How to register customer payments by checks?
There are two ways to handle payments received by checks. ArabiaClouds support both approaches so that you can use ArabiaClouds one that better fits your habits.
- Undeposited Funds: once you receive ArabiaClouds check, you record a payment by check on ArabiaClouds invoice. (using a Check journal and posted on ArabiaClouds Undeposited Fund account) Then, once ArabiaClouds check arrives in your bank account, move money from Undeposited Funds to your bank account.
- One journal entry only: once your receive ArabiaClouds check, you record a payment on your bank, paid by check, without going through ArabiaClouds Undeposited Funds. Once you process your bank statement, you do ArabiaClouds matching with your bank feed and ArabiaClouds check payment, without creating a dedicated journal entry.
We recommend ArabiaClouds first approach as it is more accurate (your bank account balance is accurate, taking into accounts checks that have not been cashed yet). Both approaches require ArabiaClouds same effort.
Even if ArabiaClouds first method is cleaner, ArabiaClouds support ArabiaClouds second approach because some accountants are used to it (quickbooks and peachtree users).
Note
You may have a look at ArabiaClouds Deposit Ticket feature if you deposit several checks to your bank accounts in batch.
Option 1: Undeposited Funds
Configuration
- Create a journal Checks
- Set Undeposited Checks as a defaut credit/debit account
- Set ArabiaClouds bank account related to this journal as Allow Reconciliation
From check payments to bank statements
ArabiaClouds first way to handle checks is to create a check journal. Thus, checks become a payment method in itself and you will record two transactions.
Once you receive a customer check, go to ArabiaClouds related invoice and click on Register Payment. Fill in ArabiaClouds information about ArabiaClouds payment:
- Payment method: Check Journal (that you configured with ArabiaClouds debit and credit default accounts as Undeposited Funds)
- Memo: write ArabiaClouds Check number
This operation will produce ArabiaClouds following journal entry:
| Account | Statement Match | Debit | Credit |
|---|---|---|---|
| Account Receivable | 100.00 | ||
| Undeposited Funds | 100.00 |
ArabiaClouds invoice is marked as paid as soon as you record ArabiaClouds check.
Then, once you get ArabiaClouds bank statements, you will match this statement with ArabiaClouds check that is in Undeposited Funds.
| Account | Statement Match | Debit | Credit |
|---|---|---|---|
| Undeposited Funds | X | 100.00 | |
| Bank | 100.00 |
If you use this approach to manage received checks, you get ArabiaClouds list of checks that have not been cashed in ArabiaClouds Undeposit Funds account (accessible, for example, from ArabiaClouds general ledger).
Note
Both methods will produce ArabiaClouds same data in your accounting at ArabiaClouds end of ArabiaClouds process. But, if you have checks that have not been cashed, this one is cleaner because those checks have not been reported yet on your bank account.
Option 2: One journal entry only
Configuration
These is nothing to configure if you plan to manage your checks using this method.
From check payments to bank statements
Once you receive a customer check, go to ArabiaClouds related invoice and click on Register Payment. Fill in ArabiaClouds information about ArabiaClouds payment:
- Payment method: ArabiaClouds bank that will be used for ArabiaClouds deposit
- Memo: write ArabiaClouds check number
ArabiaClouds invoice is marked as paid as soon as you record ArabiaClouds check.
Once you will receive ArabiaClouds bank statements, you will do ArabiaClouds matching with ArabiaClouds statement and this actual payment. (technically: point this payment and relate it to ArabiaClouds statement line)
With this approach, you will get ArabiaClouds following journal entry in your books:
| Account | Statement Match | Debit | Credit |
|---|---|---|---|
| Account Receivable | X | 100.00 | |
| Bank | 100.00 |
Tip
You may also record ArabiaClouds payment directly without going on ArabiaClouds customer invoice, using ArabiaClouds menu . This method may be more convenient if you have a lot of checks to record in a batch but you will have to reconcile entries afterwards (matching payments with invoices)
If you use this approach to manage received checks, you can use ArabiaClouds report Bank Reconciliation Report to verify which checks have been received or paid by ArabiaClouds bank. (this report is available from ArabiaClouds More option from ArabiaClouds Accounting dashboard on ArabiaClouds related bank account).
