Closing and Reconciling AR

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

2. Agenda • Sarbanes Oxley and Your Close • The Close • Formal Close Schedule • Period Close Activities to Do In Advance • Close Checklist • Reconciling AR to the Aging • Document Your Account Activity • Reconciling AR to GL • Improve Your Close Process Copyright @ 2007 Cathy Cakebread

3. Sarbanes Oxley and Your Close • CFO, CEO Certify Financial Report Accuracy (302) • Document and Disclose Internal Controls and Procedures (302) • Insure That Company Transactions Are Properly Reported and Controlled (404) • Establish and Maintain Proper Internal Controls and Procedures (404) • Timely Financial Reporting Copyright @ 2007 Cathy Cakebread

4. The Close • Visibility • Too Much to Do • Not Enough Time • STRESS! Copyright @ 2007 Cathy Cakebread

5. Relieve The Stress! • Brevity! • Accuracy! • Control! Suggestions: • Take advantage of a Close Schedule • Use a Close Checklist • Create Standard Reconciling Procedures Copyright @ 2007 Cathy Cakebread

6. Use A Formal Close Schedule • Clear Cut-Offs / Deadlines • Defined In Advance • Consistency • Useful For: • Bank Deposits • Shipments • Inter-company Activity • Miscellaneous Cash • Other Interfaces • Avoiding the “Just One More Thing” Syndrome Copyright @ 2007 Cathy Cakebread

7. Period Close Activities – Complete in Advance • Accept/Reject Adjustments • Complete/Delete Incomplete Transactions • Resolve AutoInvoice Rejects • Clear Lockbox Exceptions • Transfer Data to the General Ledger • Run Revenue Recognition Process • Enter Miscellaneous Cash • Apply Unapplied Cash Copyright @ 2007 Cathy Cakebread

8. 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 Copyright @ 2007 Cathy Cakebread

9. Use a Close Checklist • See What You Need to Do • And, The Sequence To Do Them • Know What is Done • And, What is Left to Do Copyright @ 2007 Cathy Cakebread

10. 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 Close Checklist - Sample Copyright @ 2007 Cathy Cakebread

11. Reconcile AR to the Aging • AR Reconciliation Report (11i) and • Starting Aged Trial Balance • Transaction Register • Applied Receipts Register • Unapplied Receipts Register • Adjustment Register • Invoice Exceptions Report • Currency Gains/Losses Report • Ending Aged Trial Balance Copyright @ 2007 Cathy Cakebread

12. Reconcile AR to Aging Copyright @ 2007 Cathy Cakebread

13. A Few Tips • Journal Entries Report – Summary By Category • Verify That No Illogical Entries (AR vs. No AR in Category) • Transaction Register (Split by Company and Currency) • Invoices, Debit Memos, Credit Memos, Commitments • Credit Memo Total Should be Negative • Watch Bottom Total in 11.5.9 – includes ALL Currencies • Applied Receipts Register – • Add Totals and Multiply by -1 • Result May be Negative or Positive • Note that Total Does Not Include Discounts (in 11.5.9) • Note: Cash Received Does Not Equal Amount Applied! • Adjustment Register (May be Negative or Positive) • Invoice Exceptions Report (Items Not Aged but they appear on the Transaction Register) Copyright @ 2007 Cathy Cakebread

14. Reconciling Items? • Inconsistent Use of Dates • Always Use First Date to Last Date • Use of Wrong Sign • Buggy Version of a Report • Improper Entry on Spreadsheet • More Than One AR Period Open at a Time • Watch Currency and Company Copyright @ 2007 Cathy Cakebread

15. Document Accounting Activity • Key Accounts • AR, Cash, Unapplied Cash… • What Does AR Say? • Journal Entries Report • What Does GL Say? • Account Analysis Report • Are There Differences? Copyright @ 2007 Cathy Cakebread

16. Reconcile AR to GL Copyright @ 2007 Cathy Cakebread

17. Tie AR to GL • GL Ending Balance • +/- Current Period Manual Journal Entries • +/- To Date Manual Journal Entries • Should Equal: • Aged Trial Balance by Account (at the end of the period) Copyright @ 2007 Cathy Cakebread

18. Differences Between AR and GL? • Why Are There Differences? • Account Usage From Other Sources • Manual Journal Entries • Journal Import Not Completed Successfully • Changes to Standard Accounts, e.g., Unapplied Cash • Improper Setups • Unposted Items Copyright @ 2007 Cathy Cakebread

19. 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? Copyright @ 2007 Cathy Cakebread

20. 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 Copyright @ 2007 Cathy Cakebread

21. 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 Copyright @ 2007 Cathy Cakebread