Typical problems with the open item list and how to solve them
It doesn’t matter which method you choose, problems can still arise that you need to effectively avert. These include, for example, the following:
- The list is not maintained and checked regularly.
- Several invoices are combined and the final amount does not match an existing invoice, so that the individual items have to be laboriously searched for.
- When the due date has expired, it is noticed that the money has not yet been received, but no immediate action or reminders are issued .
- There are no clear terms of payment, mostly with debtors, but also with creditors, so it is unclear when a reminder should be issued at all.
- Inadequate master data maintenance leads to incorrect information in the invoice. This can result in the recipient not being able to pay the invoice. The invoice must meet the requirements of § 14 UStG (Value Added Tax Act)!
- Any kind of booking error – missing booking or double booking, subsequent changes or incorrect assignment of invoice numbers.
With all these problems, it only helps if communication at the interfaces is improved and clear instructions are available for processing. This can be done via work instructions.
In addition, an effective dunning system must be introduced, which immediately initiates reminders or even further steps according to clear guidelines.
Missing payment terms should no longer occur at all nowadays, as the payment and delivery conditions must already be mentioned on the offer and the AB and, of course, on the invoice.
Bookkeeping and annual accounts
Attention : This simplified financial accounting is only suitable for smaller companies. It is permissible according to § 146 AO (tax code) if it is carried out according to the principles of proper bookkeeping. Because most small businesses only need an income statement .
However, if your company is subject to bookkeeping, you have to post and record all open items for the annual financial statements . This is regulated in Section 243 (1) of the German Commercial Code (HGB), which specifies the principles of proper accounting.
The best solution: an accounting software. Even the best specially created Excel list and the most exemplary resubmission could be faulty, so accounting software is always a good choice. It is convenient and enables an evaluation and a printout of various lists or automatic reminders to the customers at any time.
Open items in the accounting software
In any case, accounting software is ideal for your company. It can relieve you of a lot of work and is usually easy to use.
There are several excellent providers from which you can choose the one that’s right for you. Sometimes there are also different industry solutions for small business owners. It depends on what exactly and to what extent you want to use such software. After that, you should also make your selection.
Posting Example – Accounts Payable – Accounts Receivable and Closing
In your software you have entered certain master data for your customers and suppliers and post your invoices accordingly to their accounts under their customer or supplier number. These personal accounts are called the current account book .
They are a sub-ledger of the accounting and record the “trade accounts receivable” that you have against your customers, as well as the “trade accounts payable” that exist towards your supplier.
If you post the invoice to the customer or the incoming invoice from the supplier with the invoice date, you create an open item on the accounts payable or accounts receivable side.
As soon as you pay the invoice to the supplier or the customer pays you, you post the incoming money to this customer or supplier using the “Post receipts” function (or according to your software).
The account of the customer or the supplier is now balanced.
Alternatively, you can even offset two items against each other here. This can happen, for example, if the customer pays too late and your financial year has already ended and you can no longer book in the old year. Your software will report a warning here or block your booking attempt accordingly.
Now it can still happen that a customer can no longer pay because he is insolvent. You can then no longer settle this item with a payment and you have to post the open item directly to the customer account as a bad debt loss.
At the end of the year, you have to somehow bring the bookings made to your main accounts in order to create your balance sheet . However, the accounts receivable and payable is one of the collective accounts for which there is a booking block in the software. So you cannot make any manual entries to transfer the total from the subledger. However, when you use software, your customer and supplier accounts are automatically booked by your software in the main accounts.
That saves you a lot of calculations and manual transfers!
Conclusion – the open item list is essential for your receivables management
As you have seen, keeping track of your bills and finances is at the heart of your bookkeeping. According to phonecations, your receivables management cannot function without the open item list . You have to be aware of the fact that only regular checks and effective and timely collection of claims will ensure your liquidity.
The success of your company depends on it. Without funds, you cannot pay your own debts or invest anything. You may not even be able to procure the new machinery you need and your production will be at risk.
An automated solution with accounting software that suits you is therefore ideal. This also helps you to uncover weak points. Customers who regularly pay late could find themselves in financial difficulties. Then you may have to get to the bottom of the matter via the credit reform or the justice portal (bankruptcy announcements) and, if necessary, stop further deliveries so as not to lose money. Or you can switch deliveries to critical customers to prepayment .
Your dunning procedure can also be optimized by setting up different dunning levels . It is usually not a problem to have the reminders printed in different languages in the SAP programs. International customers cannot rely on misunderstandings because they do not understand the German text.