Opening Balances - Accounts Receivable

It is necessary to enter open A/R invoices to compile the accounts receivable opening balance. These invoices are entered as service invoices so that they do not affect inventory. Inventory has already been accounted for by this point. These invoices are tax exempt as the entry to the tax accounts are made as lump sum entries during the opening balance journal entry for the non-control accounts. The offsetting account for this invoice is the Opening Balance - Accounts Receivable G/L account.

If there are foreign currency A/R invoices to be entered then an average exchange rate has to be calculated to ensure that the local currency and the foreign currency balances match the trial balance from the legacy system. For example if the A/R Foreign G/L account needs to have a foreign currency (i.e. USD) balance of $ 435,119.56 and a local currency (i.e. CDN) balance of $528,366.21 then the exchange rate becomes:

• LC Balance / FC Balance = 528,366.21/435,119.56 = 1.214

This rate should be entered for a day within the opening balance month and all foreign A/R invoices need to be posted on this day.

The due dates for the opening A/R Invoices should be accurate to aid with aging and customer statements. In addition a reference to the legacy system invoice number should be entered on the A/R Invoice for reference purposes and reconciliation to the previous system.

Timing

These entries although not critical to have done before go-live will need to be completed prior to the first month end when customer statements have to be generated. If the opening A/R Invoices have not been entered and a payment is received, the invoice must quickly be keyed in before the payment can be processed

Validation

Once the opening A/R Invoices have been keyed into SAP the accountant can quickly confirm the balance in the A/R account(s) under the general ledger. If the balances do not match the original trial balance from the legacy system then an Aging report (or trial balance by business partner) will have to be printed from SAP. This document can then be used to validate each individual customer balance to determine where the variance occurs. Most often a document is missed or added more than once.

Requirements

If the client is entering the A/R invoices manually it is anticipated to take approximately 1.5-2 minutes per invoice. This means that an individual can enter 30–40 invoices per hour. If you have approximately 600 invoices you can expect it would take someone 20 hours or almost three working days to key in the open A/R Invoices.

If ProjectLine is importing the invoices the client must provide a Microsoft Excel file containing the required information. An import template will be provided to the client by a ProjectLine implementation consultant. The time it takes to do an import can largely depend on the state of the data but generally it takes between 8-12 hours.

Exceptions if Historical Entries are Required

If the client requires that historical months be accounted for in SAP then the process for the entry of accounts receivable changes slightly. Detailed invoices for each client are not entered into the system. Instead a lump sum A/R Invoice is added to a dummy business partner (accounts receivable is a control account which cannot be posted to directly).

Every month the delta between the balance of the previous month and the current month must be posted as a lump sum invoice against the dummy business partner. For example:

In September the accounts receivable balance (CDN) needs to be $100,000.00 so a single A/R Invoice is posted against a business partner called zzSAPOBCUSTCDN. The invoice is entered in the same fashion as detailed above with the exception that there is no legacy reference as it is a lump sum entry. The A/R Invoice is for $100,000.00.

In October the accounts receivable balance needs to b $125,000.00 so an A/R Invoice is posted against the zzSAPOBCUSTCDN business partner for $25,000.00. This brings the total accounts receivable balance up to $125,000.00 for October.

Once the historical entries are finished and the detailed opening balance A/R Invoices are ready to be entered into the opening balance month then the dummy business partner account must be reversed entirely using a credit memo. If this is not done the accounts receivable will end up being twice what it should be.

Additional Notes

A/R credit memos can be entered in exactly the same way as the A/R Invoices as indicated above.