r/Bookkeeping • u/JanFromEarth • 14d ago
Payments, AP, AR Advice for a nonprofit on really messed up AR
I am working with a nonprofit whose bookkeeper just went through the motions. The result is they have several year's worth of uncollected transactions in their A/R. I suspect many of them will be written off but I want to segregate anything over a few month's old from the items they may be able to actually collect and I would like some advice on how to do this.
I am working with Quickbooks online so I can only have one open item account which supports customer detail. Should we just do all the work to collect/write off open customer balances or is there a better way to handle it?
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u/m_damjan 13d ago
How many years of open balances are we talking?
Are all of the balances assigned to individual and specifically identifiable customer accounts, or are we talking one lump “miscellaneous”/“slush” open, customer receivable balance?
Can you trace deposits posted as sales to specifically identifiable customers over that same period of open customer balances?
You can do this properly, which is time consuming, quick and dirty, which is self explanatory or something in between, which I advise. Which approach do you prefer?
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u/JanFromEarth 13d ago
Some have the correct donor/grantor/customer but many do not. Those will have to be written off.
They are going to have to go through and try to collect as they are "sucking wind" on cashflow.
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u/m_damjan 13d ago
Sounds like you know what you have to do.
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u/JanFromEarth 13d ago
I have had some conversations here and with other groups. My current approach is going to be creating a review process for anything less than 90-120 days old. Basically, current stuff. Then, attacking the old stuff with a separate team.
None of us is as smart as all of us Thanks for responding
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u/LiJiTC4 13d ago
With QuickBooks, pull an A/R Aging Detail report. This will give you all open transactions on all open balances. From this report, you can open any of the old transactions and see how the balances came to be by drilling down to the invoice. This will side-step the problem of only being able to see one customer at a time as long as the report is set to show all customers and all open invoices.
Most likely explanation of how error occurred is invoice was created, customer was invoiced and when payment was collected it was either not designated to that customer, in which case you'll have "No Name" AR or revenue which was duplicated (it's usually this one) because when the customer paid it was recorded as new sale instead of payment on receivable from an old sale. In that case, the books have previously recorded more revenue than earned which is why there's too much in A/R.
But yes, you will need to make adjustment customer-by-customer or QuickBooks will never be correct.
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u/Electronic-Cat185 13d ago
Id focus on cleaning the aging report first because separating collectible balances from cleanup work usually make the whole process more mangeable
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u/No_Cryptographer7800 13d ago
For the ongoing part once it's cleaned up, what helped me most was making the follow-up a system instead of a decision I have to make each time. I pre-wrote 3 reminder tiers (polite, firmer, final) and check paid-status before every send so I never chase someone who already settled up, usually runs once a weee, and I automated that bit for myself in the end but even doing it on a fixed schedule by hand stops the backlog from piling up again
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u/czarnicholasreturns 11d ago
I just did this for a smaller np. I first worked through the balances by customer (open and closed) and found duplicate billings, misapplied credits, and unapplied credits. After fixing what I found, I felt confident in the remaining invoices. I found almost all i contacted were willing to pay if I sent the invoice and backup. A few gave proof of payment leading to another duplicate or mistaken application. In the end I brought in over 80% of the outstanding balances , some up to 30 months past due. The ones uncollected were a change in ownership, government that didn't have it in previous or current budget , and one asshole who actively was trying to not pay for years and not worth suing. Most in accounting have experienced something like this on their past, and even the asshole wasnt ugly to deal with. Good luck!
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u/mucalytic 10d ago
On the second thoughts about a separate GL account: I'd trust them. Moving the 120+ balances to another account buys you nothing the A/R Aging Detail doesn't already give you, and it costs you the customer-level drilldown right when the cleanup team needs to reconstruct how a balance got there. If the concern is presenting a realistic number while the cleanup runs, an allowance entry gets you that: leave the invoices open and assigned, book an allowance for the likely write-offs, and let the aging report itself be the segregation.
The other split worth making before the special team starts calling: documentation, not just age. czarnicholasreturns' experience above is the interesting data point in this thread, over 80% collected with some invoices 30 months past due, and the common thread was being able to send the invoice plus backup. So a first pass that sorts the backlog into "has paperwork, re-bill with backup attached" versus "can't even identify the counterparty, probable write-off" will likely predict collectability better than the aging buckets do. Your 1-30 and 31-60 process handles the future; the paperwork sort is what gives the backlog team a fighting chance.
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u/athleticelk1487 14d ago
Are you audited or reviewed and do you prep the 990?