Post date cheque payments - how to record or monitor in Simply Accounting

Sage 50 Accounting - Canadian Edition

Sage 50 Accounting - Canadian Edition
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Post date cheque payments - how to record or monitor in Simply Accounting

  •  What is the best way to record and monitor post dated cheques paid for by customers.

    Our Situation.  Some customers are suppose to make a one time payment.  Instead, the business owner allows valued customers to pay by post dated cheques (PDC) spread over a period of one year.  I would select "Cash to be deposited" account (account class is bank) to record these payments.  This is perfect as the receivable becomes nil and would select and deposit the cheque from this account at cheque date.

    The Problem.   I am unable to record PDC's beyond the company's fiscal period  and for these PDC's not recorded, AR aging shows a balance equal to the PDCs not receipted.

    Help Needed. (1)  To continue on with our existing procedure, how can I enter PDC's beyond our current fiscal period without starting a new year? (2) Is there a better Simply Accounting functionality that I could use?

    Any help will be greatly appreciated.  Thanks.

    /joven

     

  •  Hi,

    If this is something you must be able to do, you can open the next fiscal period, but continue to work in the present one.  This will permanently close the fiscal period just past.

    I understand that this process is working for you.  Having post dated cheques in a pending file isn't yet money in the bank, so the presentation of the receivable on your books as a receivable is technically correct.  Post dated cheques have a shaky legal standing.  T

    What your company is doing sounds like instalment payments, which can be accounted for differently than a regular account receivable.  (but only if title to the sold goods pass at the end of the contract rather than at the beginning.

  •  Hi Randy:

    I would say, our total receivable is AR + Cash for deposit.  Our fiscal period ends in AUG, but to date we have PDCs up to JUL 2012. 

    This is not a real installment sales.  Our business requires us to collect insurance premiums from our clients and remit collected amounts to our principals.  In our situation, we paid the principal in advance and will collect the amount in installment and in periods convenient to the customer.  I do not want to do year-end because it closes the current fiscal period which is wrong because our fiscal period ends in AUG.

    Considering the above explanation, can you suggest any better way to account and monitor PDC?  Thanks.

  • Hi:  The correct way to deal with post dated cheques is to record them into your system ONLY when the cheque is actually deposited to the bank.  On the day you do the deposit each month for all the post-dated cheques, record the deposit and the corresponding receipts in the A/R module (which I presume is set up to be received).  Having all those post-dated cheques sitting in a Cash to Be Deposited account is incorrect bookkeeping.   The amount showing for your Receivables should be the correct amount, not a "net" amount of all the post-dated cheques you have taken off the customer's accounts and put in to the "Cash to Be Deposited" account.    And you are right, you do not want to roll forward to a new fiscal year until you are past your year end date.   That would be a real headache!    Rita  

  •  Hi Rita and to everyone:

    I wanted to add that the reason why I moved AR to cash to be deposited is so that we can focus on accounts where we do not have post dated cheque.  To understand it better, the entries are as follows:

    (1)     Record a receivable from customer as an agent of the insurance company.

    DR          Accounts receivable

                    CR           Accounts payable – Insurance Company

    This is recorded when the insurance coverage takes effect.  We must collect from the customer and remit to the insurance company at 45th day

     

    (2)    At 45 days, we remit to the insurance company whether we have collected from the client or not.

    DR          Accounts payable – Insurance Company

                    CR           Cash

    Since some customer pays by post dated cheque over a year, our AR aging would have balances beyond 330 days, which is also wrong, because we have already agreed on installment payment.  

    How do I avoid having aged receivable of 334 days, if I am to issue receipts when it is time to deposit the PDC?  When an aging report is generated, is there a way or functionality that I could use to exclude clients who are on postdated cheques?

    As always, thank you for your help.

     

  •  Hi:  When you generate an accounts receivable aging report there is a choice to "Select All" so that all your customers are included in the report.  If you have quite a number that have given you post dated cheques, don't use the Select All choice.  You choose which customers you want to include on the list by just hiliting those and leaving off any that you have PDC's on hand.   Give that a try and see what you come up with and if it will work for you.  

    The other thing you can do is export your A/R customer aged report to Excel and do whatever you want to it in there, leaving out the ones with PDC's while still seeing them, but being able to deal with just the ones that you need to focus on for collections.    Just a couple of suggestions that might be suitable for your practical needs.   

    You should not be recording the PDC's before they are deposited though.  That is still not proper bookkeeping.    Rita 

  •  Hi,

    If your business needs to continue using the mechanics of the system that you are using now, you can open your upcoming fiscal year, and leave the present year open.  The consequences of doing that are:

    1.  The current default date can't be earlier than the beginning of the new fiscal year, and

    2.  You will be warned, for every transaction that you post, that it is in the previous year, etc, etc.

    Therefore, if you have a large number of transactions to enter into the current fiscal year, you probably want to hold off, and just keep these cheques in a file, to enter after you open the next fiscal year.

    Posting a cheque as of it's face date will have no effect on any report printed 'as of' a date, prior to the cheque.   Recording that an account is paid on August 15 will not affect the August 14 report.  Even if that was an issue, it's generally understood that interim accounting reports are incomplete (missing accruals, depreciation, tax liabilities, etc.) and can't be issued publicly.  

    Simply Accounting does not have features to support a series of due dates and revenue recognition points, for a single invoiced sale.  This is what's needed to properly record subscriptions, progress billings on projects, etc.  (i.e. you can't sell 0.2 of a list of serial numbered items).

    As I understand it the business you describe, properly accounting for one sale to be paid over 12 months, would probably require that you record 12 separate sales invoices to 'sell' the insurance, and 12 separate expenditures to 'buy' the insurance. 

    Or, it requires that whoever is preparing the final financial statements fully understands the business, and records the necessary acruals and / or reserves.