Closing and
Reconciling AR
Cathy Cakebread
Consultant
NorCal OAUG – January 2007
Agenda
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Sarbanes Oxley and Your Close
The Close
Formal Close Schedule
Period Close Activities to Do In Advance
Close Checklist
Reconciling AR to the Aging
Document Your Account Activity
Reconciling AR to GL
Improve Your Close Process
Copyright @ 2007 Cathy Cakebread
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Sarbanes Oxley
and Your Close
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CFO, CEO Certify Financial Report Accuracy
(302)
Document and Disclose Internal Controls and
Procedures (302)
Insure That Company Transactions Are Properly
Reported and Controlled (404)
Establish and Maintain Proper Internal Controls
and Procedures (404)
Timely Financial Reporting
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The Close
Visibility
 Too Much to Do
 Not Enough Time
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 STRESS!
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Relieve The Stress!
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Brevity!
Accuracy!
Control!
Suggestions:
 Take advantage of a Close Schedule
 Use a Close Checklist
 Create Standard Reconciling Procedures
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Use A Formal Close Schedule
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Clear Cut-Offs / Deadlines
 Defined In Advance
 Consistency
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Useful For:
 Bank Deposits
 Shipments
 Inter-company Activity
 Miscellaneous Cash
 Other Interfaces
 Avoiding the “Just One
More Thing” Syndrome
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Period Close Activities –
Complete in Advance
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Accept/Reject Adjustments
Complete/Delete Incomplete Transactions
Resolve AutoInvoice Rejects
Clear Lockbox Exceptions
Transfer Data to the General Ledger
Run Revenue Recognition Process
Enter Miscellaneous Cash
Apply Unapplied Cash
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The Actual Close
Complete All Interfaces
 Enter Final Transactions
 Clear Exceptions
 Verify Accounting Entries
 Transfer to General Ledger
 Close the Current Period
 Open the New Period
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Use a Close Checklist
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See What You Need to Do
 And,
The Sequence To Do Them
Know What is Done
 And, What is Left to Do
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Close Checklist - Sample
TASK
DESCRIPTION
PROCESSED
BY
1.
Complete manual payments and adjustments for
the period and cleanup of “Out of Balance” batches
2.
Complete final Projects Streamline Process
3.
Complete final Receivables Interface from Order
Entry
4.
Complete manual invoices and credit memos
5.
Run your final AutoInvoice process
6.
Correct all AutoInvoice rejects and re-run
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Reconcile AR to the Aging
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AR Reconciliation Report (11i) and
Starting Aged Trial Balance
 Transaction
Register
 Applied Receipts Register
 Unapplied Receipts Register
 Adjustment Register
 Invoice Exceptions Report
 Currency Gains/Losses Report

Ending Aged Trial Balance
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Reconcile AR to Aging
ACTIVITY
SOURCE
Starting Balance
Aged Trial Balance - Old
Invoices
Transaction Register
Debit Memos
Transaction Register
Credit Memos
(
) Transaction Register
Transaction Register Subtotal
Applied Payments (
) Applied Receipts Register (Applied Amount Total)
Discounts Taken (
) Applied Receipts Register (Earned Discount + Unearned Discount)
Unapplied Activity (
) Unapplied Receipts Register
(On-Account Amount + Unapplied Amount) * -1
Adjustments Register
(may be + or -)
Adjustments
Items Not Aged
(
) Invoice Exceptions Report
TOTAL
Ending Balance
Aged Trial Balance - New
Difference
Should be 0
(Total - Ending Balance)
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A Few Tips
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Journal Entries Report – Summary By Category
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Transaction Register (Split by Company and Currency)
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Invoices, Debit Memos, Credit Memos, Commitments
Credit Memo Total Should be Negative
Watch Bottom Total in 11.5.9 – includes ALL Currencies
Applied Receipts Register –
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Verify That No Illogical Entries (AR vs. No AR in Category)
Add Totals and Multiply by -1
Result May be Negative or Positive
Note that Total Does Not Include Discounts (in 11.5.9)
Note: Cash Received Does Not Equal Amount Applied!
Adjustment Register (May be Negative or Positive)
Invoice Exceptions Report (Items Not Aged but they appear on the
Transaction Register)
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Reconciling Items?
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Inconsistent Use of Dates
 Always
Use First Date to Last Date
Use of Wrong Sign
 Buggy Version of a Report
 Improper Entry on Spreadsheet
 More Than One AR Period Open at a Time
 Watch Currency and Company
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Document Accounting Activity
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Key Accounts
 AR,
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Cash, Unapplied Cash…
What Does AR Say?
 Journal
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Entries Report
What Does GL Say?
 Account
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Analysis Report
Are There Differences?
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Reconcile AR to GL
ACTIVITY
Balance to
Aging
Journal Entries
Report Totals
AR1
AR2
Cash1
Cash2
Unapplied
Starting Balance
Invoices
Debit Memos
Credit Memos
CM - Application
Applied Payments
Discounts Taken
Unapplied Activity
Adjustments
Items Not Aged
Manual - Journal Entries
Cash-AR
Cash-Misc.
Unapplied Cash
NEW BALANCE
NEW REPORT TOTALS
Difference
Current JE's
JE's To Date
TOTAL
ATB- By Account
Difference
Note - Unapplied activity impacts ATB but is included in the applied receipts total when posted to GL
New Report Totals = The New Aging and The Account Analysis Reports (gray areas are from the Account Analysis Report)
Add NEW BALANCE to JE's (current and to date) - should = ATB by Account totals
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Tie AR to GL
GL Ending Balance
 +/- Current Period Manual Journal Entries
 +/- To Date Manual Journal Entries
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 Should Equal:
 Aged Trial Balance by Account (at the end of
the period)
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Differences Between
AR and GL?
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Why Are There Differences?
 Account
Usage From Other Sources
 Manual Journal Entries
 Journal Import Not Completed Successfully
 Changes to Standard Accounts, e.g., Unapplied Cash
 Improper Setups
 Unposted Items
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Balancing Cash
May Be Included in the Process Above - or
Separate
Accounts Shared with Accounts Payable?
Keep Batches Clean
Reconcile With Bank Deposits
 Deposited Cash Reports
 Cash Management
Have Procedures for Re-Entry of Prior Period
Data
What About Credit Card Receipts?
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Improve Your Close Process
Resolve Inappropriate Usage of
Accounts
 Reduce Manual Journal Entries
 Suggest Process Improvements
 Get In the Habit of Pre-Doing as Much
As You Can
 Create and Use a Close Schedule
 Use a Close Checklist
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Good Luck!
Cathy Cakebread
Consultant
See www.cathycakebread.com for more papers
For this paper: www.cathycakebread.com/close
cathyc@cathycakebread.com
(650) 610-9130
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