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Last modified on 1/7/2016 4:29 PM by User.

Payment Posted to Wrong Customer Account

Occasionally a payment will be applied to invoices on a different customer’s account instead of the correct account. 

 

Scenario 1: the incorrectly paid invoice is still on the customer’s account and in AR Open Items file (Task 18), because the end-of-the-month ‘clearing’ process has not been completed or the incorrect invoice was not paid-in-full.  This scenario could use A/R Cash/Receipts Entry & Editing (Task 2) to correct the situation.

 

Scenario 2 the incorrectly paid invoice is still on the customer’s account and in AR Open Items file (Task 18).  This scenario uses creating Debit and Credit memos and using A/R Sales Entry & Editing (Task 1) to correct the situation.

 

Note: Scenarios 1 and 2 both state the invoice HAS NOT been cleared off of the account the payment was misapplied to…choose the preferred method to correct the error.

 

Scenario 3, the invoice has been ‘cleared’ off of the customer’s account and is no longer in the AR Open Items file (Task 18).  This scenario uses A/R Cash/Receipts Entry & Editing (Task 2) to correct the situation.

 

Scenario 4, the invoice has been ‘cleared’ off of the customer’s account and is no longer in the AR Open Items file (Task 18). This scenario uses Debit and Credit memos using A/R Sales Entry & Editing (Task 1) to correct the situation.

 

Note: Scenarios 3 and 4 both state the invoice HAS been cleared off of the account the payment was misapplied to….choose the preferred method to correct the error.

 

 

Scenario 1:  USING A/R CASH RECEIPTS ENTRY & EDITING (TASK 2).  To fix the accounts of customers when a payment on an Invoice was applied in error and the invoice is still on the wrong customer's account (i.e. account not been "cleared" yet, or invoice not paid in-full)

 

Example: On June 10th, customer 1467 paid $500 on invoice #5230; however the payment of $500 was applied to invoice #7890 (which was for $700) on Customer’s 3496 account by mistake.   Leaving account 3496 (the wrong account) like this:

  • Original Invoice:         #7890     05/21/xx           $700.00
  • Wrong Payment:           #200001          06/10/xx           $-500.00 applied to #7890

The error is discovered on September 23rd

Step 1:  Go to:

  • Accounts Receivable (Module 2)
    • Cash Receipts Entry & Editing (Task 2)
      • Enter New Cash Record (Sub-task 1)
        • Enter information for the wrong customer, to create a Negative Payment, as follows:
          • Front Screen
            • 02. Trx Type: Use type 2
            • 03. Customer #: Use the customer number the check was applied to in error…per the example, this would be 3496
            • 04. Recv Date: Use current date (for this example, it would be 0923xx)
            • 06. Check$: Enter the amount of the check as a negative (per the example -50000), the amount will appear as + on the customer's account). Think Algebra…negative and negative equals positive.
            • 07. Check #: Use the original check #.
          • Second Screen

            • If the invoice is paid in-full, but still not cleared off the account, type in the invoice that the payment was applied to in error.

            • If the invoice is partially paid, use the F1 key to select the invoice (per example, invoice 7890)

            • In both cases, enter the dollar amount using a negative sign (-50000, for -$500.00)

        • Note: After posting, the system will generate a new document number for the $500, for this example it is #200523

After following these instructions, the account of Customer 3496 (the wrong customer) will look like this:

  • Original Invoice:          #7890     05/21/xx          $700.00
  • Wrong Payment:           #200001          06/10/xx           $-500.00 applied to #7890
  • Negative Payment:        #200523          09/23/xx           $+500.00 applied to #7890

 

  At this point, invoice #7890 is back to the original amount of $700.00.

  • Note: please see document titled:  “Negative & Positive Payments” for instructions on how to handle the two ‘payments’. 
  • OR, If these payments are left applied to invoice #7890, when the customer does actually pay the $700.00 for invoice #7890, they will all clear off of the account at month end when the program “Clear paid invoices from A/R open” is ran. (The $700.00 invoice, $-700.00 payment, wrong $-500.00 payment & correcting $+500.00 payment will all clear away.)       

 

Step 2: Enter another transaction in Cash Receipts Entry & Editing; it will be for the correct customer, using a positive amount, as follows:

  • Front Screen
    • 02. Trx Type: Use type 2
    • 03: Customer #: Use the customer number the check was supposed to be applied to…per the example, this would be 1467.
    • 04. Recv Date: Use current date (for this example, it would be 0923xx)
    • 06. Check$: Enter the amount of the check as a positive just like a regular check…per the example, this would be 500.00
    • 07. Check #: Use the original check #.
  • Second Screen

    • Apply to the correct invoice just like a regular check, per the example …invoice #5230

After posting, the system will generate a new document number for the $500, for this example it is #200524.

 

Step 3:  Post the two transactions from Step 1 and 2:

The "TOTAL AMOUNT RECEIVED" should be zero!!!

The "TOTAL CHANGE TO A/R" SHOULD BE ZERO!!!

 

 

Scenario 2:  CREATING CREDIT AND DEBIT MEMOS IN SALES ENTRY & EDITING (TASK 1), to fix the accounts of customers when a payment on an Invoice was applied in error and it’s still on the wrong customer's account (i.e. account not been "cleared" yet, or invoice not paid in-full)

 

Example 1: On June 10th, customer 1467 paid $500 on invoice #5230; however the payment of $500 was applied to invoice #7890 (which was for $700) on Customer’s 3496 account by mistake. The error is discovered on September 23rd. Leaving account 3496 (the wrong account) like this:

 

  • Original Invoice:          #7890     05/21/xx          $700.00
  • Wrong Payment:           #200001          06/10/xx           $-500.00 applied to #7890

 

Step 1.  Create a Debit memo for the customer’s account where the check was applied incorrectly (per the example:  3496).   Go to:

  • Accounts Receivable (Module 2)
    • Sales Entry & Editing (Task 1)
      • Enter New Sales Record (Sub-task 1)
        • Front Screen:
          • 01.  Invoice #: Use document # out of your normal invoice # range (i.e. 123).
          • 02.  Inv date: Use a current date  (for this example 0923xx)'
          • 03.  Due date: Press ENTER key
          • 04.  Division #: type in appropriate division #
          • 05.  Sale type: 5-Debit memo (Check for duplicate credit memo or debit memo? Y)
          • 06.  Customer #: type in the customer # that has the payment on it by mistake (for this example 3496)
          • 07.  Salesman #: type in appropriate salesman #
          • 08.  Sale amt: Press ENTER key
          • 09.  Other amt: type in amount paid to wrong customer (for this example $500.00)
          • 10.  State tax: Press ENTER key
          • 11.  Non-tax amt: type in amount paid to wrong customer (for this example $500.00)
          • 12.  through 26: Press ENTER key (unless Tax Zones are used, then enter in an appropriate Non-Taxable Tax Zone
          • 27. Tax State: Type in abbreviation for state
          • 28. PO or Job #: Enter the original check #
          • 29. Terms: Press ENTER key
        • Second Screen:

          • Type in a G/L account number and press the ENTER key under the “Income amt” and “Cost amt” columns. 

          • Record the G/L account used, because the same G/L account number must be used in the next step - resulting in a "wash".'

          • Make note of the Debit Memo number just created (per the example:  123)

  

Step 2.  Create a Credit Memo for the customer the check was supposed to be applied to in the first place, go to:

  • Accounts Receivable (Module 2)
    • Sales Entry & Editing (Task 1)
      • Enter New Sales Record (Sub-task 1)
        • ​Front Screen
          • 01. Invoice #: Use document # out of your normal invoice # range. (i.e. 456)
          • 02.   Inv date: Use a current date 
          • 03.  Due date: Press ENTER key
          • 04.  Division #: type in appropriate division #
          • 05.  Sale type: 3-Credit memo
          • 06.  Customer #: type in the customer # wants to use the Credit memo (for this example 3496)
          • 07.  Salesman #: type in appropriate salesman #
          • 08.  Sale amt: Press ENTER key
          • 09.  Other amt: type in amount to transfer to other customer (for this example $500.00)
          • 10.  State tax: Press ENTER key
          • 11.  Non-tax amt: type in amount being put on the account (for this example $500.00)
          • 12.  Freight amt: Press ENTER key
          • 13.  Disc allow: Press ENTER key
          • 15.  Apply to: If the credit memo is going to be applied to only one invoice, type in the invoice number. If the credit memo is going to be applied to multiple invoice numbers, press ENTER key.
          • 16.  through 26,  Press ENTER key (if Zone Taxes are used, enter an appropriate Non-taxable zone)
          • 27.  Tax State: Type in abbreviation for the state
          • 28.  PO or Job #: Type in original check number
          • 29.  Terms: Press ENTER key
        • Second screen:

          • Type in the G/L account number used in Step 1 above and press the ENTER key under the “Income amt” and “Cost amt” columns.   

          • Make note of the Credit Memo number created (per the example: 456)

          • Remember:  If the credit amount is to be applied to more than one invoice leave field #14 blank

 

Note: make note of the created Debit Memo, Credit Memo and the original payment number (found on the Customer’s Account Inquiry).

 

 

Step 3: Post both the Debit Memo and the Credit Memo created by using Sub-task 5. Post Sales Records to A/R Files (as always, we recommend running the Edit List from sub-task 4 before posting).  The edit and posting should have zero Grand Totals.

 

 

Step 4: To apply the incorrect payment to the newly created debit memo, go to:

  • Accounts Receivable (Module 2)
    • Change Apply-to # (Task 3)
      • Enter in the wrong customer number and old payment #. (For this example it is customer #3496 and payment 200001.)   
      • New apply-to #: Type in the newly created debit memo #. (i.e.123)

 

These transactions will clear off of the accounts when the “Clear Paid Invoices from A/R Open” program is completed as part of the month-end procedures.

 

 

Step 5:  If the newly created credit memo (i.e. 456) on the correct customer is supposed to be applied to multiple invoices, apply the Credit Memo using A/R; Cash/Receipts Entry & Editing; Enter (ADD) New Cash, then on field #11 (Credit #:) select the Credit Memo.  See document titled, “Applying a Credit Memo or Unapplied Payment” on our website for complete instructions.

 

 

Scenario 3:  USING A/R CASH RECEIPTS ENTRY & EDITING (TASK 2)  To fix the accounts of customers when a payment on an invoice was applied in error and the invoice is no longer on the wrong customer's account (i.e. the invoice was paid in-full and the account has been "cleared")

 

Example:  On September 4th, Customer 4376 paid $300 on invoice #1444.  However, the payment of $300 was applied to invoice #1234 belonging to Customer 8877 by mistake.  The account was then cleared at month-end, therefore invoice #1234 is no longer on the account of Customer 8877 (however customer 8877 still owes for the invoice that the payment was mistakenly applied to…maybe that is how you found the error…customer 8877 sent in a payment for invoice #1234 and the invoice was no longer on their account or customer 4376 received their statement showing invoice #1444 as still unpaid).  The error is discovered on November 14th

Step 1.  Go to:

  • Accounts Receivable (Module 2)
    • Cash Receipts Entry & Editing (Task 2)
      • Enter New Cash Record (Sub-task 1)
        • Front Screen
          • 02. Trx Type: Use type 2
          • 03. Customer #: Use the customer number that the check was applied to in error (per the example, Customer #8877)
          • 04. Recv Date: Use current date (for this example, use 1114xx)
          • 06. Check$: Enter the amount of the check as a negative, the amount will appear as + on the customer's account. As per example: -30000
          • 07. Check #: Use the original check #.
        • Second Screen-

        • Do not enter any document number; allow the system to leave the amount un-applied on the account.  This action will put $300 back on the customer’s account that had the invoice that was mistakenly paid.

 

After posting, the system will generate a new document number for the $300, for this example it is #200082.  This information can be viewed in Customer Inquiry, Task 27 in the A/R module.

 

After following these instructions, the account of Customer 8877 (wrong customer) would look like this:

  • Negative Payment:        #200082          11/14/xx           -$300.00 (applied to nothing)
  • This step actually leaves a positive balance on the customer's account, because a negative payment is actually a positive (think old Algebra, negative and negative equals positive) 
  • A note may need to be sent to inform the customer that, because of an error, document #200082 replaces invoice #1234.

 

Note:  Remember:  the original invoice #1234 for $300 and the wrong payment of $300 applied to it were "cleared" from 8877’s account during Month-end procedures for Sept. 30th

 

 

Step 2: Enter another transaction in Cash Receipts Entry & Editing, it will be for the correct customer (4376), with a positive payment, as follows:

 

  • Front Screen
    • 02. Trx Type: Use type 2
    • 03. Customer #: Use the customer number the check was supposed to be applied to…per the example, this would be 4376.
    • 04. Recv Date: Use current date (for this example, it would be 1114xx)
    • 06. Check$: Enter the amount of the check as a positive just like a regular check…per the example, this would be 300.00
    • 07. Check #: Use the original check #.
  • Second Screen

    • Apply it to the correct invoice just like a regular check, per the example, invoice #1444

 

Step 3:  Post the two transactions.

The "TOTAL AMOUNT RECEIVED" should be zero!!!

The "TOTAL CHANGE TO A/R" SHOULD BE ZERO!!!

 

 

Step 4.

Then, assuming on November 23rd check #321 is received from customer 8877 for $450.  They are paying $150 for a new invoice (#1670 created on November 8th) and $300 for invoice #1444 (now on the account as document #200082 because of the action taken in Step 1).

Go to:

  • Accounts Receivable (Module 2)
    • Cash Receipts Entry & Editing (Task 2)
      • Enter New Cash Record (Sub-task 1)
        • Front Screen

          • 02. Trx Type: Use type 2

          • 03. Customer #: Use the customer number that the check was applied to in error (per the example, customer 8877)

          • 04. Recv Date: Use current date (for this example, use 1123xx)

          • 06. Check$: Enter the amount of the check (for this example, $450.00)

        • Second Screen-

          • Apply the full amount of the check ($450) to the customer's account as follows:

            • Line #1 $150 applied to the new invoice being paid (invoice 1670 from Nov. 8th)

            • Line #2 Manually type in the invoice number used in Line #1 (i.e. 1670) and manually type in $300.00 under “Apply-amt” column.  (in effect: over-applying $300 on the account)

 

After following the above instructions and posting the transaction, the account of Customer 8877 (wrong customer) will look like this:

  • Negative Payment:                    #200082          11/14/xx           +$300.00 applied to nothing
  • Invoice:                                    #1670              11/08/xx           +$150.00
  • Payment/check #321:               #220459          11/23/xx           -$150.00 (applied to invoice #1670)
  • Payment/check #321:               #200460          11/23/xx           -$300.00 (also applied to invoice #1670)

 

NOTE: Leaving an overbalance of zero, however the account won’t be cleared off at month-end until the next step is taken.

 

Step 5.

 

The Negative Payment (Chargeback) and the payment (check #321) from Step 4 cannot be applied to one another, because a payment cannot be applied to another payment.  So to clear Customer 8877 account, go to:

  • Accounts Receivable (Module 2)
    • Change Apply-To # (Task 3)
      • Enter the customer number (i.e. 8877) and the document number for the Negative Payment (#200082) and apply it to the invoice that was over-applied to as a result of Step 4 (extra $300 applied to Invoice #1670)

 

After following the above instructions, the account of Customer 8877 (wrong customer) will look like this:

  • Invoice:                                    #1670              11/08/xx           $150.00
  • Payment/check #321:               #220459          11/23/xx           -$150.00 (applied to invoice #1670) Balance zero
  • Payment/check #321:               #200460          11/23/xx           -$300.00 (applied to invoice #1670) Balance -$300.00
  • Negative Payment:                    #200082          11/14/xx           +$300.00 (applied to invoice #1670) Balance zero

 

All of these transactions will clear off of the account when the “Clear Paid Invoices from A/R Open” is completed as part of the normal month-end procedures.

 

Scenario 4:  CREATING CREDIT AND DEBIT MEMOS IN SALES ENTRY & EDITING (TASK 1), to fix the accounts of customers when a payment on an invoice was applied in error and it’s no longer on the wrong customer's account (i.e. the invoice was paid in-full and the account has been "cleared")

 

Example: On June 10th, customer 1467 paid $500 on invoice #5230 however the payment of $500 was applied to invoice #7890 on customer’s 3496 account by mistake.  And because  #7890 is also for $500, when the “Clear Paid Invoices from A/R Open” was completed at month-end, the invoice was cleared off of account #3496.   The error is discovered on September 23rd.

 

Step 1:

This would be the same step as Scenario 2, Step 1, except when creating the Debit memo, in Field “#18 (PO # or Job #/Name) you would type in the original invoice # for reference.  This is going to be on the customer’s account in place of their original invoice.

 

Step 2: 

This would be the same as Scenario 2, Step 2.

 

Step 3:

This would be the same as Scenario 2, Step 3.

 

Step 4:

If the newly created credit memo on the correct customer is supposed to be applied to multiple invoices, apply the Credit Memo using A/R; Cash/Receipts Entry & Editing; Enter (ADD) New Cash, then on field #11 (Credit #:) select the Credit Memo.  See document titled, “Applying a Credit Memo or Unapplied Payment” on our website for complete instructions.

 

Step 5:

Payment is received from the customer whose invoice was mistakenly paid but now has a Debit Memo for the amount of the original invoice on their account (A note may need to be sent to inform the customer that, because of an error, the Debit Memo replaces invoice #1467.)  In Cash Receipts Entry & Editing, select the Debit Memo on the second screen…the same as if applying the payment to an invoice.