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

Cathy Cakebread2 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

Cathy Cakebread3 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

Cathy Cakebread4 The Close Visibility Too Much to Do Not Enough Time STRESS! STRESS!

Cathy Cakebread5 Relieve The Stress! Brevity! Accuracy! Control! Suggestions: Take advantage of a Close Schedule Use a Close Checklist Create Standard Reconciling Procedures

Cathy Cakebread6 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

Cathy Cakebread7 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

Cathy Cakebread8 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

Cathy Cakebread9 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

Cathy Cakebread10 Close Checklist - Sample TASKDESCRIPTIONPROCESSED 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

Cathy Cakebread11 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

Cathy Cakebread12 Reconcile AR to Aging

Cathy Cakebread13 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 – 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 )  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)

Cathy Cakebread14 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

Cathy Cakebread15 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?

Cathy Cakebread16 Reconcile AR to GL

Cathy Cakebread17 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)

Cathy Cakebread18 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

Cathy Cakebread19 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?

Cathy Cakebread20 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

Cathy Cakebread21 Good Luck! Cathy Cakebread Consultant See for more paperswww.cathycakebread.com For this paper: (650)