Accounts Payable and Receivable:

Q.   I have some Accounts Receivable invoices that are a couple of years old. What's the best way to handle them in FBS?


A.  First, let's determine what should be included with accounts receivable (A/R) and accounts payable (A/P) based on generally accepted accounting principles (GAAP). A/Rs are considered current assets and A/Ps current liabilities--normally open only for 30-60 days. When these invoices get "long in the tooth," (i.e., 365 days old!) they no longer qualify as current assets or liabilities so they need to be either converted to notes receivable or payable or written off entirely.


This issue comes up frequently with large FBS clients with multiple employees or business entities. In one scenario an employee or business partner may have fallen behind on payments to the farm entity. In another example one "captive" business entity intentionally delays payment to another entity or owner to manage tax liability or cash flow. Rarely is a formal promissory note created, instead these transactions remain classified as A/Rs and/or A/Ps and income or expense not "booked" until cash is received.


In addition to non-standard financial reporting, treating these notes payable/receivable as accounts payable/receivable creates reporting challenges in FBS, since reports must "know" how many months back to search for the original invoices. That capability is controlled by an FBS preference called "Cash Look Back Months," which can be adjusted up to 72 months. Keep in mind, though, the further back in time a report searches, the longer it will take to run.




Q.  I was running my A/P Detail Report using option 7 (Invoices with Payments) to check for errors at the end of the month and there are a lot of entries up at the top in orange.  What does that mean? 

A/P Report Option 7
A/P Detail Report Option 7


 A.  Orange indicates an error with the entry.  If there are several lines in orange and you need to determine the issue, I recommend noting the vendor and then re-running the report for just that vendor. 




AP Overpaid Example
Orange indicates missing, duplicate or unlinked invoices or payments.


Reasons for errors:


  1. Time between an invoice and payment exceeds the 12 month default.
  2. Invoices are open (unpaid) for more the the 12 month default.
  3. Pay date is prior to invoice date.
  4. Payment without a matching invoice. 

 (Note that this scenario applies to Accounts Receivable as well as Accounts Payable.)


Corrective actions:



1.  If the A/P invoice is correctly linked to a check (i.e. the invoice numbers and amounts match) examine the invoice and pay (check) dates



  • If the check date is prior to the invoice date, drill-down to the invoice by (right-clicking) and change its date to an earlier date.
  • If the number of days between the invoice and payment dates is greater than 365, go to Utilities | Preferences and change the Cash Look Back Months to the appropriate interval.  (Note that extending this period will slow some reports.)



Cash Look Back Preference
Cash Look Back Preference


Items #2-4 below are all caused by "breaking" the link between invoices and payments.




2.  Identical invoice numbers for the same vendor.  Although the A/P and A/R entry screens warn you if you try to enter the same invoice number for the same vendor in the same year this is still a possibility.  To correct:



  • First change the number for one of the duplicate invoices.
  • Then change the description column in the payment (check) to the new number.  

3.  Invoice numbers in check descriptions don't match any invoice.  This is sometimes caused by using blanks or unusual characters in the the original invoice, but the most common cause is from someone editing the automatically-assigned invoice numbers in description columns in A/P payments.  To correct this, change the descriptions back to the invoice number.


4.  Payments made to the wrong invoices.  This may be crossing-up by two invoices for the same amount or partial payments for the wrong combination of invoices.  This simplest fix is to delete the check (which resets the invoices as "unpaid," then re-select the correct invoices for payment and use the same check number (without printing the check).


Once you have made corrections refresh the A/P Detail Report and check for other orange lines.  If they don't go away, close the report and go to Utilities | Recover Bad Data and check the Accounting box, then run the report again.   Note that you may have to repeat this process several times.




Q.  If I run my balance sheet by division will it properly display my outstanding A/P and A/R  liability and asset division balances?


A.  When you record an accounts payable or accounts receivable invoice you can assign each line to a division.  If all the expense or income account lines of the invoice are coded to the same division then the offsetting liability or asset accounts will also be coded to that same division.  But if you have a multi-line invoice and more than one division is used, the entire asset or liability balance will be coded to division assigned on the first line of the invoice.  Therefore, if you need a true balance sheet by division, never inter-mingle divisions within an A/P or A/R invoice





Q. What's the best way to handle an Accounts Receivable invoice that has been outstanding for a long time and which you no longer expect to be paid? In other words, how do you write-off a “bad” A/R?

A. One approach to write off an old A/R invoice—yet maintain a balanced general ledger—is to enter a new A/R invoice in the same accounting year as the “bad” A/R. Use the same Ledger Account, Center, and Division as the original entry except reverse the amount. To document the purpose of this entry, type something like “Write off A/R ####” in the Description field (where “####” is the original invoice number). Also remember that whenever you make changes in a prior accounting year, you must re-create accounting beginning balances (Utilities Create Beginning Balance) and to re-calculate retained earnings (General Input Accounting Calculate Retained Earnings) for each succeeding year.

Note when following this procedure, the original and offsetting invoice can either remain “open,” or are both paid on the date the decision is made to write-off the original A/R.

Other options are also available for handling this tricky transaction. Remember to always consult with your accountant before making changes in a prior accounting period.






Q. My A/P Aging Report doesn't match my User Defined (UD) Report for the A/P ledger account, and when I run a detail report option 7 there are a lot of unmatched entries. What is going on?

A. Several things are possible. First, check the date range of the report. All A/P invoices should have due dates, and when running the Aging Report the date range needs to look far enough in the future to include these dates, otherwise it will not match the UD Report. The date range for both the Aging and the UD R

Next run the A/P Detail Report using option 7 (Invoices with Payments), making sure that the date range begins with the date of the earliest invoice date on the invoice for which the payments have been made. For example, if you received money on 7/1/09 for an invoice that had an invoice date of 5/1/06 you would need to open up your date range to include 5/1/06 so that you have an invoice to match the payment up with. In doing so, you can see the unmatched entries and look for errors, mismatched vendors, invoice # typos, double payments, etc. The errors or unmatched entries will be shown in orange. Fix the errors that are shown; overpayments can be fixed by putting in a dummy invoice for the amount and then entering a credit invoice.

Some things to look for:

  • Payments entered as a check (or deposit) entry instead of through the A/P payment routine.
  • Vendors or invoice numbers that don't match. For example, if the invoice was to "ABC Farm" and you applied the payment to "Abc Farm," the system will consider these two different vendors. Or if the invoice number was typed in as "12345" and when paying with a check it was entered as "012345," again the system will not match up to two entries because of the variation in the invoice numbers.
  • If a payment or invoice is altered or edited it could cause it to unlink. Along those same lines if there was a change to the amount due field after a payment was made, resulting in an overpayment, you would see an unmatched entry. The last few things to keep in mind are that if data recovery was run on another machine which didn't have the year's data that contained the original invoice or that entries were made on an older version of FBS software, a version which allowed the description on payment to be changed. If data recovery was then run on the newer version the link would be removed because of invoice numbers no longer matching. The system will also flag an entry if you have an invoice that has been open for a long period of time, say several years, there may not be a problem with the entry, but the system will still flag it because it has been outstanding for so long.

    After the errors are fixed, Run Utilities Recover Bad Data for all the years that were edited and then re-run the A/P Detail Report using option 7 to match up all the entries correctly. Once you have all of the unmatched entries cleared up, rerun your Aging Report. If it’s still not correct, drill down to the source entries drilling down into the entries and check for the following:
  • Make sure that you don't have an invoice dated after the due date (for example, an invoice dated for 6/30/09 and a due date as 1/15/09).
  • Check that the beginning balance of the current year matches the previous year’s ending balance.

    Here are a few tips to avoid A/P and A/R errors :
  • Always use the Pay A/P Entries for writing checks or the A/R Money Received for recording deposits rather than going through the standard Checks or Deposits screens.
  • Be aware of your invoice and due dates; for the Aging Report to work correctly these dates need to be recorded and they need to be correct.
  • When selecting vendors during A/P or A/R Invoice entry maker sure there are not duplicate vendors with similar names.
  • Get into the routine of running the A/P and A/R Detail Reports using Option 7 on a regular basis to trap unmatched entries and errors to correct them in a timely manner instead of allowing them to accumulate.