or disbursed from the account. Just as delays in payment can aggravate problems with liquidity, so can paying bills too soon. If vendor invoices are paid earlier than necessary, there


may be the possibility of having insufficient cash to pay other bills or losing the opportunity costs associated with cash.

There are two (2) types of cash float: the disbursement float and collection float. The disbursement float starts when a company writes a cheque to another company and puts it in the mail. At that time, the sender company’s cash book balance decreases but its cash bank balance does not until the encashment or deposit of the check to the receiver company’s account. Once the encashment or deposit takes place, the disbursement float ends.

The receiver company, on the other hand, receives the cheque and records the payment in its books. Its cash book balance is increased, but its cash bank balance is unaffected until the deposit of the cheque with the bank. The period between the receipt of the cheque and its deposit with the bank is the collection float.

Companies should manage their floats as part of their financing strategy. Transfers can be timely done, and cash can sit in interest-bearing accounts even for a short time.

Relevant metrics Total invoices received within a period of time.

The total number of invoices processed within a period of time as a percentage of the total number of invoices received.

Cost average per invoice.

Cycle time invoice.

Rate of incorrect payments as a percentage of total payment.

Rate of exemptions as a percentage of total processed invoices.

Discounts taken as a percentage of the offered discounts.

Electronic invoices as a percentage of all received invoices.

Number of AP operators.(Source: Pyrus:

Track These 9 Accounts Payable Metrics to Optimise Your Invoice Processing )

3.4. Policies on Costs and Expenses

As part of its operations, a company seeks to minimise costs and expenses. In doing so, it must promptly screen and accurately record all types of expenditure according to standards. All expenses must be


https://pyrus.com/en/blog/accounts-payable-metrics

recorded as either cost or expense and not as a reduction or offset of other income or revenue.

Part of the screening process is the vendor analysis. Vendors or suppliers need to be assessed with respect to their business model, capabilities to supply appropriate products and services, reliability and quality, reputation and deliveries.

A company might consider choosing new vendors or analyse the capabilities of current suppliers periodically. This is undertaken to understand which among their suppliers are contributing most to profit and costs.

When analysing suppliers, the following five factors are considered:

Unit cost of components/raw materials

Quality of components/raw materials

Delivery lead time

On-time delivery

Flexibility in changing the order

Supplier master dataThis should indicate what the supplier can provide, any dollar limits that apply, payment terms, whether they give volume discounts or advertising credits, and any other relevant terms such as delivery lead time or contact details.

It also includes information such as the following:

Contact person

Location-related information

Range of products

Legal form of the company

Different collected certificates

Tax identification

Accounting and sales related information about payments

Payment conditions


Inventory master data This indicates information on inventory purchased, manufactured, sold, or kept. Details include costs, costing method, minimum and maximum levels, required inventory level, warehouse details, and shelf-life.

Typical organisational policiesAll costs and expenses must be allocated the relevant cost and expense account code as prescribed in a company’s chart of accounts for the facilitation of appropriate GST implications. The treatment of payments will be governed by reference to the suppliers providing invoices, type of entity providing the supply, and the quote of an Australian Business Number (ABN) on the invoice. Where the company makes a payment to an entity for an expense or cost, the company must withhold an amount excluding exceptions to ensure compliance by all entities, particularly those that do not have to be registered for GST, to their taxation obligations.

The Accounts Payable System is part of a company’s accounting system. It is concerned with making payments promptly and paying the correct amounts to the right suppliers. This system should ensure that all amounts paid are recorded and that any outstanding invoices are settled within appropriate time frames. See further discussion on this process in the following sections.

The Accounts Payable System relies on the input of accurate information provided by vendor invoices. This is to ensure that all monies due and payable by the company are recorded in the accounting books for audit and control purposes, and compliance with the GST legislation, liabilities, and expenses are not overstated.

Outstanding amounts are reviewed monthly for monitoring purposes and checking of discounts taken. Payments should be made at the right time to take advantage of discounts and maximise the earning potential of cash. Monthly reconciliations are performed between the Accounts Payable System and the totals in the General Ledger.

3.5. Operational Issues and Key Practices on Internal Control 3.5.1. Operational issues

The payment and appropriate recording of costs or expenses arising from accounts payable should be outlined in a company’s manual. It should


include provisions on the sources of costs and expenses, payment methods, disbursement of cheques and the accounts payable system.

There are several needs that must be met to satisfy audit and legal requirements for the payment and recording of costs and expenses in general. These are as follows:

Use of official, pre-numbered, sequential purchase orders and vouchers.

All vendor invoices must be retained and accounted for.

All cancelled cheques and copies to be processed and retained by the Accounting Department.

Disbursements and vendor invoices to balance and discrepancies to be reported to the Accounting Department immediately.

Payments processed in batches for completeness and accuracy.

Safe custody of cheques.

3.5.2. Key practices on internal control

Included in the table below are key controls recommended by The Accounting Coach to be examined and adopted by companies for accounts payable.

Key Control Practices

Obligation to pay controls

Invoice approval, purchase approval, and completing a three-way match among the vendor invoice, purchase order, and receiving report.

Data entry controls

Record prior and after approval. Adopt an invoice numbering guideline. Match to figures in budget.

Payment controls

Separation of cheque printing and signing. Storage of cheques in a locked and secured

location. Tracking of cheques issued and sequence of

cheque numbers used. Manual cheque signing. Requirement of an additional cheque

signer.Table 7: Key practices on Internal Control


(Source: Accounting Coach:The Accounting Coach )

3.6. Authorisation and Payment Methods

Authorisation is the process of confirming a process through approval. Approvals are needed for new vendors, the endorsement of a purchase order, and the payment for goods and services.

Approvals should be in place as part of the standardisation of the ordering process and payment of creditors.

Approvals are required in three areas within the accounts payable process:

Approval Aspect Controls

Vendors must be pre-approved or approved before ordering.

Set up of default purchasing information pertaining to a supplier. Set up of discounts for item and supplier prices.

Authorisation of purchase or expense. Purchase orders should be duly approved by assigned authority for small and big expenditures.

Requisition form is submitted to check if requested good or service is within the pricing guidelines and budgetary restrictions. Limit on amount of purchase or expense.Limit on time horizon of purchase or expense.Authorised purpose of the purchase or expense.Administrative unit accountable for purchase or expense.

Payments should be controlled, meaning, no employee can write unauthorised checks.

Check signatories have limits.Authorised person responsible for petty cash fund payment is authorised only for goods and services that were ordered and received. A series of final checks on invoices including checking of price, arithmetical accuracy, coding of the purchase or expense, and the calculation of any GST will be undertaken by the accounts payable department.

Table 8: Authorisation and payment methods

Payment methodsOften, companies prefer to settle their debts through cheque payments because of internal control and it is not always practical to pay in cash.


https://www.accountingcoach.com/accounts-payable/explanation/2

Payments are only made after the verification of documents (i.e. purchase order, vendor invoice, and delivery slip) by authorised personnel.

Payment of debt can be completed via several methods including cheques, electronic payments and BPAY.

3.7. Disputing an Invoice

Notify the vendor immediately by sending an email notice of dispute or placing a call and note the following as part of this process:

If communication is over the phone, document the details of the call including the date and time, the telephone number, the person and their title, and what was discussed during the call.

If it is through email, state in the email that the referenced invoice is being returned for one of the following reasons:

The vendor has not complied with the purchase order agreement

There is a problem with the invoice provided

Others

If the vendor or supplier committed an error, request for a new invoice.

If the company is in error, make a note regarding the details.

In the case of the vendor having committed the error, return the invoice with an Invoice Return Letter by mail. Remember, however, to keep a copy of the invoice and letter for filing.

Process the revised invoice upon receipt with a note of the original invoice number, disputed correspondences, and other documentation.

3.8. Recording and Settling Supplier Debits

A supplier debit sometimes referred to as a debit note or adjustment note is money owed to you by a supplier. For example, if you receive damaged goods, the supplier can reimburse the purchase value for you or apply the amount to other unpaid purchases with you.

To process a supplier debit, you must first record a debit transaction and then record the debit settlement (e.g. by registering your supplier's return check).


The information in this section is adapted from ‘Recording and settling supplier debits’ published on the help.MYOB website.

Recording supplier debitsYou can create a supplier debit using one of the following methods:

Reverse a purchase - Use this method if you’ve paid for the entire purchase and now need to cancel it entirely.

Manually create a debit - Use this method if you’ve received a credit for part of a purchase.

To reverse an existing purchase, complete the following:

Check that the ‘Transactions CAN’T be Changed; They Must be Reversed’ option is selected in the Setup menu > Preferences window > Security tab.

Find and display the purchase.

In the purchase window, go to the Edit menu and choose Reverse Purchase. A supplier debit will appear.

If you want, you can make some changes to the supplier debit (such as changes to the date and memo), but you can’t change the accounts, amounts, and quantities that are associated with the debit.

Click Record Reversal. The supplier debit will appear in the Purchases Register window, and you can then choose to settle the debit by applying it to another purchase or recording a refund.

To manually create a debit for a service, professional, or miscellaneous purchase

Do you have an account for tracking purchase returns and allowances?If you’re manually creating a supplier debit note for the first time, check that you have an expense account for tracking purchase returns and allowances.

Use the following method to record a supplier debit when part of a service, professional, or miscellaneous purchase has been cancelled, refunded, or returned:

Go to the Purchases command centre and click Enter Purchases. The Purchases window will appear.


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In the Supplier field, enter the supplier’s name.

Select Bill from the Purchases Type list in the top left-hand corner of the window.

Click Layout and select Miscellaneous.

In the Description field, type the reason for the supplier debit.

In the Acct No. field, enter the account number to be debited. This is normally an expense account called ‘Purchases Returns’.

In the Amount field, type the amount of the debit as a negative amount.

Click Record. The supplier debit appears in the Purchases Register window, and you can then choose to settle the debit by applying it to another purchase or recording a refund.

To manually create a debit for some items purchasedUse this method to record a supplier debit when you return only some of the items in a purchase.

Go to the Purchases Command Centre and click Enter Purchases. The Purchases window will appear.


Select Bill from the Purchases Type list in the top left corner of the window.

Click Layout, select Item and click OK.

In the Bill field, type the quantity of the item you are returning as a negative number.

In the Item Number field, enter the item. The cost of the item is displayed as a negative amount in the Total field.

Click Record. The supplier debit will appear in the Purchases Register window, and you can then choose to settle the debit by applying it to another purchase or recording a refund.

(Source: MYOB Help:Recording and settling supplier debits )

Activity 2

1. Is it always advantageous to avail of discounts? Explain your reasoning.


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1.



4. MYOB – ACCOUNTS PAYABLE The information in this chapter is adapted from the help.MYOB website.

4.1. MYOB – Linked Accounts

There are two (2) types of linked, or default, accounts used in AccountRight: feature-level and record-level linked accounts which are used when working with subsidiary ledgers.

Feature-level linked accountsFeature-level linked accounts are the default accounts used by AccountRight for some of its main functions. There is, for example, a linked account for tracking receivables (your commercial debtors) and a bank account for receiving payments from customers. When you record a credit sale, AccountRight knows which account you use to track and automatically update what customers owe you. Similarly, the linked bank account you have chosen will be used by default when you receive a customer payment.

You can see which accounts are linked to features by going to the Accounts List window. Linked accounts are indicated by a tick in the Linked column. You can also view or print the Linked Accounts report to see the full list of feature-based linked accounts (Reports menu > Accounts tab > Linked Accounts).

You can edit feature-level linked accounts by going to Setup menu > Linked Accounts. To set your accounts and banking linked accounts, go to Setup menu > Linked Accounts > Accounts & Banking Accounts. For accounts payable, you need to set up the following:

Bank Account for Electronic Payments: This account is used to track electronic payments that have not yet been processed. Payments are cleared and withdrawn from your bank account using the Prepare Electronic Payments window.

To set up purchases linked accounts, go to Setup menu > Linked Accounts > Purchases Accounts.

Liability Account for Tracking Payables: This account tracks the total amount that you are currently owing to suppliers. The balance automatically increases when you register a bill and decreases when you pay.

Bank Account for Paying Bills: This is the bank account of default from which bills are paid to suppliers. If you have more


than one bank account, choose the one that is most widely used. When recording the payment, you can choose a different bank account.

Liability Account for Item Receipt: This account tracks the stock you receive from a provider without a bill on a Receive Items transaction. This account is cleared when you register the bill for the received equity.

Expense or Cost of Sales Account for Freight: This account tracks the amount of cargo you pay to the suppliers. The amounts you enter on the purchase in the Freight field are allocated to this account.

Asset Account for Supplier Deposits: This account is used to track deposits you make on purchase orders. If you enter an amount in the Paid Today field of a purchase order, the amount will be allocated to this account.

Expense (or Contra) Account for Discounts: This account is used to track early-payment discounts suppliers give you when you pay your bill in full. Early payment discount conditions are set up in the credit terms of the purchase and can also be entered in the Pay Bills window.

Expense Account for Late Charges: This account is used to track finance charges you pay to suppliers. The late payment finance charge conditions are set up in the credit terms of the purchase and can also be entered in the Pay Bills window.

(Source: MYOB Help:What are linked accounts? )

4.2. MYOB – Viewing Bills

To open the Bills page, go to the Purchases menu and click Bills.



The Bills page lists all the bills you’ve entered MYOB Essentials. For each bill, the bill number, supplier, date received, date due, total amount, and amount due is listed. To find a bill, you can use the search feature or filter the list by type.

Each bill will have one of the following statuses:

Paid – for bills that have been paid in full.

Not paid – for bills that you haven’t entered a payment for.

Overdue – for all bills that are overdue.

Return – for all supplier returns and debits.

To filter the list of bills, select the type of bills you want to see from the list:

All – displays all bills. This is the default option.

Closed – displays bills with a Paid status.

Open – displays bills with a Not paid or Overdue status.

Returns – displays supplier returns and debits (bills with a Return status).

The filtered list of bills will appear.


To search for a bill In the search field enter part of a number or word relating to the bill

you’re trying to find.

For example, you can enter part of the bill number, the supplier’s name, the date the bill was received or is due, the total bill amount or the amount due.

When you press Enter, the list is populated with the bills that match your search term.

Use sorting in addition to searching If searching gives you many results, try sorting by one of the columns.

You can also filter the bills list by type.To view bank transactions matched to a bill On the Bills page, click the bill you want to view matches for. The Bill

page will appear.

At the bottom of the page, click the Show transactions for this bill link. A list of all bank transactions matched to this bill will appear. If there are no matches found, the bill has not been matched to any bank transactions.

If you want to view the details of a matched bank transaction, you can click on it.

4.3. MYOB – Adding a Supplier

Before a company can record its purchases and expenses on credit, it first has to create a card for its suppliers. A card is a record which contains details of an individual or business that you deal with.

To create a supplier card Go to the Card File Command Centre and click Cards List. The

Cards List window will appear.

Click New. The Card Information window will appear.


Select Supplier from the Card Type list.

Select the designation of the card: company or individual.

Type the name of the supplier.

If codes are used to identify suppliers, type the code for the supplier in the Card ID field. For more information, see Card identification codes.

Enter contact details for the supplier. If more contact information is to be entered, select Address 2 from the Locations list and enter the additional details. You can enter contact details for five locations.

Click the Card Details tab. You can enter notes about the supplier, insert a picture, and assign attributes. For more information, use the links to the relevant MYOB help pages listed below:

o Card pictureso Identifierso Custom listso Custom card fields

Click the Buying Details tab and enter your buying details.


Figure 7: Customer card information screen

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Buying information

The selections you make here will be used, by default, on quotes, orders and bills that you create for this supplier. You can override these selections when recording a purchase.

If you want to learn about each option, hover your mouse over the field to display the field help (you’ll need field help turned on, go to Help > Show Field

Help).


Figure 8: Buying Details on the Card Information window

Tax/GST information

Enter the supplier’s tax/GST information here.

(Australia only, support subscription required) When entering an ABN, if you’re connected to the Internet the ABN will be checked automatically with the Australian Business Register. If the number is valid, a green icon will appear next to the ABN field. If there’s an issue with the number, the icon will be yellow. Hover over the icon to get all the details.

(Australia only) If this is a supplier you pay for building and construction services, you need to select the Report on Taxable Payments option and enter their ABN. However, before you can select this option, you need to set up reportable taxable payments.

If the supplier’s tax/GST status takes precedence over that of the item or service being sold, click the Use Supplier’s Tax Code (Australia) or Use Supplier’s GST Code (New Zealand) option. See Setting up tax codes (Australia) or Setting up GST codes (New Zealand).

Credit termsThe credit terms entered here are used as the default terms for all purchases from the supplier but can be changed at any time. If field help is enabled, hover your mouse cursor over a field to read its description.

(Not Basics) Click the Payment Details tab to enter your supplier’s bank account details so you can pay them electronically. You can also specify how you prefer to send remittance advices to the supplier – by print or email.

(Not Basics) You can click the History tab and type the dollar value of the purchases made prior to your conversion month. You can also enter the date that the contact became a supplier.

Click OK to save the card.

4.4. MYOB – Setting Up Electronic Payments

You can make electronic payments by preparing an electronic payment file for your bank to process. In Australia, this is known as the ABA file.


http://help.myob.com/wiki/display/ar/Electronic+payments

http://help.myob.com/wiki/display/ar/More+in-product+help+features


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http://abr.business.gov.au/

Clearing AccountWhen you record a transaction, you want to pay electronically; the transaction is posted to a temporary holding account until you create the electronic payment file. This holding account is called a clearing account.

Before you can prepare an electronic payment file, you need to complete the following tasks:

1. Record your bank account details.

2. Set up a clearing account.

3. Record the bank details of suppliers.

4. Record the bank details of employees.

4.5. MYOB – Creating, Editing, and Deleting Bills

To enter a bill On the Bills page, click Create bill. The Bill page will appear.

If necessary, change the Bill number. This number is automatically generated, based on the last number used.

If you change the bill number, you’ll change the automatic numbering. For example, if you change the number to EX000081, the next time you create a bill, MYOB Essentials will display the new bill number as EX000082.

To enter information about the supplier In the Supplier field, enter the supplier’s name, or click the drop-down

arrow and select the supplier from the list. The supplier’s address details will appear in the field below.

To enter an expense billed to you by a new supplier Click the drop-down arrow for the Supplier field and select + Add

supplier from the list. Enter the supplier’s details in the Add New Supplier window and click Save.

Check the due date, payment terms, and tax preference.

Check the date in the Date of issue field.

Check the date in the Payment due date field.

If you want to record the invoice or bill number as specified by the supplier, enter it in the Supplier invoice number field.


If accounting for tax/GST, choose an option from the Amounts are list.

If you want the prices to include tax/GST, choose Tax/GST inclusive. Note that this is the default preference.

If you want the prices to exclude tax/GST, choose Tax/GST exclusive.To enter the items, you’re buying In the Item column of the list, enter the number of the item you’re

being billed for or select it from the list. To enter a new item Click the drop-down arrow in the Item column and select + Add Item

from the list. Enter the item details in the Add New Item window and click Save.

The item Description, Account, Unit price, and Tax rate/GST type will appear, based on the details you entered when you created the item.

The Quantity and Total will also appear. The default quantity is 1. You can change this in the Quantity field.

To remove an item from the list, click the delete icon ( ) to the right of the item line.

Repeat these steps for each item on the bill.

The following totals are calculated at the bottom of the bill:

o Subtotal—the total for the items added to the bill.

o Tax/GST—the amount of tax/GST applied to the bill.

o Total—the subtotal amount plus the tax/GST amount.

o Amount paid—the total of any bill payments made.

o Amount due—the total minus the amount paid.

If you want to add a note about the bill, enter it in the Notes field.

Check that all the information in the bill is correct.

Complete the bill.

To save the bill, click Save. The bill is saved, and the Bills page appears.

To enter a payment for the bill, click the Enter payment link, and then click Yes to the confirmation message. On the Enter supplier payment page, enter the payment details. For more information, see Enter payments made to suppliers.


http://help.myob.com/wiki/display/ea/Entering+payments+made+to+suppliers#Enteringpaymentsmadetosuppliers-1074470

To edit a billYou can click on bills to open them for editing.

In the Bills list, double-click the bill you want to edit. The Bill page will appear, showing the bill details.

Make any changes to the bill.

Click Save. The Bills page will reappear. To change a supplier’s details See Adding, editing and deleting customers and suppliers. After

updating a supplier’s details, to see the changes reflected on an existing bill (such as a change of address), open the bill and click Save. The updated address will now show.

To delete a bill In the bills list, find the bill you want to delete and click the Bill

Number. The Bill page will appear, showing the bill details.

Click Delete. A confirmation message will appear.

Click Yes to delete the bill. The Bills page will reappear.

Can’t delete a bill? If the Delete button is inactive, it means the bill has a payment

against it so can’t be deleted. You’ll first need to delete the payment (click the payment to view its details then click Delete).

4.6. MYOB – Paying Bills

Use the Pay Bills window to record supplier payments against bills recorded in AccountRight. In this window, you can record full or partial payments to one or more of your outstanding bills.

Supplier payments can also be made in the Bank Register window. Paying bills through the Bank Register window can save you time if you have several purchases to pay and do not need to record detailed information (such as discounts and finance charges) for each payment. When you use the Bank Register window to make a supplier payment, the entire payment is automatically allocated to the supplier’s oldest purchases first.

You can also pay several outstanding bills at once in the Accounts Payable view of the To Do List window.


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To pay bills Go to the Purchases Command Centre and click Pay Bills. The Pay

Bills window will appear.

Select how the payment is to be made.

If you’re paying the supplier electronically – that is, if you will be generating an electronic payment file for this payment – select the Group with Electronic Payments option.

If you’re paying the supplier by some other means—such as by cash, cheque, credit card, or Internet banking, select the Pay from Account option and enter an account in the adjacent field.


If you have an outstanding debit with this supplier, a message may appear. You will have the opportunity to settle the debit now, or at a later date. (See Settling supplier debits.)

In the Amount field, type the total amount paid.

Change the Memo and Payment date if necessary.

In the scrolling list in the bottom half of the window, indicate which purchases are covered by the payment by entering amounts in the Amount Applied column.


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A Pay all

If you’re settling your account in full, click Pay All. The total payment amount appears in the Amount field, and the individual payment amounts are applied to each open purchase.

B Discount

If you’re taking an early-payment discount for a purchase, assign the discount to the appropriate purchase in this column. Note that you cannot assign a discount to a purchase that you are not settling in full. If this is the case and you want to record a discount that the supplier has given you, create a supplier debit. (See Settling supplier debits.)

C Amount applied

Enter how much of the payment you want to apply to each purchase in this column.

D Finance charge

If part of the payment was used to pay finance charges, type the finance charge amount here.

E Out of balance The Out of Balance amount must be


Figure 9: Pay Bills window



zero before you can record the transaction. This field will show an out of balance amount if there is any variance between values in the Total Paid and Amount fields. If you have out of balance amounts, correct the amounts in the Amount Applied and Finance Charge fields.

If you’ve overpaid a supplier, you should still enter the amount paid. The full payment should be entered in the Amount Paid field and in the Amount Applied column in the scrolling list. When you record the payment, a debit note for the overpaid amount is created automatically. This can either be settled as a refund or applied to a future purchase. For more information, see Settling supplier debits.

If you want to print or email a remittance advice later, select an option from the Remittance Advice Delivery Status list.

If you’re recording a cheque payment and the cheque has already been written, or if you are recording a transaction that doesn’t require a printed cheque (such as a petty-cash payment or Internet payment), select the Cheque Already Printed option.

If you want to print a cheque or remittance advice now, click Print and select the Form Type you want to print or select to Preview the form before printing it. Note that the payment is recorded before it is printed or previewed.

Click Record.

If you’ve recorded a bill payment that you want to pay electronically, you can prepare the electronic payment file for your bank to process. See Electronic payments.

To pay several bills at onceYou can pay several outstanding bills at once in the To Do List window. The linked account for paying bills will be used for all supplier payments made from this window.

Click To Do List in any Command Centre. The To Do List window will appear.

Click the Accounts Payable tab. A list of all unpaid purchases will appear. If you want to view details about a specific bill, click the

zoom arrow ( ) next to the bill.


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Click in the select column ( ) next to each bill you want to pay.

Click Pay Bills.

In the window that appears, enter a date for the selected transactions. This is the date that the transactions will be recorded in your accounts.

Click OK and then click Close.


5. OVERARCHING SALES AND ACCOUNTS RECEIVABLES Sales or revenues are tied to cash and accounts receivable. The revenue cycle captures the accounts receivable process as shown in the diagram below:

Making sales is important, but the collection of those sales is critical. To ensure that accounts receivables are managed, there must be consistency in the credit and collection policies.

To do this, credit and collection policies that coincide with relevant legislation and compliance requirements, as well as reliable industry practices, should be properly drafted, applied, and periodically reviewed.

Know the Goal

Define and Set Goals

Measure to Manage

Clarify Responsibilities and Focus Resources

Establish Credit and Collection Policies

Systematise Collection Procedures

Figure 10: Revenue cycle

Establish Terms of Sale

5.1. The Selling Process

Sales order entry is carried out by the Department of Sales order. The sales order department usually reports to the Marketing Vice President.

Steps in the sales order entry process include taking customer orders, checking customer credit, checking inventory availability, and responding to customer inquiries as outlined below:

Taking customer orders: When receiving customer orders, order data is received on a sales order document that can be filled out and received in the store, by mail, by telephone, on a website or by a field salesman. The order for sales (paper or electronic) indicates the ordered item numbers, quantity, prices and the seller. In order to reduce human errors, customers should enter data as much as possible themselves.IT can improve efficiency by

directly routing orders to the picking and shipping warehouse

using sales history to customize requests

offering selection boards to customize orders

using Electronic Data Interchange (EDI) to directly link a company to its customers or manage the customer's inventory

using email and instant messaging to notify price changes and promotions to sales staff

provide laptops and handheld devices for sales personnel to present, pricing, marketing and technical information, etc.

The accounting information system (AIS) aims at ensuring the accuracy and reliability of the collected data. Edit checks to be carried out include customer account validity checks and inventory item numbers, completeness checks to ensure that all necessary information has been collected and reasonableness tests comparing the ordered quantity with the history.

Checking customer credit: Credit sales should be approved before the order is processed any further. There are two types of credit authorisation: general authorisation for existing customers who do not exceed their credit limit and have no past balance


sheets, and special authorisation for all others. IT can improve the process by automatically checking credit limits and balance sheets and by sending credit manager e-mails or IMs for accounts requiring specific authorisation.

Checking inventory availability: This step means that there is a sufficient inventory to complete the order and to inform the customer about the delivery date. If there are sufficient units to complete the order, the sales order will be completed, the available quantity field will be updated in the inventory file and the shipping, inventory and billing departments will be notified. Recognition is also sent to the customer. If you don't have enough to complete the order, a back order is initiated. Exact inventory records are required in order to inform customers of their order status correctly.

Responding to customer inquiries: This activity can be carried out before or after the order is placed and the quality of this customer service can be crucial for the company's success. Many companies utilise Customer Relations Management (CRM) systems to support this process. CRMs should be seen as tools to improve customer service, promote loyalty and not as a way to keep customers away from you.Transaction processing technology can be used to improve relationships with customers. Systems of sales points (POS) can be connected to the client master file to automatically update receivable accounts, print custom coupons, etc.

IT should be used to automate response to customer requests routine, for example. Phone menus, account balance or order status information automatically, FAQs and chat options online. These methods allow customer service representatives to deal with fewer routine problems.

The next step in the process is filling customer orders and shipping the desired merchandise. This consists of two steps: picking and packing the order and shipping the order.

The warehouse department usually selects the order and the shipping department packs the order and ships it.

Both functions include inventory custody and are ultimately reported to the Manufacturing VP and include:

Picking and packing: A pick-up ticket is printed by entering the sales order and triggers the pick-up process. The ticket identifies


which products to choose and how many products to pick. Warehouse workers record the quantities selected on the ticket that can be a paper or electronic document. The inventory collected will be transferred to the shipping department. Technologies such as barcode scanners, conveyor belts, wireless devices and RFID tags can speed up inventory movement and enhance perpetual inventory record accuracy.

Shipping: The shipping department compares the following quantities: physical inventory count, pick ticket quantities and sales order quantities. There may be discrepancies if items were not stored at the specified location or if perpetual inventory records were incorrect. A back order is initiated if there are differences.The clerk then records the order number online, the ordered item numbers and the quantities shipped. This activity updates the quantity-on-hand field in the master inventory file, produces a slip and produces multiple copies of the bill of lading.

The packaging slip, a copy of the bill of lading and the freight bill accompany the shipment. A copy of the bill of lading shall be kept in shipping to track and confirm delivery, one shall be sent to the billing to trigger a bill and one shall be retained by the carrier.

A major decision in the shipping industry is the choice of delivery methods. Some companies maintain a fleet of trucks, but increasingly outsource companies to commercial carriers, which helps reduce costs and enables companies to focus on their core business. Choosing the best carrier requires the collection and monitoring of carrier performance data for on-time delivery and the delivery of goods.

The location of distribution centers is another decision. Many customers only want suppliers to supply products if necessary. Logistic software tools can help to identify optimal locations to minimise inventory transport, meet customer needs and optimise day-to-day use of delivery vehicles.

Globalisation makes logistics outbound more complex. The methods of distribution differ in efficiency and efficiency throughout the world. Country-specific taxes and regulations influence the options for distribution. Logistical software can help with these problems as well.

Advanced communication systems can provide information on the shipping status in real time and therefore add value. If you know


that the shipment is late and notifies the customer accordingly, it helps to adapt to the customer.

5.2. Clarifying Responsibilities and Focusing Resources

After the goal parameters are set, it is necessary to spell out specific roles and responsibilities within the accounts receivable process as set out in the following diagrams. Setting responsibilities is key to strengthening financial position.

Employee Accountability

Sales order personnel

Responsible for taking orders from customers; reports to the VP Marketing.

Warehouse personnel

Responsible for the checking of available inventory, picking the order and maintenance of inventory as well; reports to the VP Manufacturing.

Shipping personnel

Responsible for the packing and shipping of goods to the customer; reports to the VP Manufacturing.

Credit manager

Responsible for adjusting customer accounts in cases of returns, and allowances for damaged goods and write-offs of uncollectable.

Controller Responsible for preparing budgets and supervising accounting and auditing work.

Cashier Responsible for handling customer remittances and depositing them in the bank; reports to the Treasurer.

Treasurer Responsible for seeking resources such as loans and other credit from outside sources and maintaining relationship with banks.

Accounts receivable personnel

Responsible for gathering information for billing customers and processing remittance data and updating of customer accounts.

IT personnel Responsible for improving the efficiency and effectiveness of the accounts receivable process.


Figure 11: Sales and Accounts roles and responsibilities

Internal auditor

Responsible for comparing copies of remittances with validated deposit slips and bank statements.Table 9: Sales and Accounts roles and responsibilities

5.3. Knowing, Defining, Setting, and Measuring Goals

The goal is to maximise sales and guarantee collection while extending credit to worthy customers. Defining this goal means looking into standards, metrics, and even reports that are parallel to the industry to which the business belongs to and knowing what to expect. Important measures are determined first, such as the following:

Days Sales Outstanding

Aging Performance

Write-off Percentage

Days Sales OutstandingThe Days Sales Outstanding (DSO) is a robust metric to check on cash flows, and one of the first key performance measures to look at when assessing and consulting with a company. It is the average number of days of sales that are sitting in accounts receivable. It measures how well a company is collecting its receivables considering the payment terms. It helps determine whether a change in receivables is due to a change in sales, or to another factor such as a change in selling terms.

DSO is calculated by taking the average receivable balance for a period, for example, the fiscal year, and dividing by total billed revenue for that same period, then multiplying by the number of days in the period.

Days Sales Outstanding = (Average Accounts Receivable / Billed Revenue) x Days

Formula 2: Days Sales Outstanding

Evaluate the DSO against the best possible DSO. That is:

Best Possible Days Sales Outstanding =(Current Accounts Receivable / Billed Revenue) x Days

Formula 3: Best Possible Days Sales Outstanding

The closer the regular DSO is to the Best Possible DSO, the closer are the receivables to the optimum level.


(Source: Three Metrics to Improve Receivables Effectiveness )

Relevant metrics According to a Deloitte publication titled ‘Strategies for Optimising Your Accounts Receivable’ and an article on Anytime Collect, granular metrics for accounts receivable apart from DSO are the following:

How many bills are due?

How many have no discounts approved?

How often are standard terms overridden by the sales team?

Should you change your terms if overrides are frequent?

Average Days Delinquent (ADD)

Collection Effectiveness Index (CEI)

Accounts Receivable Turnover Ratio (ART)

Further Reading

You can access Anytime Collect’s article on ‘How to Measure Accounts Receivable Performance’ here:

How to Measure Accounts Receivable Performance

5.3.1. MYOB reports

MYOB generates reports that provide vital information for the documentation of customer history and payment patterns.

The following reports allow for the review of debtor ledgers in accordance with organisational policy and guidelines:

Sales Transactions: Displays a list of sales transactions for each customer along with totals.

Sales by Customer: Displays a list of sales transactions for a certain period, organised by customer. You can choose to see a summary or detailed version of this report.

Sales by Item: Displays sales data for each of your items.

Items: Lists details of your items.


http://anytimecollect.com/measure-accounts-receivable-performance/

http://anytimecollect.com/measure-accounts-receivable-performance/

https://npengage.com/nonprofit-management/three-metrics-improve-receivables-effectiveness/

The following reports make the identification of clients in default easier and the recovery process more efficient:

Unpaid Invoices: Displays the payments due from each customer, within a range of dates by which they are overdue.

Sales Reconciliation: Lists each customer’s outstanding invoice amounts and compares the total amount from outstanding invoices with the Accounts Receivable account up to a certain date.

Customer Invoices: Displays a list of invoices for a certain period and shows the amount, amount due, and status for each.

Customer Payments: Displays a list of payments for a certain period that were made for invoices.

Payment Time by Customer: Displays the list of fully paid sales, along with the number of days it took for them to be paid.

(Source: MYOB Help:Sales reports )

5.4. Establishing Credit and Collection Policies

Now that you have the general overview of the process and the persons responsible for the different functions, the next step is the establishment of credit and collection policies and the controls needed to capture important information in the conduct of recognising sales and accounts receivable.

There is the common problem of delinquency in payments and to protect the company from risks, it must implement a rigorous credit monitoring system. Common risks include the following:

Failure to follow up with customers in a timely manner when payments are past due.

Allowing sales representatives to override credit limits and suffering losses from bad credit risks.

Neglecting to provide staff with appropriate training on how to deal with late paying customers.

Not paying sufficient attention to the accuracy of bills, invoices, or credit terms.

Allocating cash payments incorrectly, making it harder to figure out which payments are outstanding.

(Source: Deloitte:


http://help.myob.com/wiki/display/ea/Sales+reports

Strategies for Optimising Your Accounts Receivable )

Typical organisational policies solicit input from critical and relevant people when setting policies to ensure that market realities and all possible economic, legal, and technological facets are reflected.

A company seeks to maximise income from all sources. In doing so, it must promptly and accurately record all types of income received according to standards. All revenue must be recorded as revenue and not as a reduction or compensation for other costs.

Only income received from external sources is considered as income. All revenues must be allocated to the relevant income account code as specified in the account chart of a company in order to facilitate the relevant GST implications.

The Accounts Receivable System is part of a company’s accounting system. It is concerned with raising invoices, and matching payments to invoices to record amounts owed or pending payments. This system should ensure that all amounts received are recorded and that any outstanding invoices are paid within a particular time frame. The company’s trading terms are incorporated in this system. Further discussion on the process can be found in the following sections.

The Accounts Receivable System relies on the input of accurate information provided by invoice requests by authorised individuals who have online access to the system. This is to ensure that all monies due and payable to the company are recorded in the accounting books for audit and control purposes and compliance with the GST legislation.

Outstanding amounts are reviewed on a monthly basis for monitoring purposes. Statements of accounts are sent to customers in accordance with the Consumer Credit Act as well as follow up letters and letters of demand where necessary. Monthly reconciliations are performed between the Accounts Receivable System and the totals in the General Ledger. Debt recoveries are bad debts considered.

Notes on credit analysis and terms of sale included in the following discussions are adapted from a discussion on The Revenue Cycle: Sales and Cash Collections on, and a publication by Deloitte entitled ‘Strategies for Optimising Your Accounts Receivable’.


https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/finance/ca-en-FA-strategies-for-optimizing-your-accounts-receivable.pdf

Further Reading

Access the full discussions here:

The Revenue Cycle: Sales and Cash Collections

Strategies for Optimising Your Accounts Receivable

5.4.1. Credit analysis (who gets credit and how much credit is issued)

Before companies grant credit, they may use several credit analysis methods such as:

Pulling credit reports

Credit scoring

Evaluation of the 5Cs of credit.

The ‘5 Cs of Credit have been provided below:


Figure 12: The 5Cs of evaluating credit

ConditionsEnvironmental and economic conditions that pertain to the stability of employment, other debts and financial obligations. The length of employment and frequency of moving are measured to assess if life conditions appeal to potential creditors

CollateralAny property or possession that can be used as security for a payment of debt. This serves as guarantee against a total loss in case of default.

CapitalRepresents the savings, investments, and other assets that can help repay the loan. A higher relative capital investment of a potential borrower means more alignment with the incentives of the lender and the borrower.

CapacityReflects the ability to repay a loan or other financial agreement. This is translated as the debt-to-income ratio, which measures the income versus the outgo. The lower the monthly debt obligations and the higher the income, the better the capacity.

CharacterA subjective judgment about the potential borrower. The track record one has established to manage credit and make payments over time. First impressions, the reputation, know-how and experience, and references and background are all



http://www4.semo.edu/gjohnson/AC330/Ac330ch10notesedition11.htm

Customer credit approvalThis section has been adapted from ‘Strategies for Optimising Your Accounts Receivable‘ by Deloitte.

Responsibilities should be set: Assignments and accountabilities should still be periodically reviewed. Establish clearly who is authorised to grant credit or change terms, or in special circumstances, who has the merit to override and what can be done in the meantime. These should be determined so as not deter the flow of the sales process and cause distress to customers.

Assessment of credit limits should be determined: The company should be quick to identify whether a new customer is to be granted credit or not. It should have a simple internal scorecard for customers who buy low volume items on short terms and a more stringent process with full background and credit history checks for those who purchase large volumes on a regular basis.

Commit to approving or rejecting credit applications within a certain time period: Establish the time to assess credit applications for approval or rejection. This contributes to an efficient process and helps develop relationships with customers and internal departments, such as sales and finance.

Regularly review the credit approval process: Be flexible in terms of changing credit terms of customers as there are external forces such as the industry they belong to and economic conditions that readily affect risk profiles. Adjust accordingly by checking on the application requirements or perhaps shortening the grant terms to accommodate customers while decreasing risk of default. The details for a customer in a snapshot should be captured by the Customer Master Data in the accounting system.

Customer master data This should indicate what the customer is allowed to purchase, any applicable dollar limits, payment terms, whether they receive discounts on volume or advertising credits, and any other relevant terms such as delivery address or email address. It should also include the following:

Information for invoice and manual receipt processing;

General Ledger account information;

Information relating to the processing of automatic receipts;




Tax information;

Currency information;

Billing and shipping information relating to the processing of sales orders;

Credit and collection information;

Electronic data interchange information for processing sales orders electronically;

Category code information.This information is vital as an incorrect address can lead to invoices in the wrong places and receivables slowing down. Continuous update is needed and should be reflected in the system to ensure the smooth flow of operations. To do so, the following measures should be implemented:

Centralise the master data process and identify who is ultimately responsible for managing customer information.

Perform regular master data audits to identify customers with abnormal credit limits, payment terms and/or discount rates.

Document and communicate all customer data modifications. Changes in finances and operations should be approved because they can have a significant impact on cash flow forecasts.

Implement controls to ensure data accuracy and allow read-only access to staff to ensure that customer data can not be overridden without proper sign-off.

(Source: Deloitte:Strategies for optimizing your accounts receivable )

Terms of Sale (Payment or Credit Terms) Terms of Sale are included in the setting up of credit policies. This is to allow consistent decision making at the time of sale and determine when accounts are due.

The terms of a sale state how a company will sell its products or services. The terms cover the following:

When payment is due and expected;

Any conditions on the payment;

Any discounts for the buyer.



Any exception to the established terms must be based on competitive practices and thorough assessments. Maintain the periodic review of the terms of sale to warrant that it is advantageous to the business.

The terms of the sale and credit limits are set before a credit line is granted to a customer. In MYOB, before a sale can be recorded, a card or a customer record is first created to account for relevant details such as payment terms. It is critical that this detail not be overlooked as its effect

FNSACC312 Learner Guide Version No. 1.1Page 85 Australian College of Business and AccountingExample 6: Due dates

Example:Assume a sale is made on 11 March. The due date depends on the terms and the balance due date entered.

Option Description Balance due days/date

Payment due

COD – cash on delivery

Payment is due when goods are delivered. 0 11 March

Prepaid/PIA – payment in advance

Payment is due before goods are delivered. 0 11 March

In a given number of days

Enter the number of days before payment is due. 7 days 18 March

On a day of the month

Enter the day of the month when payment is due. For example, if you enter 15th, and a sale or purchase is made on the 14th of the month, payment is due the next day. And if the sale or purchase is made on the 16th, payment is due on the 15th of the next month.

20th of month 20 March

# of days after EOM (end of month)

Enter the number of days after the current month that payment is due, such as 28 days.

31 days 2 May

Day of month after EOM (end of month)

Set the day of the month after the current month that payment is due, such as EOM (the last day of the month). Use this option if payment is due on the last day of the month, regardless of the number of days in the month.

EOM 30 April

% N1 Net N2 Set the discount rate and the number of days the discount

1% 10 Net 30- 1%

discount is given if

payment is received

within ten

If paid on or before March

21, a 1% discount is

given, otherwise, if

will trickle down to the monitoring of balances and collection and recovery.

Establishing collection policies The monitoring of the subsidiary ledgers follows the granting of credit. Clear collection policies will safeguard consistent and effective management of accounts receivable to achieve the goals set. Collection policies include the following:

When to contact a client.

How to contact a client.

When to place a credit account.

How to resolve disputes, deductions, etc.

When to transfer delinquent accounts to an external collection agency.

When to write off a bad debt account.(Source: Credit Today:

Credit and Collection Policy Basics )

5.5. Billing Procedures and Customer Accounts Procedures

The billing process is as important as the product or service the business tries to sell. This process begins with the preparation of invoices and sending them to customers.

Invoicing Invoices are issued prior to payment. For cash sales, however, the invoice is as good as the receipt. For sales on credit, the invoice usually specifies the terms of the sale and provides information on the available methods of payment.

All invoices should be monitored and should follow regular collection schedules with appropriate escalation actions for those in default. Invoices to be sent to clients should be initiated by the accounts receivable personnel. Invoices may be sent/received in paper form or by Electronic Data Interchange (EDI). When buyer and seller have accurate online systems the invoicing process may be skipped.

An integrated Accounting Information System (AIS) may also merge the billing process with sales and marketing by using data regarding a


https://www.credittoday.net/public/Credit-and-Collection-Policy-Basics.cfm

customer’s past purchases to send information about related products and services with the monthly statement.

USEFUL TIPS:Tips to consider when invoicing include the following:

12. Invoice clients in their own right time: Know your clients and invoice them at just the right time to get necessary approvals for immediate payment. This requires separate billing dates and special accounting estimates for potentially every client; however, the cash flow improvement could be substantial. Once a job is completed, invoice right away regardless of what the client invoice cycle might be.

13. Deliver invoices electronically: Send an email or fax. Do not lose the several days it would take an invoice to travel by mail to its destination. Take note that it is easier to confirm an email address or a fax number than the correct address or PO box number. Everyone appreciates formats that save work at their end and speeds processing.

14. Document charges concurrently: Project managers should track and scan or copy any documents related to an invoice on a daily basis. Reimbursable expense reports should be approved through the accounting system at least weekly, and back up documentation scanned and available in the system. Organised invoices are sent out faster and are easier for accounts payable departments to approve, which means money goes into accounts faster.

15. Delegate invoicing responsibility to the person responsible for the work: The professional staff working on a regular basis are in the best position to know the person or persons that must authorise payment, and field the questions that accounts payable clerks are trained to ask.

16. Implement a process for prompt approval: The reviewing manager should have 24 to 48 hours to approve outgoing invoices; if not done, the request should be escalated up the chain of command for immediate approval. Consistently followed, this policy ensures timely approvals.

17. Offer a discount for early payments: Any amount less than one per cent might not be enough to encourage early payment, but one percent should be enough to prompt most companies. However, be prepared for those who take the discount without making the early payment by only offering it to selected clients.

18. Before the invoice goes out, call those who must approve the invoice before payment: As a quality control step, make sure the job is sufficiently good to be approved and discuss any problems. Confirm that the person will be ready to approve the invoice or to find out who will have to approve in the absence of that person.

19. Talk to the accounts payable person: Get to know the person who controls the purse strings in the client’s office and maintain a relationship with that contact.

20. Call again, two days after the invoice was sent.21. Call a third time the day the payment is due, especially if you have offered an

early payment discount. (Source: Best Practices Accounts Receivable Process Collection in Professional Service

Firms )


https://www.arizonab2bcfo.com/best-practices-accounts-receivable-process-collection-in-professional-service-firms/

https://www.arizonab2bcfo.com/best-practices-accounts-receivable-process-collection-in-professional-service-firms/

See Section 5.8. Resolving Invoice Disputes and Customer Deductions.

After the invoices are prepared and sent out, it is time to collect customer payments.

Payment optionsPolicies outlining the acceptable methods of payment for the company should be established. The policies should include the method of access as well as method of payment and promote electronic methods of access and payment when feasible and cost-effective in order to reduce overall risk and increase cash flow. Some of the common payment methods include the following:

Cash

Cheques

Bank transfers

Direct deposits or Electronic Funds Transfer (EFT)

Credit cards such as American Express, Bank Card, Diners Club, MasterCard, and Visa

Customers should always be informed of the available payment options. The company should aim to make this as easy as possible to encourage prompt payments.

The final step in the billing process is the record-keeping and sending out of receipts to customers if required. The maintenance of ledgers serves as a reference for a customer’s billing and payment history. The ledgers are also important for auditing purposes.

The MYOB software allows a business to set up a payment account for customers and send them their invoices and process their payments.

MYOB has many different features and options available from customer setup, to invoicing, to tracking customer trends and information. MYOB helps keep the record-keeping and processes in sync.

5.6. Operational Issues and Key Practices on Internal Control

Operational issuesThe receipt and appropriate recording of income from accounts receivable should be outlined in a company’s manual. It should include


provisions on the sources of income, income payment methods, receipting of monies, and the accounts receivable system.

There are many procedures to be followed in order to comply with the audit and the legal requirements for receiving and recording revenue in general, and these are as follows:

Using official, pre-numbered, sequential receipts.

Retaining and accounting for all receipts

Retaining all cancelled receipts and copies to be processed by the Acocunting Department

Reporting monies and receipts to balance, and discrepancies to the Accounting Department immediately.

Daily banking of funds.

Processing receipts in batches for completeness and accuracy

Ensuring that monies are not placed in the internal mail.

Ensuring the safe custody of monies. (Source: The University of Western Australia:

Overarching revenues and receivables )

Key practices on internal controlAccounts receivable is a major asset for the company. Delays or failure to collect accounts due may lead to a lack of cash flow and a loss of profit. General key practices on internal control in the recording and accounting of accounts receivable according to a CPA Australia publication are as follows:

Key Control Practices

Segregation of duties Separate the receivable and cash receipts functions.

Process controls

Guarantee that credit and collection policies are written.

Have numerical or batch-processing controls over billing.

Ensure account mailing cannot be manipulated.

Periodic reviews Cross-checked transactions, such as non-cash credits and bad debt write-offs.

Review credit balances periodically. Prepare trial balance of accounts


http://www.finserv.uwa.edu.au/receivable/revenues

receivable periodically. Reconcial trial balances with General

Ledger control accounts.

Prompt investigation of credit issuance and discrepancies

Conduct credit checks on new credit customers.

Guarantee that credit purchases are recorded as soon as the transaction takes place.

Regular review of delinquent accounts

Age accounts regularly and have an independent review of the report.

Have a well-documented and strict policy for the monitoring of overdue accounts

Ensuring that early payment discounts and penalties are checked for overdue accounts.

Table 10: Key internal control practices

(Source: SlideShare – Suitheng Ear:Internal controls for small business )

5.7. Collection Options

A business needs to define its collection procedures by having appropriate escalation actions in place. It can take a proactive approach to ensure the timely collection of receivables by taking the following steps:

Engaging in frequent and consistent collection efforts. This includes the following:

o Ageing of receivables.

o Statement of account, reminders.

o Letter of demand; and telephone calls and dunning emails. This includes strengthening employee skills if they do not know how to collect amounts from recalcitrant customers.

Ensuring that the company benefits from any discounts and are properly implemented.

Reinforcing processes to enable accurate reporting.

Automating processes to prevent manual input errors.In the event a debtor fails to pay or fails to communicate why they cannot pay, you can decide to chase it up, or just write it off to experience. Bear in mind it may be counterproductive to compare the costs and benefits of chasing it up or not. You can take the following courses of action:


https://www.slideshare.net/SuithengEar1/internal-controlsforsmallbusiness

Negotiating payment plans that align to corporate collection policies.

Establishing procedure for overdue debt – use outside agencies.

Outsourcing of accounts receivable functions.

As a last resort, legal proceedings.

5.8. Resolving Invoice Disputes and Customer Deductions

The credit and collections department of a business deals with collection and customer deduction issues. Part of the process of collections is managing and resolving customer disputes.

Invoice disputesAn invoice discrepancy occurs when there is a mismatch between the system-generated invoice and a customer’s records. Discrepancies may be in terms of quantity or value:

Items invoiced have not been received by the customer.

Incorrect goods were received by the customer.

Items invoiced have the wrong quantity or amount.To understand what took place, you have to understand what happened within the accounts receivable at the invoice matching stage.

Discrepancy Resolution

Items invoiced have not been received by the customer

Do a status check on the progress of the goods and make sure that the goods are delivered to the customer as soon as possible if delivery is in transit. If the goods are not scheduled to be delivered shortly, ask the customer to return the invoice to you.

Incorrect goods were received by the customer

Determine where the mistake occurred and the costs pertinent to augmenting the situation. Check on the possibility that another customer might have received incorrect goods as well, and make sure that the customer will receive the correct goods as soon as possible.

Items invoiced have the wrong quantity or amount

Quantitya. If the invoice quantity is correct and the

mismatch is due to insufficient receipting activity, create another entry in the sales register.

b. If the invoice quantity is incorrect, make the


change by editing the invoice recorded in the sales register or by sending a credit memo to the customer.

Value or Amounta. If the invoice amount is correct and the

mismatch is due to insufficient receipting activity, create another entry in the sales register.

b. If the invoice quantity is incorrect, make the change by editing the invoice recorded in the sales register or by sending a credit memo to the customer.

The customer is not happy with the goods or services.

Come up with a compromise to decide how the situation could be resolved. Ask the client of their expectations and how you can fix it. Cross check client expectations with client orders.

The customer asks why they have been billed this time.

Tell your client up front that they will be billed for time and make sure to track of the time through time sheets and the pricing.

The customer says they cannot pay.

Try to produce a resolution by perhaps extending their credit. If this is not feasible, pass the invoice to a credit collector.

Table 11: Discrepancy resolution

Steps for tackling invoice disputes Attach supporting documents such as sales orders to customer

invoices for easier double-checking.

Make follow-up calls once an invoice has been sent to a customer. This is to ensure that they received the invoice. Take this time to confirm the details on the invoice.

Make sure the accounts receivable department is organised and set rules for consistency.

Use invoicing software for easier tracking and monitoring.

Offer live chats to your customers in cases of disputes.

Customer deductions Deductions correctly taken: In most cases, customers will take

deductions only when there is a legitimate problem with an invoice.


If they do take a deduction in error, they are generally willing to pay once the error has been proven to them.

Common reasons for deductions include such things as pricing errors, quantity errors, delivery problems (too early, too late, to the wrong location, not signed for), concealed shortages, the wrong product shipped, returns for credit, rebates, advertising credits, etc. None of these is initiated by the credit collections department, however, it is responsible for identifying the issue and collecting open balances. If your company is missing the target in any of these areas, it will have an impact on Accounts Receivable (AR) turnover, overhead costs, and customer service.

Erroneous deductions: Some customers may take deductions because they simply lack the information needed to process payment. Others may use this as a tactic to slow payment or hope the issue will just end up as a write off by a weary or disorganised seller.

The unfortunate fact is that the time and cost to research and resolve a deduction can be significant. If it is ultimately determined that the deduction was taken in error, the effort, time and expense required to document your position can be significant. If the amount is found to be due and payable, additional effort will still be required to convince the customer to pay the disputed amount.

Steps for tackling deductions Determine if there is a return on your time and effort invested

(ROI) to pursue a small dollar deduction.

Remember, not all customers are created equal.

Analyse and document.

If the customer is making claims without supporting documentation, ask them to immediately provide what you need.

Focus on reducing the volume and impact of deductions.

Build a minimum dollar threshold into your credit collections policy for collection versus write-off.

Decide whether to charge back or not.

Determine how the customer is treating others in the marketplace.


Have a good system to automate the deduction management process.

Pick your battles. (Source: Credit Today:

Managing the Customer Deduction Challenge )

For MYOB:

An adjustment note is a posting transaction which can be applied to a customer’s invoice as a payment or reduction.

A delayed credit is a non-posting transaction that you can include later on a customer’s invoice.

A refund is a posting transaction which is used when reimbursing a customer money.

This means that:

Adjustment notes are used to offset an existing customer balance.

Delayed credits can only be included on an invoice.

Delayed credits don’t affect a customer balance until they are included on a saved invoice.

Refunds are used to show money given back to a customer to refund for services the customer is not happy with, to offset a credit balance, merchandise or service not received, or an overpayment.

(Source: Intuit QuickBooks Help:Applying an adjustment note, credit or refund for a customer )


https://community.intuit.com/articles/1315672-applying-an-adjustment-note-credit-or-refund-for-a-customer-australia-only

https://www.credittoday.net/public/Managing-the-Customer-Deduction-Challenge.cfm

Activity 3

1. Which is better? Explain your answer in no more than three (3) sentences.

1. Relaxed credit policy together with a strict collection policy.

2. Strict credit policy together with a relaxed collection policy.

2. True or False.

1. Sales can only be entered after a customer card for the specific customer has been created.

2. A sales order serves as the document for tracking the delivery of a shipment.

1.

2.



6. MYOB – ACCOUNTS RECEIVABLE Billing is an information-processing activity that repackages and summarises information from the sales order entry and shipping activities. It requires information from the shipping department on items and quantities shipped and from the sales department on prices and other sales terms. The basic document created is the sales invoice.

Billing procedures in MYOB include the following:

Initiating the sending of statements of accounts to customers based on subsidiary ledgers through the accounting system.

Filing of invoices.

Review and analysis of accounts receivables.

Collection calls.

Recording cash receipts.The information in this chapter is adapted from the MYOB website.

6.1. MYOB – Linked Accounts

For accounts receivable, you need to set up the following:

Bank Account for Undeposited Funds: This is a clearing account you use to track receipts that have not been directly deposited with your bank account (e.g. cash and checks). Receipts are cleared from this account and deposited to your bank account in the Prepare Bank Deposit window when processing them.

To set your sales linked accounts, go to Setup menu > Linked Accounts > Sales Accounts.

Asset Account for Tracking Receivables: This account tracks the total amount currently owed to you by your customers. The balance automatically increases when you record your invoice and decreases when you make a payment.

Bank Account for Customer Receipts: This is the default bank account deposited in customer payments. If you have more than one bank account, choose the one that is most widely used. When recording the receipt, you can choose a different bank account.

Income Account for Freight: This is the account that you charge customers for freight on invoices. The amounts you enter on a sale in the Freight field are assigned to this account.


Liability Account for Customer Deposits [Not Basics]: This account is used to track customer deposits that you collect when you place a sales order. If you enter a sales order amount in the Paid Today field, the amount is allocated to this account.

Expense or Cost of Sales Account for Discounts: This account tracks early payment discounts that you give customers when they fully pay their invoice. Early payment discount terms are set in the sale's credit terms and can also be entered in the receipt window.

Income Account for Late Charges: This account tracks the financing fees collected from customers. The terms of the late payment financing charge are set in the credit terms of the sale and can be entered in the receipt window as well.

(Source: MYOB Help: What are linked accounts?)

6.2. MYOB – Setting Up Sales

MYOB assists in the following:

Preparing sales quotes, orders, and invoices.

Generating statements.

Viewing customer sales history.

Seeing how much your customers owe you.It features the Sales Easy Setup Assistant to set up credit terms and credit limits, customer details, and historical sales.

To access the Sales Easy Setup Assistant, go to the Setup menu, choose Easy Setup Assistant and then click Sales.



In the Sales Easy Setup Assistant, you can enter the following details:

Default credit terms and credit limits: Enter the credit terms and credit limits generally extended to customers.

Customer details: Create a record for each customer and enter relevant details such as their address and phone number.

Historical (pre-conversion) sales: If customers owed money on the first day of the conversion month, it is necessary to record some details about the outstanding sales, such as the invoice date and the amount owed to the business. That way, the customer payments are recorded against these sales when the payments are made.


Figure 13: Setting up sales – 1/2

6.3. MYOB – Adding a Customer

Before a company can record sales for a customer, it first has to create a customer card. A customer card is a record which contains details of an individual or business that you deal with. This is for the system to generate delinquency fees, delinquency notices, and workflow messages, or update credit information. Adding a customer also means specifying and entering credit and collection information for the customer.

Credit and collection information on the customer record should include the following:

Delinquency policy. In case of no manual assignment of a policy, the system should automatically assign the default policy.

Credit limit for the customer.

Credit and collection manager assigned to the customer.


Figure 14: Setting up sales – 2/2

When delinquency notices and fees are generated.

When the customer is placed on the collection report for external collections.

When statements are generated.To create a customer card

Go to the Card File Command Centre and click Cards List. The Cards List window will appear.

Click New. The Profile tab of the Card Information window will

appear.

Select Customer from the Card Type list.

Select the designation of the card: Company or Individual.

Type the customer name.

If the business uses codes to identify customers, type the code for the customer in the Card ID field. See Card identification codes for more information.


Figure 15: Adding a customer – 1/3

Enter contact details for the customer. More contact information can be entered by selecting Address 2 from the Locations list and entering the additional details. MYOB allows you to enter contact details for up to five locations or people at the same business.

Click the Card Details tab. You can enter notes about the customer, insert a picture and assign attributes.

Click the Selling Details tab and enter the selling details.




Click the Payment Details tab and select the method of payment the customer will use to pay the business.

Click the Jobs tab and enter the details of each job started or are about to start for the customer. See Jobs for more information about jobs.

Click the History tab and type the dollar value of the sales made prior to the conversion month. You can also enter the date that the contact became a customer.

Click OK to save the card.

6.4. MYOB – Entering a Sales Invoice

In MYOB there are two (2) methods which can be applied to enter a sale based on the following process:

Two ways to enter a saleSales can be recorded using the Sales window. This window enables you to record a number of details about the sale, the payment, freight, and tax.


Figure 18: Process to enter a sales invoice

http://help.myob.com/wiki/display/ar/Enter+an+invoice%2C+quote+or+order

Shown below is an invoice for the customer Enrique Ugg, who availed of the Comprehensive Oral Health Care service, which is GST free. Enter a sale by clicking on the Enter Sales in the Sales window.

A quick way to enter a cash sale is by using the Bank Register window. You can only record key information about the sale, but you can record more detail later. Enter a cash sale by clicking on the Bank Register in the Banking window.


Figure 19: Enter a sale – method 1A

Figure 20: Enter a sale – method 1B

http://help.myob.com/wiki/display/ar/Bank+Register+window



http://help.myob.com/wiki/display/ar/Enter+an+invoice%2C+quote+or+order


To enter a sale:

Go to the Sales Command Centre and click Enter Sales.

Select the customer or create a new card for them. Note that once the sale is recorded on the card, it cannot be changed so make sure you select the correct card.

Click the Terms arrow to change the customer’s default credit terms for this sale.


Figure 21: Enter a sale – method 2 – 1/3


If prices to be entered include tax or GST, select the Tax Inclusive (Australia) option. The selection made here will be remembered for the next sale. Don’t change this setting after you start entering amounts.

Click Layout to change the sale layout to suit the type of goods or services the business provides. Note that sales using the Miscellaneous layout cannot be printed or emailed.

Indicate whether it is for a quote, order (Not Basics), or invoice from the Sales Type list in the top-left corner.

Insert details of what was sold, as well as headings, subtotals, and blank lines. The fields that are available depend on the sale type and layout selected.

Enter any charges for freight and, if required, select the right tax/GST code.

Enter an amount in the Paid Today field to record the amount the customer paid at the time of the sale. When creating an order, record the amount the customer gave as a deposit.

Click Details if you want to enter details about the payment. For example, if you are being paid by credit card, you can record the last four digits of the credit card number.

Click Record (or Save Quote for quotes) to just save the sale or click Print to also print it on form stationery. Or click Send To for



http://help.myob.com/wiki/display/ar/Sending+forms+when+you+record+a+transaction

http://help.myob.com/wiki/display/ar/Sales+and+purchases+information

the email the sale (set up email first) or save it as a PDF (not available for Miscellaneous sales).

6.5. MYOB – Changing or Deleting a Transaction

Changing a transaction At times, it is necessary to make changes to or delete a transaction previously recorded.

The details of most transactions can be changed (such as the number of items sold on an invoice, the quality purchased, or the account allocated on a journal) by taking the following steps:

Find and display the transaction in its original transaction window.

Make the necessary changes to the transaction, and then click OK.You can also add and delete lines on an invoice or lines of a purchase you’ve recorded.

Deleting a transaction Open the transaction and select Delete from the Edit menu (you can also right-click in the transaction window and select the delete option). When you delete a transaction, it is permanently removed from your records.

Be wary of a number of restrictions when deleting transactions. Your security preferences and user role must allow deleting; the transaction cannot be in a locked period, and the transaction must be in your current financial year. There are also some restrictions depending on the type of transaction to be deleted.


Figure 24: Deleting a transaction

http://help.myob.com/wiki/display/ar/Deleting+a+transaction

http://help.myob.com/wiki/display/ar/Add+headers%2C+subtotals+and+lines+to+purchases

http://help.myob.com/wiki/display/ar/Add+headers%2C+subtotals+and+lines+to+sales

http://help.myob.com/wiki/display/ar/Finding+a+transaction

http://help.myob.com/wiki/display/ar/Changing+a+transaction


http://help.myob.com/wiki/display/ar/Sending+emails


To delete a transactionFind and display the transaction in its original transaction window.

Go to the Edit menu and choose Delete [...]. For example, if you want to delete a sale, choose Delete Sale. The transaction will be removed permanently from your record.

Follow the procedure outlined above to delete the following:

Sales, including invoices, orders, quotes and credit notes.

Purchases, including bills, orders, received items, quotes and debit notes.

Spend money and receive money transactions.

Journals, including general journals.If you need to regularly change transactions, ask your administrator to add this permission to your user role.

Important information about different transaction types

Sales transactions

You can only delete a sale that does not have a payment applied to it. If you have recorded a payment for a sale, you must first delete the payment and then delete the transaction. Any discounts that have been given must also be deleted before the transaction can be deleted.

If you applied a credit note towards a sale, you must delete the credit before you can delete the sale.

If you want to delete a line or other information from an invoice you’ve recorded, see Add headers, subtotals, and lines to sales.

Purchase transactions (Not Basics)

You can only delete a purchase that does not have a payment applied to it. If you have recorded a payment for a purchase, you must first delete the payment and then delete the transaction (see the FAQ below about deleting payments). Any discounts that have been given must also be deleted before the transaction can be deleted.

If you applied a supplier debit towards a purchase, you must delete the debit before you can delete the purchase.

If you want to delete a line or other information from a




purchase you’ve recorded, see Add headers, subtotals and lines to purchases.

6.6. MYOB – Setting Up AccountRight for Customer Payments

Before recording customer payments, you need to ensure the following have been set up:

Undeposited funds account.

Payment methods, such as cash, cheque, EFTPOS, etc.If your company file was set up using the default chart of accounts, an undeposited funds account may already exist. Also, your software comes with a set of default payment methods, although new payment methods can be created as required.

The Undeposited Funds account is used to track all the payments you receive by cash, cheque, and credit card before they are deposited to your bank account. When you visit your bank to deposit the receipts (or your credit card company deposits the funds), you can record that deposit by transferring the payments from the Undeposited Funds account to your AccountRight bank account.

This makes reconciling your bank account easy because you’ll be able to match up the bank statement deposit amount with the amounts you’ve recorded in AccountRight.

An undeposited funds account exists to pool all received payments prior to those payments being cleared to the bank. Once an undeposited fund’s account is set up in your software, this account must be linked to ensure all received payments are allocated to the correct account.

If your software already has an undeposited funds account set up and this account has already been linked, skip to ‘Payment methods’ below.

Exercise 1Task 1 – Create an undeposited funds account Go to the Lists menu and choose Accounts.

Click the Assets tab.

Click New. The Account Information window appears.




Select the Detail Account option.

Set Account Type to Bank.

Enter the Account Number and the Account Name, such as Undeposited Funds. The Edit Accounts window should look similar to the example above.

Click the Details tab and set the Tax/GST Code to N-T. If desired, enter an account Description.

Click OK.

Task 2 – Link the undeposited fund’s account

Go to the Setup menu and choose Linked Accounts then choose Accounts & Banking Accounts.

In the Bank Account for Undeposited Funds Account field enter the Undeposited Funds account created above.

Click OK.

Payment methods


To access the list of existing payment methods, go to the Lists menu and choose Sales and Purchases Information then choose Payment Methods.

The most common payment methods will already exist in your software.

To create a new payment method, take the following steps:

On the Sales and Purchases Information window shown above, click New. The Edit Payment Methods window is displayed.

The Payment Method can only contain letters and numbers - don’t use special characters such as dashes, commas or asterisks.

Enter the Payment Method and set the Method Type as shown in the example above.

Click OK.

To link a payment method to a customer’s card to specify the method of payment for that customer, take the following steps:

Go to the Card File Command Centre and click Cards List.


Click the Customer tab.

Click the zoom arrow next to the applicable customer.

Click the Payment Details tab.

Set the customer’s Payment Method. Depending on the selection, a set of fields may be displayed for additional information, such as credit card details as shown below.

Click OK.

Exercise 1: Setting up an account for customer payments

6.7. MYOB – Receiving Payments

Incoming payments should be applied to the right customers and to the specific customer invoices they relate to. This should be done on a timely basis to monitor up-to-date accounts, as well as outstanding accounts.


Take note that this will be the basis for the computation of bad debts, interest, and penalties in case of delayed payments.

When applying payments consider the following:

Payments are allocated to specific invoices rather than simply crediting the customer accounts.

Apply payments to the appropriate invoices, not just the oldest invoices.

Apply payments to each account on the day they are received, to maintain system accuracy. This can be complicated if the company accepts many different forms of payment, such as pre-authorised debit, cheques, wire transactions, electronic funds transfer, or even payment over the phone. In these cases, it may make sense to limit the payment methods customers can use.

Post journal entries well before system cut-off dates.

Reconcile accounts on a timely basis by quickly and consistently following up on unidentified cash receipts rather than dumping them into suspense accounts and letting them languish.

MYOB When customers make payments against invoices, record them in Receive Payments in the Sales window. Full or partial payments can be recorded against one or more of the customer’s outstanding invoices.

If a payment received is not in response to an invoice or order created, use the Receive Money window instead.

Payments can also be recorded in the Bank Register window. This can save time if several invoices have been paid and there is no need to record detailed information (such as discounts and finance charges) for each payment.

When the Bank Register window is used to record a customer payment, the entire amount is automatically allocated to the customer’s oldest invoices first.

6.7.1. To record payments against invoices

Go to the Sales Command Centre and click Receive Payments. The Receive Payments window will appear. Choose the account that will be used to record the customer payment.


Deposit to Account: Select this option if the customer has made a direct payment to your bank account. The linked bank account for customer receipts is selected, but this can be changed if the deposit was made to another account.

Group with Undeposited Funds: Select this option if the payment will be deposited at a later time.

In the Customer field, enter the customer’s name.

Type the amount received.

Click Details if you want to enter further details about the payment in the Payment Method field. For example, if you are being paid by credit card, you can record the last four digits of the credit card number.

The Memo and payment Date can also be adjusted. The automatically generated ID number can be changed as well, however, it is recommended you use the default number to make

sure that duplicate IDs are not used.

A Discount

If you intend to offer an early-payment discount for a sale, assign the discount to the appropriate invoice in this column. Note that you won’t be able to assign a discount to an invoice that is not being settled in full. If this is the case, you can give them a customer credit note. See Customer returns, credits, and refunds.

B Amount Applied Enter how much of the payment you want to apply to each sale in this


Figure 25: Receive payments screen

http://help.myob.com/wiki/display/ar/Customer+returns%2C+credits%2C+and+refunds

http://help.myob.com/wiki/display/ar/Customer+returns%2C+credits%2C+and+refunds

column. If you only receive a part payment, enter the amount received. Ensure that the total of the amounts applied in this column equal the value entered in the Amount Received field.You can let AccountRight automatically fill this column for you, by applying payments to the customer’s oldest invoices first. Select the Apply Customer Payments Automatically to Oldest Invoice First option in the Setup menu > Preferences > Sales tab. The amount received will be distributed automatically based on invoice date, but you can override the allocation.

C Finance ChargeIf part of the payment is to pay finance charges, type the finance charge amount here. For more information, see Finance charges paid by customers.

D Out of Balance

The amount you apply in the Amount Applied column accumulates in the Total Applied field. The Total Received amount (which includes any finance charges) must equal the amount that appears in the Amount Received field in the top half of the window before you can record the transaction. The Out of Balance amount must be zero before you can record the transaction.

Click Record.

6.8. MYOB - Partial Payments

Some clients may offer to pay for less than the full amount as part-payment or an instalment payment. To account for this in MYOB, enter the payment in the same way as in Section 6.7 but take note of the History of payment of the customer (as shown in the highlighted portion in the screenshot below).


http://help.myob.com/wiki/display/ar/Finance+charges+paid+by+customers#Financechargespaidbycustomers-1347187

6.9. MYOB – Printing Payment Receipts

MYOB enables the printing of receipts in the following windows:

Bank Register

Receive Money

Receive Payments

Sales (where an amount is entered in the Paid Today field)

Settle Returns & Debits (Receive Refund view)Payment receipts correspond directly to receipt transactions. That is, when you record a receipt transaction, the information you entered on the transaction can be printed on a payment receipt. Because of this


Figure 26: Customer payment history

relationship, if you change, reverse, or remove a receipt transaction, the payment receipts that have been printed may no longer be valid.

To print payment receipts Go to either the Sales or Banking Command Centre and click

Print Receipts. The Review Receipts Before Printing window will appear.

If you print receipts on pre-printed stationery, type the number of the first receipt in the Number of First Receipt in Printer field. The IDs of the recorded receipts will be renumbered to match the printed receipts.

Type the number of copies you want to print of each receipt in the Print field.

If you want to filter the list of receipts, click Advanced Filters. For more information, see Advanced batch filters.

Click in the select column ( ) next to each receipt you want to print.

Click Print.

6.10. MYOB – Preparing a Bank Deposit

Once there are multiple payments, which have all been allocated to the linked Undeposited Funds Account, these funds can be cleared (deposited) to your bank account. This can be done for all received payments or only for those received by specific methods, such as all cash and cheque deposits, or perhaps all credit card payments, etc. Take the following steps to transfer the customer receipts from the linked Undeposited Funds account to your software’s General Bank account.

Go to the Banking Command Centre and click Prepare Bank Deposit.

In the Deposit to Account field, ensure the correct account is displayed and change if required.

Enter the Date and an applicable Memo for this deposit. Click the drop-down arrow next to the Select Receipts By field

and select Payment Method. If using the Deposit Adjustment feature to record items such as credit card merchant fees, you will need to set the Select Receipts By option to All Methods.

Click the drop-down arrow next to the Payment Method field and select the Payment Methods to be deposited.


http://help.myob.com/wiki/display/ar/Advanced+batch+filters

Click OK to return to the Prepare Bank Deposit window where only payments received by the specified methods will be displayed.

Select the payments to be included in the bank deposit.

[Optional] Click Deposit Adjustment to enter and record credit card merchant fees.

Click Record.

6.11. MYOB – Printing a Bank Deposit Slip

The Bank Deposit Slip report can be used for a bank deposit advice. Take the following steps to print a bank deposit slip:

Go to the Reports menu and choose Index to Report. Click the Banking tab. Click the Bank Deposit Slip report (under the Cheques and

Deposits subheading) then click Customise. Set the report parameters to display the applicable deposits then

click Display. Click Print.


See below for an example of a Bank Deposit Slip report. It shows the bank account details and the total credit card payments that have been

deposited.

Where a deposit includes more than one Payment Method, such as cash and cheques, the Payment Methods will be listed and totalled separately.

To automatically group all customer payments with your undeposited funds:

Go to the Setup menu and choose Preferences. Click the Banking tab. Select the option When I Receive Money, I Prefer To Group It

With Other Undeposited Funds.

Click OK.


Figure 27: Bank deposit slip report

6.12. MYOB – Deleting or Changing a Bank Deposit

Once you create a bank deposit, the individual payments are ‘locked’. If you want to modify individual payments, you’ll first need to delete the bank deposit transaction. This will also allow you to change the details of the bank deposit, such as a date or to modify which payments are included in the deposit. Take the following steps:

From any Command Centre, click Find Transactions. In the Find Transactions window, click the Accounts tab. In the Search by Account field, select your undeposited fund’s

account. In the Dated From and To fields, specify a date range in which the

bank deposit was first created. Find the bank deposit - this will be a credit and will generally have

a ‘CR’ number. Click the zoom arrow to open the deposit transaction. Go to the Edit menu and choose Delete Bank Deposit

Transaction. The deposit will be deleted, and the individual payment transactions will once again be listed on the Prepare Bank Deposit window.

You can now delete or modify the individual payment transactions as required, then prepare the bank deposit again.


6.13. MYOB – Finding a Transaction

There are several ways to find a transaction. The method you use depends on the information you have on hand.

Figure 28: Find a transaction

To find a transaction using the find transactions window From any Command Centre, click Find Transactions at the

bottom of the Command Centre. In the Find Transactions window (see below), click the

appropriate tab, for example, the Card tab to search by card. Filter your search using the Search By and date-range fields.

Results will appear based on your search criteria.

If you want to narrow your search further:

Click Advanced. The Advanced Filters window will appear.

Type or select additional search filters and click OK. The transactions that match your search criteria will appear in the Find Transactions window. You can view a transaction in detail by clicking the zoom arrow ( ) next to it.

Quotes and orders without applied payments don’t appear in the Find Transactions window (Not Basics).

To find a transaction using the sales register windowThe Sales Register window lists all open and closed invoices, quotes, orders, returns, and credits. You can also view a list of all sales if you choose.

Go to the Sales Command Centre and click Sales Register. The Sales Register window will appear.


Figure 29: Search for a transaction

Click the tab of the sales category you would like to view, for example, Open Invoices (see below).

[Optional] Filter your search using the Search By and date range fields. The transactions that match your search criteria will appear in the Sales Register window. You can view a transaction in detail by clicking the zoom arrow ( ) next to it.

To find a transaction using the purchases register window (not basics)The Purchases Register window lists all open and closed purchases, returns and debits, quotes, and orders. You can also view a list of all purchases.

Go to the Purchases Command Centre and click Purchases Register. The Purchases Register window will appear.


Figure 30: Find a transaction using the sales register

Click the tab for the type of purchase you would like to view, for example, Open Bills (see below).

[Optional] Filter your search using the Search By and date range fields. The transactions that match your search criteria will appear in the Purchases Register window. You can view a transaction in detail by clicking the zoom arrow ( ) next to it.

To find a transaction using the bank register windowYou can use the Bank Register window to find cash and banking transactions such as Spend Money, Receive Payments, and Receive Money transactions.

Go to the Banking Command Centre and click Bank Register. The Bank Register window will appear.


Figure 31: Find a transaction using the purchases register

Type or select the bank, credit card, or petty cash account you used for the transaction in the Account field.

In the Dated From and To fields, enter the date range during which the transaction was recorded. The transactions that match your search criteria will appear in the Bank Register window (see

below).

If you want to view a transaction in detail, click the zoom arrow () next to the transaction.

To find a transaction using the transaction journal windowThe Transaction Journal window groups all your accounting entries into journals or you can display all transactions.

Click Transaction Journal from any Command Centre (except Card File). The Transaction Journal window will appear.


Figure 32: Find a transaction using the bank register

Click the appropriate tab, for example, the Sales tab to find a sales invoice (see below).

In the Dated From and To fields, enter the date range within which the transaction was recorded. All transactions between (and occurring on) these dates will be listed.

If you want to search for a range of journal ID numbers, enter the range in the ID From and To fields. All transactions with IDs between (and matching) these numbers will be listed.


To open the transaction in its original window, click the zoom

arrow ( ) to the left of the journal entry.

To find a recurring transaction Go to the To Do Lists menu and choose Recurring Transactions.

The Recurring Transactions List window will appear (see below).

To locate the recurring transaction, you can do the following: Sort the transactions by name, type, or frequency, or Search for a transaction by name, amount, or due date.

For more information on changing the details of a recurring transaction, see Recurring transactions.


Figure 34: Find a recurring transaction

6.14. MYOB – Customer Overpayments and Double Payments

Mistakes happen and when paying an invoice, customers may accidentally overpay or record the payment twice. There are a number of easy ways to handle the overpaid amount:

Apply it to another unpaid invoice

Create a credit and refund the amount

Create a credit and apply it to a future invoice

Write it off

To create a credit for the overpaid amountHow you create a credit depends on how the overpayment was made. After creating the credit, you can settle it by refunding the amount or applying it to a future invoice.


Overpay the invoice amount

When recording the payment in the Receive Payment window, enter the full payment in the Amount Received field and in the Amount Applied column in the scrolling list. A credit for the overpaid amount will

be automatically created.

After creating the credit, you can settle it by refunding the amount or applying it to a future invoice.

Pay an invoice twice

Apply the first payment to the unpaid (open) invoice as you normally do and then record another customer payment and apply the second payment to the same invoice. As this invoice is now paid (or closed), you’ll need to select the Include Closed Sales option to it. A credit for the second payment will be automatically created.


Figure 36: Credit on an overpaid invoice amount

Overpay the invoice amount

When recording the payment in the Receive Payment window, enter the full payment in the Amount Received field and in the Amount Applied column in the scrolling list. A credit for the overpaid amount will

be automatically created.

After creating the credit, you can settle it by refunding the amount or applying it to a future invoice.

You record the payment using the Receive Payment window or by selecting the Receive Payment option in the Band Feeds window.


Figure 36: Credit on an overpaid invoice amount

To write-off a small overpaid amountSometimes the amount is very small, like a rounding error of a few cents. When this happens, you can record a new invoice for the overpaid amount (allocate to a rounding income account, if you have one) and then apply a credit to this invoice to close it.

6.15. MYOB – Finance Charges Paid by Customers

How finance charges are calculated Each open invoice’s due date is calculated using the terms on the invoice by which default is sourced from the Selling Details tab of the Card Information window. The overdue balance is then increased by 1/30th of the monthly charge for late payment for every day it is overdue, where the monthly charge is calculated by multiplying the amount overdue by the % Monthly Charge for Late Payment value you specified on the customer’s card.

If the customer makes a partial payment during the overdue period, the finance charge is adjusted accordingly.

Setting up finance chargesBefore you can apply finance charges, you need to select an account for tracking late-payment charges. Go to the Setup menu, choose Linked Accounts and then Sales Accounts. Select the I assess charges for


Figure 35: Setting up finance charges

late payment option and select an income account to record the late payment charges.

Set the percentage you will be charging for late payments in the % Monthly Charge for Late Payment field of the Selling Details tab of each customer card.


7. MONTH-END PROCEDURES – AGEING AND RECONCILIATION

7.1. Ageing of Payables

Accounts payable should be aged to provide details of all the payments that are due in the immediate future. The ageing report is an important document that includes information about the various suppliers of the business, such as vendor names, purchase details, purchase and due dates, and payment terms.

To maximise float and optimise cash flow, a business should produce an accounts payable ageing report and pay bills at regular intervals. This report helps in the analysis and allocation of resources. In cases of cash crunches gleaned from the report, owners and managers can contact vendors ahead of time and ask for alternative payment arrangements or temporary extensions.

7.2. Ageing of Receivables

More importantly, receivables should be aged to increase cash flow. Most companies use the ageing of accounts receivable to monitor accounts receivable. Another method is to use the average collection period. For this unit, the focus is on the ageing method.

Ageing analysis involves the classification of accounts receivables according to their age in days. This is to differentiate the customers’ account balances to meet the receivables turnover of the business.

Accounts are grouped according to their age. Problems in individual accounts can be detected through analysis of receivables by ageing. A receivables ageing classifies customers’ accounts into amounts that are 0-30 days old, 31-60 days old, 61-90 days old, etc. Each classification is assigned a percentage of uncollectible based on company experience or industry standards.

The longer an account is past due, the more serious the problem. These can be identified quickly by ageing, and corrective action can be initiated promptly. This makes the monitoring relatively easier.

An accounts receivable ageing (schedule of accounts receivable) is a report that lists unpaid customer invoices and unused credit memos by date ranges. An ageing report is a primary tool used by collections personnel to determine which invoices are overdue for payment.


(Source: BizMove: How to Extend Credit to Customers )

The following is an illustration of the ageing of accounts receivable. The transaction information below is obtained from the subsidiary ledgers of Seicho Consulting.


Date Amount17 January $1,8008 February 3,200

01 March 11,20010 4,00023 15,000

04 April 14,50008 14,40019 9,00028 7,000

11 May 13,70015 8,90021 11,00029 16,30030 14,100

02 June 23,40006 8,80013 14,00018 20,10024 15,00029 27,700

Table 12: Ageing of accounts receivable

From the table above, the accounts receivables will be grouped according to their age based on a calendar year from 1 July 2015 to 30 June 2016. The following table is the result:

Age Amount % of collectability0-30 days

$109,000

2%

31-60 64,000 4%61-90 44,900 10%91-120 30,200 75%Over 120 5,000 100%

Table 13: Grouping of aged accounts


The end figure on the ageing schedule is the determined allowance for bad debts. Pertinent journal entries are prepared to account for this.

7.3. MYOB – Monthly Ageing of Invoices

Ageing of invoices helps you to do the following:

Identify the customers who regularly pay late. You might then send out reminder letters or adjust their credit limits accordingly.

Know which customers’ payments are most overdue or owe you the most.

Check on your cash flow. If a lot of money is overdue now, you might end up with cash flow problems later. By monitoring the ageing of amounts, you can identify potential cash flow problems and try to fix them.

You can produce a report using MYOB to help you analyse and age receivables and switch between Daily and Monthly ageing.

Go to the Setup menu and choose Preferences. The Preferences window will appear.

Click the Reports & Forms tab. You can now select your ageing

method.


Figure 36: Changing between Daily and Monthly ageing

7.4. MYOB – Running the Company Data Auditor

Go to the Accounts Command Centre and click Company Data Auditor. The Company File Overview window will appear.

The window will show the following:

The company file name The AccountRight release version The location of the company file The date on which the company file was last backed up


Figure 37: Running the company data auditor

The end month and year of the current financial year The locked period date (if one has been specified) The date of the payroll tax tables (Plus and Premier, Australia)

If necessary, you can perform the following maintenance tasks from this window:

Back up your company file

Click Back Up and complete the backup procedure.

Back up your company file

Set a locked period for your company file

Click Lock Period and select the date defining the locked period (that is, a period before which data cannot be entered).

Lock a period

Load PAYG Withholding tax tables (Plus and Premier, Australia)

Click Load Tax Tables and then follow the on-screen instructions.

Update the PAYG tax tables

Table 14: Maintenance tasks on the company auditor window

When you’ve completed the required maintenance tasks, click Next. The Account Reconciliation Review window will appear.


Figure 38: Account Reconciliation Review

The window will show the following:

Your bank/credit card accounts and any other accounts you may have reconciled.

The balance of each account. The date on which each account was last reconciled.

If you want to reconcile an account, select the account and click Reconcile Accounts.

Click Next. The Transaction Review window will appear, or if you’re using AccountRight Basics, the Data Exception Review window.

Enter the start date and end date of the period you want to review.

Click Run Review to start the transaction review of the following:


Reconcile invoices with the linked receivables account

The total of all customers’ balances is compared to the current balance of the linked receivables account. If there’s an out-of-balance amount, click Display to view the Receivables Reconciliation Exceptions report and analyse the details of the report.

Reconcile purchases with the linked payables account

The total of all suppliers’ balances is compared to the current balance of the linked payables account. If there’s an out-of-balance amount, click Display to view the Payables Reconciliation Exceptions report and analyse the details of the


http://help.myob.com/wiki/display/ar/Receivables%2C+payables+or+inventory+out+of+balance



(Not Basics) report.

Compare item values with inventory account (Not Basics)

The total value of items on hand is compared to the current balance of the linked inventory account. If there’s an out-of-balance amount, click Display to view the Inventory Value Reconciliation Exception report and analyse the details of the report.

Scan for future-dated transactions

The company file is checked for any transactions dated later than the current date. If there are such transactions, click Display to view the Future Dated Transactions report and analyse the details of the report.

Scan for prepaid transactions

The company file is checked for any prepaid transactions. These transactions include all customer and supplier payments (excluding deposit payments) that have a payment date prior to the date of the invoice or purchase. If there are such transactions, click Display to view the Prepaid Transactions report and analyse the details of the report.

Scan for deposits paid(Not Basics)

The company file is checked for any deposits paid (within the date range specified) on sales orders or purchase orders.

If any orders have a payment flagged as a deposit transaction, click Display to view the Deposit Transactions report and analyse the details of the report.

Review audit trail changes (Not Basics)

The company file is checked for transaction changes made during the review period.

If any such changes are found, click Display to view the Journal Security Audit report and analyse the details of the report.

Check for job exceptions [Cash Transactions] (Not Basics)

If you have selected the Warn if Jobs Are Not Assigned to All Transactions option in the Preferences window, the company file is checked for cash transactions (within the date range specified) that have no job number.

If any transactions are detected with no job number, click Display to view the Job Exceptions—Cash Transactions report and analyse the details of the report.






Check for job exceptions [Invoice Transactions] (Not Basics)

If you’ve selected the Warn if Jobs Are Not Assigned to All Transactions[System-wide] option in the Preferences window, the company file is checked for sales and purchase transactions (within the date range specified) that have no job number.

If any transactions are detected with no job number, click Display to view the Job Exceptions—Invoice Transactions report and analyse the details of the report.

Table 15: Transaction reviews

7.5. The Reconciliation Process

As invoices are entered into the accounting system and any changes are accounted for in the system by the appropriate personnel, reconciliation should be done on a regular basis to ensure accuracy. Accounts receivables need to be reconciled every month and a process should be in place to ensure that this occurs.

Reconciliation is the process of ensuring that two sets of records (usually the balances of two accounts) agree. For this unit, reconciliation means the following:

Assuring bank statements equal what a company expects from reports generated internally. This process involves collecting relevant account data such as invoices, checking account balances, correcting these balances if necessary, finding discrepancies, controlling policy to prevent discrepancies, and more.

Assuring that General Ledger balances are in sync with subsidiary ledger balances. Differences may be identified due to timing, such as outstanding cheques and post-dated cheques.

Assuring that General Ledger amounts are in sync with ageing schedules.

Documentation should be intact to immediately identify issues and address them quickly. Documentation includes filed invoices.

MYOB has a reporting function and the report Receivables Reconciliation (Detailed or Summary) to show an out-of-balance position if any.


Start with the reconciliation. Run the report and compare the data generated:

o If the report is balanced, all transactions have been entered correctly. (Remember to do this every month.)

o If there is an unbalanced figure, this means that a transaction (or more) could have been entered in the General Ledger without going through the accounts receivables system.

In the case of an out-of-balance figure, the best option is to address it immediately.

Print out a copy of the General Ledger for the month for the accounts receivable and check that all transactions in the ledger are in the accounts receivable report.

If there is difference, you need to reverse the amount out of the ledger and report it through the accounts receivable module (that is the Sales window in MYOB). This should eliminate the problem. There may be more than one amount. If so, just repeat the procedure for each.

Run the report again to confirm that everything is balanced. (Remember to do this every month.)

7.6. MYOB - Reconciliation of Accounts Payable

If the Company Data Auditor finds an ‘out of balance’, a red question mark will appear.

FNSACC312 Learner Guide Version No. 1.1Page 143 Australian College of Business and AccountingFigure 39: Transaction Review for an ‘out of balance’ accounts payable

Click Display to view a report to identify the transactions which may be causing the out of balance, then refer to the info below.

If your payables are out of balanceReferring to your Payables Reconciliation Exceptions report, check the following:

Wrong account used on a purchase

The payables linked account (sometimes called the Trade Creditors account) has been incorrectly used on a purchase.Remember to never post directly to your payables linked account.

Reverse the purchase and enter it again using the correct allocation account. This is typically an expense or cost of sales account.

Wrong feature used to record a purchase

Recording a bill payment using Spend Money instead of Pay Bills.

Reverse the transaction and record it again using the correct feature.If the payment relates to a bill, record it using Pay Bills.

Incorrectly allocated journal entry

Recording a journal entry to allocate directly to the payables linked account.Remember to never post directly to the payables linked account.

Reverse or delete the general journal entry. If it’s an adjustment, re-enter the transaction as a negative purchase and settle it against the original bill.

Timing issue

A payment or supplier credit may be dated earlier than the bill to which it has been applied.This will create a false out of balance.

Do nothing! This will correct itself in time.

Table 16: Payables out of balance causes

Still out of balance.Check the following:


The opening balance of your payables linked account may have been changed. You might need to restore an early backup to check the account’s original opening balance. If it’s been changed, change it back to its original value.

The account you use as your payables linked account may have been changed. Check by going to Setup menu > Linked Accounts > Purchases Accounts, then check the Liability Account for Tracking Payables. If this account has been changed, do the following:

Change it back to the correct linked account.

Determine the value of purchases that have been recorded while the wrong linked account was set (this is likely to be your ‘out of balance amount’).

Record a journal entry to transfer this value from the wrong linked account to the correct linked account.

7.7. MYOB – Reconciliation of Accounts Receivable

If the Company Data Auditor finds an out of balance, a red question mark will appear.


Figure 40: Transaction Review for an ‘out of balance’ accounts receivable

Click Display to view a report to identify the transactions which may be causing the out of balance, then refer to the info below.

If your receivables are out of balanceReferring to your Receivables Reconciliation Exceptions report, check the following:

Wrong account used on a sale

The receivables linked account (sometimes called the Trade Debtors account) has been incorrectly used on a sale.Remember to never post directly to your receivables linked account.

Reverse the sale and enter it again using the correct allocation account. This is typically an income account.

Wrong feature used to record a sale

Recording a customer payment using Receive Money instead of Receive Payments.

Reverse the transaction and record it again using the correct feature.If the payment relates to an invoice, record it using Receive Payments.

Incorrectly allocated journal entry

A bad debt has been recorded using a journal entry allocated to the receivables linked account.Remember to never post directly to the receivables linked account.

Reverse or delete the general journal entry, then create a new sale to account for the bad debt.

Timing issue A customer payment or credit may be dated earlier than the invoice to which it has been applied.This will create a false out of balance.

Do nothing! This will correct itself in time.

Table 17: Receivables out of balance causes


Still out of balance.Check the following:

The opening balance of your receivables linked account may have been changed. You might need to restore an earlier backup to check the account’s original opening balance. If it’s been changed, change it back to its original value.

The account you use as your receivables linked account may have been changed. Check by going to the Setup menu > Linked Accounts > Sales Accounts, then check the Asset Account for Tracking Receivables. If this account has been changed, do the following:

Change it back to the correct linked account.

Determine the value of sales which have been recorded while the wrong linked account was set (this is likely to be your ‘out of balance’ amount).

Record a journal entry to transfer this value from the wrong linked account to the correct linked account.

7.8. Understanding Bank Reconciliation

A company records its cash and cheque transactions in a check register. The check register is a part of the General Ledger. Consequently, the bank also keeps a similar record of a company’s checking account. The bank issues a statement to reflect all transactions in the account every month.

The cash balance of a company in the bank and the cash balance according to its accounting records do not usually match. This is due to the fact that checks may be outstanding at any given date, deposits may be made to the bank, errors may have occurred, etc. Therefore, companies must carry out a process of bank reconciliation that prepares a statement accounting for the difference between the cash balance in the cash account of a company and the cash balance according to its bank statement.

Following are the transactions (bank reconciling items) which usually appear in a company’s records but not in a bank statement:


Deposits in Transit/Undeposited funds: Deposits sent to the bank by the company but not received by the bank at the appropriate time prior to the issuance of a bank statement.

Cheques Outstanding: Cheques issued by the company, but not submitted or cleaned before a bank statement was issued.

Following are the transactions (book reconciling items) which usually appear in a bank statement but not in a company’s cash account:

Service Charges: You may have deducted service charges from the bank. Such charges are generally unknown to the company before a bank statement is issued.

Interest Income: If the company has earned interest income on its bank account, it is not usually entered in the cash account of a company before the issuance of a bank statement.

NSF Cheques: NSF stands for ‘not sufficient funds’. These are checks deposited in a bank account by the company, but due to insufficient funds in the payer's account the bank can not receive payment on these checks.

(Source: Accounting Explained: Bank Reconciliation )

The reconciliation process is as follows:

Adjust the bank statement balance. o Deposits in transit: These have been recorded in the check

register as receipts but due to timing differences may appear in the next bank statement. These increase the bank balance.

o Outstanding cheques: These have been recorded in the cheque register as disbursements but due to timing differences may appear in the next bank statement. These decrease the bank balance.

Adjust the cheque register balance. o Bank service fees: These have been recorded in the bank

statement as deductions but due to timing differences do not appear in the company records. These should decrease the check register balance or the book balance.

o NSF checks: These are checks which cannot be cashed because of insufficient funds of the payer or issuer of the check. These should decrease the check register balance or the book balance.


o Interest earned: The bank accounts might earn interest, and this appears in the bank statement. This is yet to be added to the check register balance or the book balance.

Compare the adjusted balances. o The bank balance and check register (book) balance should

have the same amounts given that reconciling items were reflected in the balances.

7.9. MYOB – Recording Bank Interest and Charges

Go to the Banking Command Centre and click Reconcile Accounts.

Select your Account and enter the Bank Statement Date. Click Bank Entry. Enter the transaction details.

In the Service Charges section, enter details of fees and charges you’ve paid.

In the Interest Earned section, enter details of bank interest you’ve earned.

The following is an example showing how these steps have been applied:


Click Record.

When you return to the Reconcile Accounts window, the Bank Entry transactions have been automatically selected as Cleared.

7.10. MYOB – Reconciling Bank Accounts

To manually reconcile an accountFollow this procedure for banking accounts that you manually enter transactions into, that is, accounts that don’t have bank feeds, and accounts you don’t import bank statements for.

Go to the Banking Command Centre and click Reconcile Accounts. The Reconcile Accounts window will appear.


Figure 41: Recording bank interest and charges

In the Account field, enter the account you want to reconcile.

In the Closing Statement Balance field, type the closing balance that appears on the statement your bank sent you. If you are reconciling as at the end of the week or month, and your statement has transactions dated after that date, type the closing balance for the last day of the period you’re reconciling.

In the Bank Statement Date field, enter the closing date that appears on your bank statement and then press Tab. Only unreconciled transactions dated on or before that date will appear. If you are reconciling as at the end of a week or month, and your


Figure 42: Reconciling bank accounts

statement has transactions dated later, type the last day of the period you’re reconciling.

For each entry on your bank statement, select the corresponding transaction by clicking in the select column (

).

If there are entries on the statement relating to bank charges or bank interest that do not appear among the transactions on the Reconcile Accounts window, you need to manually enter these transactions.

Click Bank Entry. The Bank and Deposit Adjustments window will appear.

Fill in the appropriate transaction details and click Record. The Reconcile Accounts window will reappear.

Click Reconcile. If your account is reconciled, you have the option of printing a confirmation report. You’ll need to click Reconcile again after printing the report. If you don’t want to print the report, click Reconcile to finish.

To reconcile by importing a bank statement (Get Statement feature)Follow this procedure for accounts for which you download statement files from your financial institution’s online banking website. Once downloaded you will be able to import the bank statement.

Download the statement file from your bank. Your bank’s website should provide instructions on how to download this file. The following file formats are supported: OFX, QFX, QIF, and OFC. Take note of where you save the downloaded statement.

Go to the Banking Command Centre and click Reconcile Accounts. The Reconcile Accounts window will appear.

In the Account field, enter the account you want to reconcile.

In the Closing Statement Balance field, type the closing balance that appears on the statement your bank sent you.

In the Bank Statement Date field, enter the closing date that appears on your bank statement and then press Tab. Only unreconciled transactions dated on or before that date will appear.


Click Get Statement. The Select a Bank Statement file window will appear.

Locate and select the statement file you downloaded in step 1. Click Open. The Get Statement window will appear.

Click OK. The statement transactions are automatically matched with the transactions in your company file using the cheque number, date, and amount as the criteria for matching withdrawals and deposits.

If the Unmatched Statement Transactions window appears, choose what you want to do for each unmatched transaction:

Match. If you’ve already entered a transaction that matches a statement transaction, select the statement transaction and click Match Transaction. In the Match Transaction window, select the transaction that you want to match and click Match.

Add. If you want to add the statement transaction to your company file (spend money or receive money only), select it and click Add Transaction. The Spend Money window or the Receive Money window (depending on the type of transaction you’re adding) will appear. Enter the details of the transaction and record it.

Need to enter a different transaction type?

o If you need to add a different type of transaction, such as a receive payment or pay bills, right-click anywhere on the Unmatched Statement Transactions window.

o Choose Enter Transactions then choose the type of transaction you want to enter. Once you’ve recorded the transaction, you can Match it on the Unmatched Statement Transactions window.

o When you have finished matching and adding all statement transactions, click Done. The Reconcile Accounts window will appear.

o Click Reconcile. If your account is reconciled, you have the option of printing a confirmation report. If you don’t want to print the report, click Reconcile to finish.


7.11. MYOB – Doing an Initial Bank Reconciliation

When doing an initial bank reconciliation, you will need to complete the following three (3) tasks:

Identify uncleared withdrawals and deposits:Compare your banking source information (such as your chequebook and deposit book) with your bank statements for the period that includes your conversion date. If you find transactions that have not been cleared by your bank as at this date, you will need to record the details of these transactions in your company file.

For example, in June, the month prior to your conversion month, you wrote a cheque for $1,000 and deposited $500 you received from a customer. If these transactions had not appeared on a bank statement by 30 June, you would have needed to record both transactions in your company file.

Record uncleared withdrawals and deposits:When you entered the opening balance of your bank account, this would have included the value of any uncleared transactions (such as unpresented cheques). So, you need to record these uncleared transactions in such a way that the opening bank account balance is not affected.

To record these uncleared deposits and withdrawals, you need to post a debit and a credit of equal amounts for each transaction against the applicable bank account. This will then allow you to reconcile these transactions when the cheques are eventually presented.

To enter uncleared withdrawals Go to the Banking Command Centre and click Spend Money. The

Spend Money window will appear. In the Pay from Account field, type or select the bank account you

want to reconcile. In the Cheque No. field, enter a reference number for the

withdrawal. In the Date field, type the first day of your conversion month. For

example, if your conversion month is January 2017, enter 01/01/17. In the Amount field, type the amount of the withdrawal. In the Account No. field, type or select the bank account you want

to reconcile. This must be the account entered in step 2. (Australia) In the Tax field, select the N-T tax code. (New Zealand) In the GST field, select the N-T GST code


Enter details of the withdrawal in the Memo field. Click Record. Repeat from step 3 for each uncleared withdrawal.

To enter uncleared deposits Go to the Banking Command Centre and click Receive Money.

The Receive Money window will appear. In the Deposit to Account field, type or select the bank account

you want to reconcile. In the Date field, type the first day of your conversion month. For

example, if your conversion month is January 2017, enter 01/01/17. In the Amount Received field, type the amount of the deposit. In the Account No. field, type or select the bank account you want

to reconcile. This must be the account entered in step 2. (Australia) In the Tax field, select the N-T tax code. (New Zealand) In the GST field, select the N-T GST code Enter details of the deposit in the Memo field. Click Record. Repeat from step 3 for each uncleared deposit.

To reconcile the account Go to the Banking Command Centre and click Reconcile

Accounts. The Reconcile Accounts window will appear. In the Account field, select the bank account you want to

reconcile. In the Closing Statement Balance field, enter the closing bank

balance as at the day prior to your conversion month (for example, the closing balance as at 31/12/2016).

In the Bank Statement Date field, enter the first date of your conversion month. (For example, if your conversion month is January 2017, enter 01/01/17.) Your uncleared transactions will appear. When you recorded uncleared transactions, the same account was debited and credited. Therefore, an uncleared transaction appears as both a deposit and a withdrawal.

For each uncleared withdrawal, click the select column next to the deposit.

For each uncleared deposit, click the select column next to the withdrawal. When each uncleared transaction is selected, $0.00 will appear in the Out of Balance field.


Click Reconcile. A confirmation window will appear. Depending on what you want, do one of the following: To print a report, click Print Report. When the report is

printed, click Reconcile. To reconcile without printing a report, click Reconcile.

To change any details entered in the Reconcile Accounts window, click Cancel and make the required changes.

7.12. MYOB – Resolving Out of Balance Bank Reconciliations

When you’re reconciling a bank account, an out of balance amount tells you that something isn’t quite right so it is essential that you work out what has gone wrong.

Checking your current reconciliationHere are some things to look out for:

Did you set up a bank account and carry over an opening balance? If so, have you performed an initial bank reconciliation?

Did you type the correct figure in the Closing Statement Balance field? You need to type the closing balance from your bank statement, not the opening balance.

Did you enter the correct date (that of the closing balance from your bank statement) in the Bank Statement Date field? An incorrect date may prevent some transactions from appearing in the list.

Did you select all the transactions that appear on the bank statement? If not, some transactions might not have been accounted for in the reconciled balance.

Did you select, by mistake, a transaction that didn’t appear on your bank statement? If yes, you need to deselect this transaction.

Did you record all bank charges and bank interest entries that appear on the bank statement? If not, you need to record them and select them for reconciliation.

Has the opening balance of the bank account been changed? If it has, you’ll need to change it back to its original value. You might need to restore an early backup to check the account’s original opening balance.

(Source: MYOB Help: Reconciling your bank accounts )


Checking previous reconciliationsIf you’ve checked the above things and there’s still an out of balance, it probably means a previously reconciled transaction has been changed, deleted, or reversed.

Checking the Calculated Statement Balance If you’ve checked all the things listed above and your reconciliation still doesn’t balance, it might relate to an incorrectly displayed Calculated Statement Balance in the Reconcile Accounts window. This is a rare issue that only affects the displayed balance, not the actual balance.

You can quickly check the Calculated Statement Balance by taking the following steps:

On the Reconcile Accounts window:

Enter the closing date of your latest bank statement in the Bank Statement Date field.

Enter $0.00 in the Closing Statement Balance field.

Select all transactions as cleared and take note of the Calculated Statement Balance.

Go to Find Transactions > Accounts tab.

o Select the bank account you’re trying to reconcile. o Enter the closing date of your latest bank statement in both

the Dated From and To fields. o Press the tab key on your keyboard and take note of the

Ending Balance in the bottom-right of the screen.

Undoing a reconciliationIf your issue relates to a previous reconciliation (perhaps a transaction was incorrectly reconciled, or a wrong date was used) and you haven’t been able to fix these issues, try undoing the last reconciliation. All transactions for that period will return to an unreconciled state, and you’ll need to reconcile them again using the previous bank statement.

To undo a bank reconciliationo Go to the Banking Command Centre and click Reconcile

Accounts. The Reconcile Accounts window will appear.


o In the Account field, enter the account for which you want to undo the reconciliation.

o Click Undo Reconciliation in the Actions button. The Undo Last Reconciliation window will appear, confirming the account and date of the reconciliation you are undoing.

o Undoing a bank reconciliation can’t be reversed, so it’s strongly suggested you click Back Up to create a backup before proceeding.

o Click Undo Reconciliation. A confirmation window will appear.

o Click OK. The Reconcile Accounts window will reappear.

7.13. MYOB – Sending Customer Statements

Being prompt in sending out reminders to customers can go a long way. Most businesses send invoices and statements to customers who have outstanding balances at the end of a month.

To print a customer statement Go to the Sales Command Centre and click Print/Email

Statements. The Review Statements Before Delivery window appears.

Click the To Be Printed tab.


In the Statement Type field, select the type of statement you want to print.

Invoice statements list all invoices aged as at a specified date.

Activity statements list all sales invoices and payments within a specified date range. Activity statements include a running account balance.

Specify the statement period.

If you selected Invoice as the statement type, enter an ageing date to display invoices outstanding as at that date.

If you want to include only invoices recorded up to the statement date, select the Only include invoices up to Statement Date option.

If you selected Activity as the statement type, enter the statement date range in the From and To fields.

Type the number of statements you want to print per customer in the Print field.

If you want to filter the statement information or change the type of form the statement will be printed on, click Advanced Filters and make your selections.

Click in the select column ( ) next to the customers you’re printing statements for.

Click Print. If you need to reprint a statement, repeat the above steps.

To email a customer statement Go to the Sales Command Centre and click Print/Email

Statements. The Review Statements Before Delivery window will appear.

Click the To Be Emailed tab (see below).


In the Statement Type field, select the type of statement you want to email.o Invoice statements list all invoices aged as at a specified

date.o Activity statements list all sales invoices, payments and

orders with a customer deposit for a specified date range. Activity statements include a running account balance.

Specify the statement period.

If you selected Invoice as the statement type, enter an ageing date to display invoices outstanding as at that date. If you only want to include invoices recorded up to the statement date, select the Only include invoices up to Statement Date option.

If you selected Activity as the statement type, enter the statement date range in the From and To fields.

If you want to filter the customer list or select a different statement form, click Advanced Filters and make your selections. For more information, see Advanced batch filters.

Click in the select column ( ) next to the customers to whom you want to email statements.

If you want to change a customer’s email address, select the customer’s name and then select another address from the Email Address list or type a different address in the Email


Address field at the top of the window. A message appears asking if you’d like to update the employee’s card. Click Yes if you want to update it or No if this is a temporary change.

Type the subject and message of the email or accept the default subject and message. If you want to change the default message, click Email Defaults and make the changes as appropriate.

Click Send Email. If you need to resend a statement, repeat the above steps.

(Source: Accounting Explained Bank Reconciliation )


8. REVIEWING YOUR REPORTS

8.1. MYOB - Reviewing Purchases Information

During the review and reconciliation phase, it is important to review vendor (supplier) invoices for accuracy by comparing charges to purchase orders, verify that the goods and services purchased have been received, and perform monthly reconciliations of subsidiary ledgers to ensure accuracy and matching of expenses.

There are several tools that you can use to review your purchases information:

Tool DescriptionTo Do List The To Do List window displays all open

purchases, recurring purchases, and orders, sorted by due date.

Analyse Payables The Analyse Payables window provides details of your purchase activities.

Purchase Reports Purchase reports help you keep track of your purchase activities.

Purchase History History lets you view seven years of purchase history for an item or a supplier.

Purchases Register

The Purchases Register window gives you a complete picture of your purchase activity – open and closed purchases, orders, quotes, returns, etc.

Find Transactions Find Transactions helps you find purchase transactions.

Transaction Journal

The Transaction Journal lists journal entries of your purchases and other transactions.

Table 18: Purchases information

To view a list of all unpaid purchases sorted by days overdue Click To Do List in any Command Centre. The To Do List window

will appear. Click the A/P tab. A list of all unpaid purchases will appear.

The Overdue column shows the number of days a payable is overdue (a negative number in the Overdue column indicates that the payment is not

FNSACC302 – Learner Guide Version No. 1.0 Page 162 Australian College of Business and Accounting© Compliant Learning Resources

yet due). The number of days a purchase is overdue is calculated by checking the original date of purchase, comparing it to today’s date, and looking at your credit terms with the supplier.

To analyse payables The Analyse Payables window allows you to view detailed information about how much you owe suppliers and how long you have owed them. This analysis is based upon all purchases and payments recorded in your company file.

Go to the Purchases Command Centre and click Analysis. The Analyse Payables window will appear.

Click Filters. The Ageing Date window will appear. Set filters in the Ageing Date window and click OK. Display the required view of the Analyse Payables window:

o The Summary view displays all the money that you owe suppliers, totalled by supplier.

o The Supplier Detail view displays all the money that you owe the supplier in the Supplier Detail field.

o The Purchase Detail view displays all the transactions assigned to the purchase in the Purchase Detail field.

Note that the information in this window is based on:

o The entries you made in the Ageing Date window, ando The entries you made in the Ageing fields in the Reports &

Forms view of the Preferences window.

To view purchase reportsThere are several purchase reports that can help you track your purchase activity. For example, you can run a Payables Reconciliation Summary report if you want to analyse your payables as of a past date. The Analyse Purchases Items Spreadsheet report shows you the inventory items on which you are spending the most money.

Go to the Reports menu and choose Index to Reports. The Index to Reports window will appear.

Click the Purchases tab. A list of purchase reports will appear.

For information on displaying, customising, and printing your reports, see Reports.


To view purchase history You can view the purchase history for an item or a supplier by taking the following steps:

Display the Item Information window for an item or the Card Information window for a supplier.

Click the History tab.

The History tab displays a total of seven years of purchase history for the item or card: the five years preceding your current financial year (as displayed in the Company Information window), the current financial year and the next financial year.

8.2. MYOB - Reviewing Purchases Information

It is important to review invoices for accuracy by comparing charges to sales orders, verify that the goods and services ordered by customers have been delivered or rendered, and perform monthly reconciliations of subsidiary ledgers to ensure accuracy and matching of income.

There are several tools incorporated in MYOB that can be used to review sales information:

ToolBusiness Insights

Use business insights to analyse sales and customer information.

To-do list The to-do list displays all open sales, recurring sales and orders sorted by overdue dates.

Sales reports Sales reports help you keep track of your sales activities.

Sales history History lets you view seven years of sales history for an item, customer, or an employee (Not Basics).

Sales register The sales register window gives you a complete picture of your sales activity – open and closed invoices, orders, quotes, returns, credits etc.

Find transactions

Find transactions helps you find individual sales transactions.

Transaction The transaction journal lists journal


journal entries of your sales and other transactions.

Table 19: MYOB tools to review sales information

To analyse sales and customer information using Business InsightsBusiness Insights presents a summary of your sales and customer information, including which customers owe you money and how much money is overdue. You can also see how much your customers owe you for each ageing period, as well as the sales history of your customers.

To find information specific to your needs, sort the table columns by clicking a column heading. For example, you can sort the list of outstanding invoices to find the most overdue invoice or the largest

overdue amount.

Click Business Insights in any Command Centre. The Business Insights window will appear.

Click the Customer Analysis tab. This tab shows the following: o The total you are owed and details of each overdue customer

payment (based on their invoiced credit terms), including the number of days overdue.

o Your top ten customers by year-to-date sales value.o The amounts owing for each ageing period.o A summary of your customer sales and payment history.


Figure 45: Using Business Insights to analyse sales and customer information

o This information can be used to do the following:

Contact customers for overdue payments;

Identify which customer payments are the most overdue or which customers owe you the most money;

Renegotiate a customer’s credit terms;

View the customer’s outstanding balances and payment history, such as the average number of days it takes for them to pay you.

If you want to use one of the graphs or tables in another document, right-click it and choose the following:

Copy to Clipboard. This copies the graph or table to the clipboard, ready to paste into a document.

[Graphs only] Save As. Choose where you want to save the image and click Save. This saves the graph as an image file, so you can use it later.

If you want to customise the look of Business Insights, click Customise. The Customise window will appear, enabling you to show or hide information in Business Insights.


Figure 46: Business Insights to analyse data

To view a list of all unpaid sales sorted by days overdue Click To Do List in any Command Centre. The To Do List window

will appear. Click the Accounts Receivable tab. A list of all unpaid sales

appears. The Overdue column shows the number of days an invoice is overdue. (A negative number in the Overdue column indicates that the payment is not yet due.) The number of days an invoice is overdue is calculated by checking the original date of the invoice, comparing it to today’s date and looking at the customer’s credit terms.

If collection letters are to be sent to customers with overdue payments:

Select those customers by clicking in the select column ( ).

Click Mail Merge to create the letter directly in Microsoft Word. Otherwise, click Disk to save a mail merge file that can be used in another word processor.

To view sales reports Several sales reports can help track sales activities. For example, an Aged Receivables Summary report will show customers’ current balances sorted by ageing periods. The Sales Item Summary report shows the items that are selling best. The Referral Source report is useful for finding out which referral source is bringing the business the most money.

Go to the Reports menu and choose Index to Reports. The Index to Reports window will appear.

Click the Sales tab. A list of available sales report groups will appear.

Click a group category to view the available reports.

For information on displaying, customising, and printing your reports, see Reports.

To view sales history You can view sales history for an item, customer, or employee (Not Basics).

Display the Item Information window for an item or the Card Information window for a customer or an employee.


Click the History tab. The History tab displays seven years of sales history for the item or card: the five years preceding the current financial year (as displayed in the Company Information window), the current financial year and the next year.

Employee sales history (Not Basics). To record employee sales history, select the employee as the

salesperson when a sale is to be recorded in the Sales window.

8.3. MYOB – Producing a Bills Reconciliation Report

To produce a Bills Reconciliation report Go to the Bills reports section of the Reports page. Click Bills Reconciliation. The Bills Reconciliation Report

page will appear in a new window, where you can customise and produce the report.

If you want your purchases reconciliation to start from a different date to the one displayed, enter a new date in the Date field, using the standard date format. You can also click the calendar icon ( ) to open the calendar and select a date from here.

Click Generate Report. The report appears as a PDF in an Adobe Reader window, ready for you to review, save, or print.

8.4. MYOB – Producing a Sales Reconciliation Report

To produce a Sales Reconciliation report Go to the Sales reports section of the Reports page. Click Sales Reconciliation. The Sales Reconciliation Report page appears in a new window,

where you can customise and produce the report. If you want your sales reconciliation to start from a different date

to the one displayed, enter a new date in the Date field, using the standard date format. You can also click the calendar icon ( ) to open the calendar and select a date from here.

Click Generate Report. The report will appear as a PDF in an Adobe Reader window, ready for you to review, save, or print.


8.5. MYOB – Producing Banking Reports

The banking reports give you full or summarised information about all of your transactions, where money comes from within your business, the results of reconciling your accounts against your banks’ records, and the amount of tax or GST you have collected and paid.

MYOB Essentials banking reports are listed in the Banking reports section of the Reports page. The reports and their functions are listed below.

Reconciliation: Displays a detailed or summary report for each bank reconciliation completed in the Bank reconciliation window, listed by account and reconciliation date.

Banking Transactions: Displays deposits and withdrawals for your selected bank or credit card accounts along with a running balance. This report can be filtered by the following:

Contact (single or all)

Account (single or all)

Transaction Type (single or all)

Reference Number (single or a range)

Date (single or a range)

Amount (single or a range)

To produce Reconciliation reports On the Bank reconciliation page, click the Reports link at the

top of the screen. The Banking Reconciliation Reports page will appear,

displaying a list of the available reconciliation reports for each account you reconcile.

o If you want to view a summary report, click the PDF icon ( ) in the Report column next to the required account and reconciliation date.

o If you want to view a detailed report, click the PDF icon ( ) in the Report (Long) column next to the required account and reconciliation date. The selected report will appear as a PDF in an Adobe Reader window, ready for you to review, save, or print.


To produce a Banking Transactions report Go to the Banking reports section of the Reports page. Click Banking Transactions. The Banking Transactions Report

page will appear, where you can customise and produce the report. Select a Contact from the list (or select All to include all contacts). Select an Account from the list (or select All to include all

accounts). Select a Transaction Type from the list (or select All to include all

transaction types). If you want to report on banking transactions within a certain

reference number range, enter the range in the Ref. No. From and To fields.

If you want to report on banking transactions within a certain date range, enter the range in the Dated From and To fields, using the standard date format.

If you want your report to include a range of amounts, enter the range in the Amount From and To fields.

Click Generate Report. The report will appear as a PDF in an Adobe Reader window, ready for you to review, save or print.

8.6. Purchases and Bills Reports

The following are outlines of the types of purchase and bill reports which can be extracted from MYOB.

8.6.1. Purchases – Items

Item

Purchases [Item Summary] report

This report displays the total quantity bought and sum spent, summarised by supplier, for selected items within the period.

View transaction source.

Click an Item No. or Name to open the Item Information window.

Purchases [Item Detail] report

This report displays the quantity and purchase amount on a purchase-by-purchase basis for specific items within the


Itemperiod.


Click an Item No. or Name to open the Item Information window.

Click a Supplier Name, Purchase No., Date, Quantity, Amount, Status or Promised Date to open the transaction source window.

Analyse Purchases [Item Multi-Period] report

You can prepare this report to view amounts of item purchases, item quantities purchased for multiple accounting periods. The report is based on recorded bills and does not include orders or quotes.

Table 20: Reports: Purchases – Items

8.6.2. Purchases – Suppliers

SupplierPurchases [Supplier Summary] report

This report displays the original purchase amount, the GST paid, and the current balance for all purchasing transactions within the period.View transaction source.Click a Supplier Name to open the Card Information window.Click an ID No., Original Date, Purchase Amount, GST, Current Balance, Status or Due Date to open the Purchases window.

Purchases [Supplier Detail] report

This report displays the purchase line items, including quantity purchased, for all purchases from specific suppliers within the period.View transaction source.Click a Supplier Name or Card ID to open the Card Information window.Click an ID No., Date, Quantity, Item/Acct, Description, Amount, GST or Status to open the Purchases window.

Analyse Purchases

Displays purchase dollars and percentages of total purchases for selected suppliers within


Supplier[Supplier] report

the period, based on recorded bills, not orders or quotes.

Supplier Ledger report

This report displays a listing of all purchases transactions for each supplier, within a specified period range. Recurring purchases are not included in this report unless they have been recorded.View transaction source.Click a Date, Src, ID No., Memo, Transaction Amount or Balance to open the Purchases window.Click a Supplier Name or Supplier ID to open the Card Information window.Table 21: Reports: Purchases – Suppliers

8.6.3. Purchases – Purchases Register

Purchases RegisterPurchases Register [All Purchases] report

This report displays a listing of all quotes, orders, bills (open, closed, debit) within a specified period. Recurring purchases are not included in this report unless they have been recorded.View transaction source.Click a Date, PO No., Amount, Amount Due or Status to open the Purchases window.Click a Supplier Name to open the Card Information window.

Purchases Register [Closed Bills] report

This report displays a listing of all closed bills, for all suppliers or a selected supplier, within a specified period range.View transaction source.Click a Date, PO No., Amount or Date Closed to open the Purchases window.Click a Supplier Name to open the Card Information window.


Purchases RegisterPurchases Register [Open Bills and Orders] report

This report displays a listing of all open bills and orders, for all suppliers or a selected supplier, within a specified period range.View transaction source.Click a Date, PO No., Amount, Amount Due or Promised Date to open the Purchases window.Click a Supplier Name to open the Card Information window.

Purchases Register [Quotes] report

This report displays a listing of all quotes, for all suppliers or a selected supplier, within a specified period range.View transaction source.Click a Date, PO No., Amount or Promised Date to open the Purchases window.Click a Supplier Name to open the Card Information window.

Purchases Register [Returns & Debits] report

This report displays a listing of all returns and debits, for all suppliers or a selected supplier, within a specified period range.View transaction source.Click a Date, PO No., Debit Amount or Promised Date to open the Purchases window.Click a Supplier Name to open the Card Information window.

Purchase Register [Open Item Receipts] report

For each open item receipt, displays the ordered, received and unbilled quantity and value of each item within a selected date range for all or a selected supplier.View transaction source.Click a Date, PO No., Qty. or Value fields to open the Purchase window.Click a Supplier Name to open the Card Information window.

Purchase Register [Open Item Receipts] report

For each open item receipt, displays the ordered, received and unbilled quantity and value of each item within a selected date range for all or a selected supplier.


Purchases RegisterView transaction source.Click a Date, PO No. Qty. or Value fields to open the Purchase window.Click a Supplier Name to open the Card Information window.Table 22: Reports: Purchases – Register

8.6.4. Purchases – Other reports

Other Purchase ReportsBill Transactions report

This report displays all bills that affect the current balance of the purchase, including the original transaction, payments, discounts, and deposits.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click a P.O. No., Supplier Name or Card ID to open the Find Transactions window.Click an ID No., Src (CD), Date, Memo Account No. or Payment to open the Pay Bills window.Click an ID No., Src (PJ), Date, Memo Account No. or Charge to open the Purchases window.

Purchase History by Supplier report

This report displays the total purchase dollars, by month for the current and previous financial years, for each supplier.

Table 23: Reports: Purchases – Other

8.6.5. Purchases – Recurring transactions

Recurring TransactionsRecurring Purchase Transactions report

This report displays the names of each recurring purchase transaction, its status, the date last posted, the frequency of posting, and the next due date for posting the transaction.View transaction source.


Recurring TransactionsClick any field to open the Purchases window.

Table 24: Reports: Purchases – Recurring transactions

8.7. Accounts Payables Reports

You can view the following purchases reports from the Purchases report group (go to the Purchases Command Centre and click the Reports button).

8.7.1. Payables – Aged accounts

PayablesAged Payables [Summary] report

For specific suppliers, this report displays a single line with the current balance due followed by the age of that balance.

Aged Payables [Detail] report

For specific suppliers, this report displays the current balance due followed by a list of your open bills, with the amount due in the appropriate ageing column.View transaction source.Click a Name, Phone, Card ID or Contact to open the Card Information window.Click an ID No. or Date to open the Purchases window.Click in the Total Due or Ageing columns to open the Analyse Payables window.

Payables Reconciliation [Summary] report

This report displays a list of payables as of a specific date presented in summary [one line per supplier] format.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click a Name to open the Card Information window.Click in the Total Due or Ageing columns to


Figure 47: Reports button on the Purchases Command Centre

Payablesopen the Supplier Analyse Payables window.

Payables Reconciliation [Detail] report

For each selected supplier, this report displays the current balance due followed by a listing of your open purchase orders (one line per bill), with the amount due in the appropriate ageing column as of a selected date.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click a Name, Phone, Card ID or Contact to open the Card Information window.Click an ID No. or Date to open the Purchases window.Click in the Total Due and Ageing columns to open the Analyse Payables window.

Table 25: Reports: Payables – Aged Accounts

The Aged Payables report will show all your current creditors regardless of the date you choose to age them at. A Payables Reconciliation report will only show creditors up to the date you enter as the ageing date.

8.7.2. Payables – Payments

Payments

Supplier Payment History report

This report shows all the purchases that were included in each payment you’ve made to your suppliers during a specified period.View transaction source.Click a supplier name to open the Card Information window.Click a Cheque No., P.O. No., Date, Supplier’s Inv. No., Purchase Total Amt or Amount Applied to open the Pay Bills window.

Supplier Payments report

This report totals all cash disbursements made to suppliers within the period range.View transaction source.


Payments

Click a Recipient, Address 1 or Supplier GST ID to open the Card Information window.

Debits and Discounts Applied report

This report displays a listing of all debit memos and discounts that have been applied to payments, for all suppliers or a selected supplier, within a specified period.View transaction source.Click a Date, PO No., Debit Amount or Promised Date to open the Find Transactions windowClick a Supplier Name to open the Card Information window.Table 26: Reports: Payables – Payments

8.7.3. Payables – Transaction Journals

Transaction Journals

Purchase & Payables Journal report

This report displays the transactions assigned to the Purchases Journal within the specified period.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click an ID No., Account No., Account Name, Debit, Credit or Job No. to open the Purchases window.

Table 27: Reports: Payables – Transaction Journals

8.7.4. Payables – To Do List

To Do List

To Do List - Payables report

This report displays a list of open Payables from the To Do List window.View transaction source.Click a purchase transaction to open the A/P view of the To Do List window.

To Do List - This report displays a list of recurring


To Do List

Recurring Purchases report

purchase transactions from the To Do List window.View transaction source.Click any field to open the Purchases window.

To Do List - Expiring Discounts report

This report displays a list of bills with expiring discounts from the To Do List window.View transaction source.Click any field to open the Expiring Discounts view of To Do List window.Table 28: Reports: Payables – To Do List

8.8. Sales Reports

All documentation such as source documents in the form of sales orders, customer invoices, receiving reports, etc. and reports which document accounts receivable should be kept and filed for control and audit purposes.

The following are sales reports which can be extracted from MYOB.

8.8.1. Sales – Items

Item

Sales [Item Summary] report

This report displays the total quantity and sales amount, summarised by customer, for specific items within the period range.View transaction source.Click an Item Name or Item No. to open the Item Information window.Click a Customer Name to open the Card Information window.

Sales [Item Detail] report

This report displays the quantity and sale amount on sale-by-sale basis for selected items within the period range.View transaction source.Click an Item Name or Item No. to open the Item Information window.


ItemClick a Customer Name, ID No., Date, Quantity, Amount, Status or Promised Date to open the Sales window.

Analyse Sales [Item] report

Not available in AccountRight Basics.This report displays sales, cost of sales, gross profit, units, average cost, and per cent margin for specific items within a range of accounting periods, based on recorded invoices, not including quotes and orders.View transaction source.Click any field to open the Item Information window.

Analyse Sales [Item Multi-Period] report

This report displays your choice of item sales and quantities sold for multiple accounting periods, based on recorded invoices, not including quotes or orders.

Table 29: Reports: Sales – Items

8.8.2. Sales – Activity

Activity

Sales [Activity Detail] report

AccountRight Plus and Premier only.

This report displays the units and amounts from each time billing invoice recorded on a sale by sale basis for each selected activity.


Click an Activity ID or Name to open the Activity Information window.

Click a Customer Name, ID No., Date, Units, Amount, Status or Rate to open the Sales window.

Analyse Sales [Activity] report

AccountRight Plus and Premier only.

This report displays sales, cost of sales, gross profit, units, average cost and per cent margin for selected activities within a specific period range, based on recorded invoices, not


Activity

including quotes or orders.


Click any field to open the Activity Information window.

Table 30: Reports: Sales – Activity

8.8.3. Sales – Customer

Customer

Sales [Customer Summary] report

This report displays the original sale amount, the GST collected, and the current balance for all sales within the period range.


Click a Customer Name to open the Card Information window.

Click a ID No., Original Date, Sale Amount, GST, Current Balance, Status or Due Date to open the Sales window.

Sales [Customer Detail] report

This report displays the invoice line items, including quantity sold, for all sales to the selected customers within the period range.


Click a Customer Name or Card ID to open the Card Information window.

Click a ID No., Date, Quantity, Item/Acct, Description, Amount, GST or Status to open the Sales window.

Sales History by Customer report

This report displays the total currency amount of sales, by month for the current and previous financial years, for each customer.

This can be a large report. For best results,


Customer

use this report with the OfficeLink feature.

Analyse Sales [Customer] report

This report displays sales and percentage of total sales for selected customers within a range of accounting periods, based on recorded invoices, not including quotes or orders.


Click a Name or a sales figure to open the Card Information window for the customer.

Analyse Sales [Customer - FY Comparison] report

This report compares this year’s sales for specific customers with sales for the same accounting period in another financial year, based on recorded invoices, not including orders or quotes.


Click any field to open the Card Information window.

Analyse Sales [Customer Spreadsheet] report

This report displays customer sales for multiple accounting periods in spreadsheet format, based on recorded invoices, not including orders or quotes. The report shows customer sales on a month-by-month sales basis.


Click a Name or Period to open the Card Information window.

Customer Payments [Closed Invoices] report

This report lists the closed (fully paid) invoices sorted by customer. Includes the amount for the invoice and the elapsed number of days from the invoice date to final payment.


Click a Customer Name or Card ID to open


Customer

the Card Information window.

Click an ID No., Original Date, Sale Amount, GST or Days ‘till Paid to open the Sales window.

Customer Reimbursable Expenses report

Not available in AccountRight Basics.

This report displays all the reimbursable expenses that have been entered for the selected customers. You can choose to view what needs to be reimbursed, or what has been removed/reimbursed.


Click a Customer Name to open the Card Information window.

Click a Supplier Name, Description, Date, Job or Cost to open the Purchases window.

Customer Ledger report

This report displays a listing of all sales transactions for each customer, within a specified period range. Recurring sales are not included in this report unless they have been recorded.


Click Date, Src, ID No., Memo, Transaction Amount or Balance to open the Sales window.

Click Customer Name or Customer ID to open the Card Information window.

Table 31: Reports: Sales – Customer

8.8.4. Sales – Salesperson

SalespersonSales [Salesperson

Not available in AccountRight Basics.For each salesperson, this report displays


Salesperson

Summary] report

every sale (sorted by customer) within a selected range of dates.You can use this report if you calculate commissions based on when the sale was made. If you base commissions on when the customer pays, see the report called Customer Payments [Salesperson].This report calculates gross sales (not including GST or freight charges) attributed to your salespeople for the reporting period. Be sure to check the Sales Status in the Report Customisation window. If you commission your salespeople based on the items they sold during the period, run the Sales [Salesperson Detail] report.View transaction source.Click a Customer Name to open the Card Information window.Click an ID No., Original Date, Sale Amount, GST, Current Balance, Status or Due Date to open the Sales window.

Sales [Salesperson Detail] report

Not available in AccountRight Basics.For each salesperson, this report displays every item sold within the period range.You can use this report to break down the items sold by the salesperson during the reporting period.The report displays gross sales (not including GST or freight charges) for each item sold by your salespeople for the reporting period.View transaction source.Click an Employee Name to open the Card Information window.Click an Item Name or Item ID No. to open the Item Information window.Click ID No., Date, Quantity, Item/Acct, Description, Sale Amount, GST or Status to open the Sales window.

Sales History by Salesperson report

Not available in AccountRight Basics.This report displays the total currency amount of sales, by month for the current and


Salespersonprevious financial years, for each salesperson.This can be a very large report. For best results, use this report with Excel.

Analyse Sales [Salesperson] report

Not available in AccountRight Basics.For a selected accounting period, this report lists each salesperson’s total sales, and their percentage of total sales, based on recorded invoices, not including orders or quotes.View transaction source.Click an Employee Name or a sale to open the Card Information window.

Customer Payments [Salesperson] report

Not available in AccountRight Basics.Displays a listing of payments made on invoices and orders within the period range, sorted and totalled by specific sales people.Use this report if you pay commissions on a cash-received basis. For all your sales people, this reports on the cash received during the reporting period.This report lists the sale amount without GST and freight. It shows GST in a separate column. If you want to display freight as well, highlight the report in the Index to Reports window, click Customise, and then click the Report Fields tab. Select the Freight field.View transaction source.Click an Employee Name or Card ID to open the Card Information window.Click an Item ID No., Date, Memo, Sale Amount, GST or Amount Paid to open the Receive Payments window.

Table 32: Reports: Sales – Salesperson

8.8.5. Sales – Sales Register

Sales Register

Sales Register [All Sales] report

This report displays a listing of all quotes, orders and invoices (open, closed, credit) within a


specified period range. Recurring sales are not included on this list unless they are recorded.


Click a Date, Invoice No., Amount, Amount Due or Status to open the Sales window. Click a Customer Name to open the Card Information window.

Table 33: Reports: Sales – Sales Register

8.8.6. Sales – Other Reports

Other Sales Reports

GIS Customers report

This report provides details of all sales to selected customers within a date range. This report is designed to be saved to disk only, for import into a GIS.Geographical Information Systems (GIS) are tools used to gather, transform, manipulate, analyse, and produce information related to the surface of the Earth. This data may exist as maps, 3D virtual models, tables, and/or lists.This GIS report produces data which allows you to plot sales by geographical location, in this case the postcode as specified within the report data.

GIS Sales report This report provides details of all sales of selected items within a date range. This report is designed to be saved to disk only, for import into a GIS.Geographical Information Systems (GIS) are tools used to gather, transform, manipulate, analyse, and produce information related to the surface of the Earth. This data may exist as maps, 3D virtual models, tables, and/or lists.This GIS report produces data which allows you to plot sales by geographical location, in this case the Postcode as specified within the report data. The report contains detailed


Other Sales Reportsinformation and can be very large. For best results, use this report with the GIS feature only.

Invoice Transactions report

This report displays all the transactions that affect the current balance of the sale, including the original transaction, GST, customer payments, discounts, and customer deposits.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click an Invoice No., Customer Name or Card ID to open the Invoice view of the Find Transactions window.Click ID No., Src, Date, Memo, Account, Charges or Payments to open the Sales window.

Referral Source report

This report displays the total of sales attributed to each referral source within the selected period range.View transaction source.Click a Referral Source to open the Referral view of the Sales & Purchases Information window.Table 34: Reports: Sales – Other Reports

8.8.7. Sales – Transaction Journals


Sales & Receivables Journal report

This report displays the transactions entered through the Sales Command Centre within a specified date range.

The report displays only transactions that were entered in windows to which your user ID allows access.


Click ID No., Account No., Account Name, Debit, Credit or Job No. to open the Sales



window.

Table 35: Reports: Sales – Transaction Journals

8.8.8. Sales – Recurring Transactions

Recurring Transactions

Recurring Sales Transactions report

This report displays the names of each recurring sales transaction, the date last recorded, the frequency of recording, and the next due date for recording the transaction.


Click any field to open the Sales window.

Table 36: Reports: Sales – Recurring Transactions

8.8.9. Sales – To Do List

To Do List

To Do List - Orders to be Shipped & Received report

Not available in AccountRight Basics.Displays the list of both sales and purchases from the To Do List window.You backorder an item or items, or create an item order, when you’re expecting a sale or purchase to be finalised. You can print this report each week to track and update the sale or purchase for recording.View transaction source.Click any field to open the Orders view of the To Do List window.

To Do List - Recurring Sales report

This report displays the list of sales saved as recurring from the To Do List window.View transaction source.Click any field to open the Recurring Sales view of the To Do List window.

To Do List - Receivables report

This report displays the list of open receivables from the To Do List window.


To Do ListOverdue Balances Only.Include Company Name.Include Company Address.Include Report Date and Time.View transaction source.Click any field to open the A/R view of the To Do List window.

Table 37: Reports: Sales – To Do List

8.9. Accounts Receivables Reports

Listed below are the reports which can be extracted from MYOB when reviewing or presenting information related to customers and debtors:

Accounts Receivables Reports

Aged Receivables [Summary] report

For each customer, this report displays a single line with the customer’s current receivable balance followed by the age of the outstanding amount balance.View transaction source.Click a Customer Name to open the Card Information window.Click in the Total Due or Ageing columns to open the Analyse Receivables window.

Aged Receivables [Detail] report

For each customer, this report displays the current receivables balance followed by a list of open sales with the amount due in the appropriate ageing column.The report shows every open invoice and notes the customer’s name and phone number.View transaction source.Click a Name, Card ID, Contact, Phone No. or Terms to open the Card Information window.Click an ID No. or Date to open the Sales window.


Accounts Receivables ReportsClick in the Total Due fields or Ageing columns to open the Analyse Receivables window.

Receivables Reconciliation [Summary] report

This report displays a list of receivables as of a specific date presented in a one line per customer format. The report includes a comparison of the total due to the balance sheet receivables amount with the difference, if any.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click a Name to open the Card Information window.Click an amount in the Total Due or Ageing column to open the Analyse Receivables window.

Receivables Reconciliation [Detail] report

This report displays a list of receivables as of a specific date presented in a one line per invoice format. Includes a comparison of the total to the balance sheet receivables amount with the difference, if any.The report displays only transactions that were entered in windows to which your user ID allows access.View transaction source.Click a Name, Card ID, Contact, Phone No. or Terms to open the Card Information window.Click an ID No. or Date to open the Sales window.Click an amount in the Total Due or Ageing columns fields to open the Analyse Receivables window.

Receivables with GST report

This report displays a list of outstanding receivables with GST amounts, for a specified period. Any customer with a receivables balance outstanding is listed in the report, whether or not they have GST outstanding.An ‘Out of Balance’ amount appears on the


Accounts Receivables Reportsreport. It is the difference between the balance of the receivables linked account and the total of the outstanding invoices.View transaction source.Click a Name to open the Card Information window.Click any Amount Outstanding or GST Outstanding to open the Analyse Receivables window.Table 38: Reports: Accounts Receivables

8.10. MYOB - Exporting Reports

To export reports from MYOB complete the following:


8.10.1. To export reports

Display the report you want to export. Go to the File menu and click Export Data. A list of file format

options will appear.

Click the file format option you need:

PDF

Portable Document Format: Select the PDF option if you want to view or print the report later and keep the same format and appearance that’s used in AccountRight. If you save a report as a PDF, the person who receives the report will need a PDF viewer, such as Adobe Reader, to view or print the report.


Figure 48: File formats to export to

Excel

Microsoft Excel spreadsheet: Select the Excel option if you want to view the report in Microsoft Excel or use Excel’s features to further analyse the data. You can edit the default spreadsheet templates that AccountRight uses. If you save the report as an Excel document, the person who receives the document will need a program that can open Microsoft Excel spreadsheets to view the report.You can only export a report as an Excel file if Microsoft Excel 2010 or later is installed. If you’re exporting a custom report, the Export to Excel button is not available in the Index to Reports window, but you can export it after displaying the report.If you are using Office 365, make sure Excel is installed on your computer and not accessed via a web browser.

XPSXML Paper Specification: Select the XPS option if you don’t need to edit the report and want to use the XPS Viewer provided with Windows to view or print the report.

CSVComma-separated values text file: Select the CSV option to save a text file where all the report data is separated with commas. This is a file format that can be opened and edited by most spreadsheet programs.

TSVTab-separated values text file: Select the TSV option to save a text file where all the report data is separated by tab characters. This is a file format that can be opened and edited by most spreadsheet programs.

Table 39: File export formats

Depending on the report format you chose:

The Export report window will appear. Specify the file name and location, and then click Save.

The report is displayed in the selected program (such as Excel). Save the report in the program as you normally would.

(Source: Accounting Explained: Bank Reconciliation )


9. DEBT COLLECTION AND RECOVERY For various reasons there are occasions where debtors have not paid their account within the specified timelines and further action may be required to recoup outstanding debts to the business.

9.1. Measures to Collect Monies

If an individual or company owes you money and all other options to chase a debtor have failed, you can:

Use a debt collector; Engage in mediation; Claim a minor debt; Take steps to collect an outstanding debt in the event of a

debtor bankruptcy.

Using a debt collectorDebtors are often moved to pay at the prospect of having their credit rating downgraded.

Engaging a debt collector to contact a customer about an outstanding payment can put an end to payment delays.

All debt collectors must be licensed. They are also bound by a code of conduct that sets down standards, provides a complaint resolution system, and ensures consumers do not feel unduly harassed by the debt collector.

By law, a debt collector cannot threaten to have the debtor sent to jail, as a person cannot be jailed for an unpaid civil debt.

MediationConsider mediation as an alternative to settling minor debt claims by a magistrate Mediation can save you time and solve the problem in a manner that suits you and your debtor. If a solution is not found, the judge will take the final decision.

Minor debt claimsAll State and Territory courts in Australia offer a small claims division of their local court or tribunal that provides a simple debt recovery procedure. The advantages are that the process is relatively informal and that costs are limited against a failing party.


http://www.qld.gov.au/law/legal-mediation-and-justice-of-the-peace/setting-disputes-out-of-court/abbreviated-mediation/

BankruptcyWhen someone who owes you money is declared bankrupt, they are usually freed of unpaid debts.

As a creditor, you can claim a proven debt. This gives you the right to participate in the distribution of debtor funds and to vote in bankruptcy meetings.

The Australian Financial Security Authority is a government agency that provides information for both debtors and creditors affected by bankruptcy.

If you are not able to recover the debt, consider writing off the bad debt in your tax return. Seek advice from your business adviser.

(Source: Business Queensland: Debt Collection Options )

9.2. Legal Systems

In the table below is an overview of the steps which can be taken to obtain payments using debt collection in the different states of Australia:

State or Territory

Judgment Enforcement Proceedings

Australian Capital Territory

Stands for 12 years

Enforcement hearing. Redirection orders. Seizure and sale order. Bankruptcy.

New South Wales

Stands for 12 years

Oral examination. Garnishee order. Writ. Bankruptcy.

Northern Territory

Stands for 12 years

Summons for oral examination.

Attachment of earnings. Warrant of seizure and sale. Bankruptcy.

Queensland Stands for 12 years

Enforcement options where no consideration for a debtor’s financial position is given by the Court: Enforcement warrant –

seizure and sale. Bankruptcy proceedings.Enforcement options where


State or Territory

Judgment Enforcement Proceedings

there must be consideration of a debtor’s financial position by the Court:1. Statement of financial

position.2. Enforcement hearing.3. Enforcement hearing warrant.4. Redirection of earnings/ debt/

permanent redirection.South Australia Stands for 15

years Oral examination. Garnishee/attachment of

earnings. Warrant of sale. Bankruptcy.

Tasmania Stands for 12 years

Oral examination. Garnishee order. Warrant to seize and sell

property. Bankruptcy.

Victoria Stands for 15 years

Warrant to seize property. Attachment of earnings. Attachment of debt. Oral examination. Bankruptcy.

Western Australia

Stands for 12 years

Property (seizure and sale) order.

Debt appropriation order. Bankruptcy. Means inquiry. Time for payment

order/instalment order. Earnings appropriation order.

Table 40: Steps to be taken to collect debts in the different states

9.3. Legal Procedures

The following discussions relating to the legal procedures which are associated with debt collection have been extracted from the ASIC-ACCC published Debt Collection Guideline: For Collectors and Creditors .

Contact for a reasonable purpose only

The purposes may be as follows:


Provide information about your account to the debtor. Make a payment request. Offer to work with the debtor to achieve a flexible payment

scheme. Explain accurately the consequences of non-payment, including

any legal remedies available to the collector/creditor, and any service restrictions that may apply in the case of utilities (e.g. electricity or gas disconnection or water supply restrictions).

Arrangements for debt repayment. Provide the debtor with a settlement proposal or alternative

payment arrangement. After an agreed period, review existing arrangements. Find out why previous attempts to contact the debtor were not

answered within a reasonable period of time, if so. Find out why an agreed repayment arrangement was not

fulfilled if this is the case. Investigate whether the debtor has changed his or her place of

residence without informing you if there is reason to believe that this has happened.

See, inspect or recover interest in security. Other similar purposes.

Contact can be made through the following methods: Communications by phone—includes circumstances in which

the recipient (debtor or other person) chooses to terminate the call, or where a voice message is left on a recording device, or where a message of any kind is delivered to the recipient (e.g. text messaging).

Communications in writing—includes any written correspondence (e.g. letter, e - mail, text message, fax, application or program for social media, instant chat, telephone application, or any other device).

Communications in person— includes face-to-face contact, whether at the debtor's home (or at another person's home), at the workplace or elsewhere.

Hours and Frequency of Contact

Contact by telephone

Monday to Friday 7.30 am to 9 pmWeekends 9 am to 9 pmNational public holidays No contact recommended


Face-to-face contact

Monday to Friday 9 am to 9 pmWeekends 9 am to 9 pmNational public holidays No contact recommended

All workplace contact

Debtor’s normal working hours if known, or 9 am to 5 pm on weekdays

Table 41: Hours and frequency for debt collection

It is recommended to contact a debtor for not more than three (3) times per week, or ten (10) times per month at most except for the face-to-face contact.

Leave a reasonable period of time before the debtor is contacted to avoid undue harassment or coercion. Give the debtor time to answer your previous communications and/or arrange payments if agreed.

For face-to-face contact, arrange one if it is only necessary and reasonable. Limit to once a month. Consider this as an option of last resort. If necessary, it is recommended to be made at the debtor’s home when possible during reasonable hours of contact.

Do not contact a third party more often than once every six months to obtain location information.

Credit holds When an account is on credit hold, all subscriptions that belong to the accounts are also put on hold. The placement of new orders is blocked. Once the account is released, all subscriptions are released as well.

Part of setting a customer’s credit terms and limits is the credit hold in case of default or breach of contract. Credit holds can be inputted manually by the seller or automatically by the system given that billing


processes are done regularly. In the case of MYOB, the option to affect this is in the Selling Details in the Card Information.

(Source: ACCC & ASIC: Debt collection guideline: for collectors and creditors )

9.4. Methods of Identifying Bad and Doubtful Debts

Bad debts and doubtful debts refer to account receivables that are owed to a company or business by its clients.

Bad debt: Bad debts are account receivables that are clearly not collectable. These are account receivables that have been recorded for a long period. Once identified, bad debts are no longer considered an account receivable and becomes a loss.

Doubtful debt: A doubtful debt is an account receivable that could become a bad debt. These are credit entries made in a separate account which are made for doubtful debts.

How do you identify bad or doubtful debts?

Estimating uncollectible accounts: Accountants use two basic methods to estimate uncollectible accounts for a period. The first method – percentage-of-sales method – focuses on the income statement and the relationship of uncollectible accounts to sales. The second method – percentage-of-receivables method – focuses on the balance sheet and the relationship of the allowance for uncollectible accounts to accounts receivable.

Percentage-of-sales method: The percentage of sales method estimates uncollectible accounts from a given period's credit sales. In theory, the method is based on the percentage of the actual uncollectible accounts of previous years compared to the sales of previous years. When cash sales are small or account for a fairly constant percentage of total sales, the calculation is based on net sales total. Since at least one of these conditions is generally fulfilled, companies generally use total net sales instead of credit.

The formula to determine the amount of the ending estimated bad debts entry is:


Bad Debt Expense =Net sales (total or credit) x Percentage estimated as

uncollectibleFormula 4: Bad debt expense – Method 1

The Allowance for Doubtful Accounts may have either a debit or a credit balance before the end of the year. Under the percentage of sales method, when calculating the amount of the year-end adjustment, the company ignores any existing balance in the allowance (except that the allowance account must have a credit balance after the adjustment).

Percentage-of-receivables method: The method of percentage of receivables estimates uncollectible accounts by determining the desired size of the Uncollectible Accounts Allowance. You would multiply the final balance in receivable accounts by a rate (or rate) based on your unrecoverable account experience. The company can use an overall rate or a different rate for each age category of receivables in the percentage of receivables method.

To calculate the adjusting entry amount of the entry for bad debt expense under the percentage-of-receivables method using an overall rate, you would use the following formula:

Bad Debt Expense =(Accounts receivable ending balance x percentage estimated as

uncollectible) – Existing credit balance in allowance for doubtful accounts or +

existing debit balance in allowance for doubtful accountsFormula 5: Bad debt expense – Method 2

To date, we have used an uncollectible rate for all receivables, irrespective of their age. However, certain companies use a different percentage of accounts receivable for each age category. When accountants decide to use a different rate for each age category, an ageing schedule is prepared. An ageing schedule classifies receivables according to their length of time and uses a different uncollectible rate for each age category. Companies base these amounts on their experience.


Accounts receivable ageing schedule The classification of accounts receivable by age often provides a better basis for the company to estimate the total amount of uncollectible accounts. For example, a company can expect that only 1 percent of the accounts not yet due (sales made less than 30 days before the end of the accounting period) will not be collectible on the basis of experience. On the other hand, a company can expect that 50% of all accounts could not be collected over 90 days. The company multiplies the accounts receivable by the percentage estimated to be uncollectible for each age category to find the estimated amount uncollectable.

The sum of the estimated amounts for all categories results in an uncollectible total estimated amount and is the desired credit balance (the target) in the Uncollectible Accounts allowance.

Since the ageing schedule approach is an alternative under the percentage-of-receivables method, the balance in the allowance account before adjustment affects the year-end adjusting entry amount recorded for uncollectible accounts.

(Source: Lumen Financial Accounting: Estimating Bad Debts )

Outlined below is an example of procedures for identifying bad or doubtful debts, these may vary per organisation:

1. Regularly monitor the collection periods to determine which clients have made timely payments.

2. If payment terms are no longer met by the client, determine if the debt can still be recovered or must be written off.

3. Prepare a debt recovery plan, if feasible.

9.5. Write-off Conditions

Debts are to be written off under the following circumstances:

If the debtor is bankrupt, receivable or liquidated. The debt is written off until the funds are available.

Where the debtor moved the address and failed any attempts to locate it.

If the recovery action is not economic due to the relatively small value of the debt and/or the potential cost of recovery is more than the initial debt.


If a particular debtor's medical, financial or domestic circumstances do not warrant recovery or further recovery action at that time.

Where legal proceedings through the courts have proved unsuccessful or on legal advice.

Where the collection agents advise that it is no longer cost-effective to pursue the debt.

In the event of recovery, a register of debtors whose debt has been written off is maintained. The registry records the details of the debt, the write-off authority and any subsequent debt recovery action.

When a debt has been written off, a debtor becomes a solvent or a new address is traced, the debt is restored to current files and the debt collection process is reactivated. Such account re-introduction remains under constant review.

Authorisation The accountant has to authorise the write-off of uncollectible debts.

After a customer is identified to be bankrupt, in liquidation, or is otherwise unable to make payment, a written request via a Request for Bad Debt Write-Off Form is prepared and forwarded for consideration and processing.

Journal entries Accounting for bad debts entails the recognition of the method to be used and journal entries to be prepared.

Initial entryRegardless of the method selected, the pro-forma journal entry to initially recognise bad debts is as follows:

Bad debts expense $ XXAllowance for bad debts

$ XX

To continue the illustration from Section 7.2 on ageing of accounts receivable, the allowance for bad debts is to be computed by multiplying the amount by the corresponding % of uncollectible per classification.

Age(a)

Amount(b)

% of Uncollectible

Allowance for Bad Debts


(c) (d)0-30 days

$109,000 2% $2,180

31-60 64,000 4% 2,56061-90 44,900 10% 4,49091-120 30,200 75% 22,650Over 120

5,000 100% 5,000

TOTAL $36,880

The entry to record the bad debts is:

Bad debts expense $ 36,880Allowance for bad debts

$ 36,880

In case of over- or under-statement of bad debts, the entries are as follows:

Overstatement:

Allowance for bad debts $ XXBad debts expense $ XX

Understatement:

Bad debts expenseAllowance for bad

debts

$ XX$XX

The Allowance for Bad Debts is a contra-asset account of Accounts Receivable. It is presented in the balance sheet as a deduction from the gross accounts receivable amount.

Accounts Receivable $ XXLess: Allowance for Bad Debts

XX

Accounts Receivable, net $ XX


Write-off entryIf at the end of the accounting period, a debt is determined to be worthless and uncollectible as in the case of the $5,000 amount in the example, the following journal entry is prepared:

Allowance for bad debts $ 5,000Accounts receivable $ 5,000

Recovered bad debtsIf a bad debt is recovered, two journal entries are prepared to reverse the write-off entry and to record collection, respectively. For example, in the case of the illustration, out of the $5,ooo, $2,000 was determined to be recoverable.

Allowance for bad debts $ 2,000Accounts receivable $ 2,000

Cash $2,000Accounts receivable $2,000

9.6. MYOB – Accounting for Bad Debts

Go to the Sales Command Centre and click Enter Sales. The Sales window will appear.

Enter the customer’s details. Click Layout, choose Service, and then click OK. In the Description field, type a description of the transaction. In the Account No. field, enter the expense account for Bad

Debts or the Provision for Bad Debts asset account. If a warning displays about the account you’ve selected, this is OK to ignore.

In the Amount field, type the bad debt amount as a negative number.

In the Tax field, enter the required tax/GST code. Typically, this will be the same tax/GST code as the invoice you’re writing off. Here’s our example:


Click Record. Go to the Sales Command Centre and click Sales Register. Click the Returns & Credits tab. Click to select the credit note created above then click Apply to

Sale. In the Settle Returns and Credits window, apply the credit

against the original open invoice and click Record.


Figure 50: Accounting for bad debts

9.7. Escalation of Recovery Actions - Internal

The steps outlined can be adapted as an escalation process to contact customers according to Business Victoria.

Further Reading

For features of recovery plans visit the following website:

Getting your money back



Repayment negotiationsConsider working with a debtor to adopt a flexible and realistic approach to repayment arrangements, which includes the following:

Making reasonable allowances for a debtor’s ongoing living expenses.

Considering if a debtor is on a fixed low income (for example a disability pension or other welfare payments) and there are no prospects of their income increasing in the future.

Recognising that debtors experiencing financial difficulties will often have a number of debts owing to different creditors.

Ensuring that payment arrangements are meaningful and sustainable.

9.8. Using Outside Agencies

In some instances, there is a need to enlist the assistance of outside agencies.

9.8.1. Community legal centres

Location: Around Australia. Local Councils and Citizens Advice Bureaux can help you find out if there is a centre near you.

Services: Check if the legal centre offers the following features:

Evening clinic sessions where you can obtain advice;

Writing a letter for you to send to the company demanding that they pay you the money;

Helping you to complete court forms;

No limit on the number of times you can get advice at evening clinics.

Limitations: These centres will not usually take your case any further than writing a letter of demand and helping you with Court forms. You may need to make an appointment if you want to see the same lawyer more than once as they often attend the centre on a roster basis.

Summary: A valuable service which can help a lot, especially if you don’t want to try to recover the money on your own.


9.8.2. Legal Aid Commissions

Location: Each State and Territory Services: Check if your local Commission offers the following

services:

o Opens during normal business hours.

o Free information sessions and initial legal advice (check to see if you need an appointment).

o Provides advice.

o Prepares letters.

o Helps to run your Court case.

Limitations: Each State/Territory has different rules about how much help these Commissions can give you. They may not be able to help if:

o The debt you are chasing is quite small.

o They think your case hasn’t much chance of success.

o You can afford to pay for your own court case.

Summary: A service which can help you if you have a serious legal action to take that you couldn’t afford to take yourself. You must first check whether you and your case fit your local Legal Aid Commission’s guidelines.

9.8.3. Small Claims Tribunals and Lower Courts

Location: Tribunals are only found in some places in Australia; otherwise, unpaid debts are dealt with in the lower Courts in each State/Territory. These are called either the Magistrates Court, Local Court, or Court of Requests depending on the State/Territory.

Services: Check if your local Tribunal/Court offers the following services:

o Gives you general advice.

o Helps you to complete forms that you need for the claim.

o Arranges for serving a summons on the person who owes you the money (this service is included in the filing fee).


o Provides you with an informal dispute settlement procedure before a magistrate. This means that a summons only needs to be issued if this procedure doesn’t resolve the dispute.

Features: These Courts/Tribunals are run less formally than other Courts (see below).

o You can conduct the case yourself - there is no need for lawyers to be involved. In some of the Tribunals, you are not allowed to use a lawyer. Although it might be better to have a lawyer act for you in the Lower Courts, you do not have to use one.

Limitations: Small Claims Tribunals can only handle some cases. You must check to see if your case fits.

o There is always a limit on the amount of money which can be claimed this way.

Summary: These Tribunals/Courts can provide quick, simple solutions which are legally binding, without having to use a lawyer or deal with difficult court procedures.

9.8.4. Other Courts - County Court, District Court, Supreme Court

Location: All Australian cities and many larger towns. Features: You go to these Courts if the amount you are owed is too

much for either a small claim or the lower Courts to be used. Limitations: Procedures in these Courts are more formal and can

be complicated. Almost all cases are run by lawyers. Summary: You should consider using a lawyer if your case has to

be heard in one of these higher Courts. It’s a good idea to get legal advice before you think of taking your matter to them.

There can never be any guarantee of success in actions in either Lower Courts or other Courts.

9.8.5. Private legal advice

Location: All Australian cities and most towns. If you don’t know a suitable lawyer, you can contact your local law society or law institute to obtain a list of names.

Services:


o Write a letter of demand.

o Run your Court case from beginning to end.

Features: People who may ignore a private letter of demand tend to take notice of a letter written by a lawyer

o If you have to go to Court, the lawyer knows how to go about it.

o The Court will usually order the company that owes you money to pay the lawyer’s costs on a scale set by the Court. Any other costs may not be covered by the order.

Limitations: A lawyer can cost you money, especially if the Court doesn’t order the company to pay your legal costs.

Summary: A lawyer can make the more complicated court cases much easier to deal with and avoid costly mistakes. Using a lawyer can sometimes save you money if you are owed a very large amount.

9.8.6. Collection agencies

Location: All Australian cities and larger towns. Services: Check if the agency offers the following services:

o Collect a debt for you

o Send a letter of demand

o Prepare a summons for you

o Run a Court action for you

Features: Some agencies have lawyers to draw up the summons and run the Court case for you.

Limitations:o Many charge a fee.

o Most will charge a commission for any money recovered, either a flat rate or a sliding scale, depending on the amount.

o Preparing a summons will cost extra. The Court will only order the company to pay the cost of a summons if a lawyer prepared it. (However, not all agencies have lawyers on staff.)


Summary: Using such an agency will relieve you of the problems of pursuing debts yourself if you are prepared to forgo a percentage of the amount you are owed.

(Source: ASIC: Getting your money back )

9.9. Escalation of Recovery Actions – External

When all avenues have been exhausted the case of outstanding money may be referred externally to resolve the matter.

9.9.1. Independent external dispute resolution schemes

Many industries (including telecommunications companies, utility suppliers, and financial services businesses) belong to an independent external dispute resolution (EDR) scheme. Specialist collection and debt purchasing agencies, and other finance providers, may also decide to join a scheme.

The ACCC and ASIC support the role played by EDR schemes in resolving consumer complaints and disputes when these are unable to be resolved through the creditor or debt collector’s internal dispute resolution processes.

You should ensure that your systems and practices allow EDR in the debt collection area to work effectively, and bear in mind the following:

When applicable, you must advise debtors of an EDR scheme to which the debtor can take his or her unresolved dispute—ensuring this information is provided to debtors at the appropriate time is a requirement imposed on EDR scheme members and may be stipulated under relevant laws or codes.

Collection activity relating to a dispute that has been referred to an EDR scheme must be suspended while the scheme considers the dispute – again, this is a requirement imposed on scheme members (including their agents).

A debt should not be sold, or passed to an external agent for collection, while a scheme is considering a dispute in relation to it.

If a debt is inadvertently sold, the assignor/creditor should seek to retrieve the debt from the assignee and seek to ensure that the assignee does not undertake collection activity or start legal proceedings until the scheme has resolved the dispute (and then only if liability is confirmed).


9.9.2. Legal action and procedures

Should things escalate, a creditor has the right to pursue debts through the courts but with the observance of consumer protection laws.

Do not make misrepresentations about the legal process. For instance, do not do the following:

Misrepresent the nature or purpose of correspondence. Ensure the layout, wording and design of documents (for example, letters of demand) are not likely to create the impression in the mind of the debtor or their representative that they are court process or other court documents, or that they were sent from a solicitor’s office, when this was not the case.

Suggest that telephone calls are recorded ‘for training purposes’ (and, by implication, only for such purposes) when those calls may also be used as evidence.

Misrepresent that failure to pay a debt (where no fraud is involved) is a criminal or police matter or is likely to be referred to the police.

Misrepresent that you are a police officer, court official, or have some official capacity that you do not have to claim or enforce payment of a debt.

State or imply that unsecured basic household items can be seized if the debtor is made bankrupt.

State or imply that legal action has already been taken, or judgment entered, in relation to the debt when this is not the case.

(Source: ACCC: Debt collection guideline: for collectors and creditors )


Activity 4

1. Enumerate three (3) sectors or industries where debt collection procedures are very important according to the ACCC and ASIC Debt Collection Guidelines.

2. True or False.

a. It is common practice to send Statements of Accounts to customers on a monthly basis.

b. It is good practice to cut off the credit of customers in default for the first time.

1.

2.

a. b.



ANSWERS TO ACTIVITIES

Activity 1

1. True or False.

1. The single-entry method of bookkeeping is now widely used by businesses.

2. Accounts receivable is a liability of the business whereas accounts payable is an asset.

3. The ‘going concern assumption’ is otherwise known as the ‘periodicity assumption’.

4. Subsidiary ledgers are used only for accounts receivable and accounts payable.

e. For information to be classified as personal it should be true and sensitive.

2. Describe two (2) instances when the customer’s personal information can be disclosed?

Answers 1. (a) False(b) False(c) False(d) False(e) False2. The instances are:

1. Disclosure where the individual was aware.2. Disclosure is authorised or required under the law.


Activity 2

1. Is it always advantageous to avail of discounts? Explain your reasoning.

Answers 1. No. It is only advantageous if the benefits or savings outweigh the costs (opportunity costs).

Activity 3

1. Which is better? Explain your answer in no more than three (3) sentences.

a. Relaxed credit policy together with a strict collection policy.b. Strict credit policy together with a relaxed collection policy.

2. True or False. Sales can only be entered after a customer card for the

specific customer has been created. A sales order serves as the document for tracking the delivery

of a shipment.

Answers

1. Choice B is better. If customers are screened scrupulously according to the 5 C’s of Credit and other relevant tools, there would be fewer problems encountered in the collection process. Responsible customers would most likely pay their dues on time to preserve their creditworthiness.

2. True or False. True False


Activity 4

1. Enumerate three (3) sectors or industries where debt collection procedures are very important according to the ACCC and ASCI Debt Collection Guidelines.

2. True or False.

It is common practice to send Statements of Accounts to customers on a monthly basis.

It is good practice to cut off the credit of customers in default for the first time.

Answers:

1. Financial Services, Energy, Telecommunications, Education, Healthcare, Government

2. True or False. True False


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