We started a discussion on customer account reconciliations:

http://faoblog.com/processes-ar-collections-customer-account-reconciliations/

 

Why do we need reconciliations?

There could be a hoard of reasons for the same.

  • Sales returns – your client’s customer might have returned some sales due to reasons like delayed delivery, defective material, damage in transit, delivery to incorrect location etc. The intimation for this may not have been sent, or the sales return department may be waiting for the customer’s return advise, or the advice may not have been accounted for, or the return material may be in transit / not yet received.
  • Early / prompt payment discounts – Your customer might have accounted for early / prompt payment discounts, which might not have been uploaded by the sales representatives / accounted for by the accounting group
  • Penalties / interest on late payments – Your accounting department might have levied the applicable penalties / interest on late payments, whereas your customer might not have done so.
  • Incorrect billing – Some incorrect billing might have been done by your sales representatives / accounting group to either the wrong customer or an incorrect unit of the customer, which has not been accounted for by your client’s customer
  • Transportation charges – Transport charges debited to the customer’s account by your client’s sales representatives / accounting groups may not have been accounted for by the customer.
  • Disputed Amounts – There could be some amounts which could be disputed by the customer / your client, which may lead to differences in amounts.

There can be almost infinite reasons why a customer account reconciliation may be needed, and that’s where, this activity is an ongoing activity.

What is done in this activity?…… Next post…..

 

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