We submitted a payment request to a foreign supplier through our bank. However, the account number on the payment request form was misread and entered incorrectly by the bank, so the payment was not received by the supplier. The supplier’s bank says the payment was returned, but it hasn’t reflected in our account yet and the latest advice from our bank was that it will show up sooner or later and we should just wait.
So, as I reconcile our bank statement, I’m wondering how to allocate the missing payment. Since the supplier hasn’t received it I don’t think allocating it to accounts payable would be correct. My thinking is that I should create an asset account called “Payments in process” or something similar, and allocate it to that. Any advice?
Bank reconcilliation reflects the accounts with the bank statement imports. In essence this means that whatever transaction that was recorded by the bank matches with your allocations in Manager.
In this case you paid a Supplier but the bank of the Supplier returned it to you but your bank has not received it. So you better be patient as the bank says and import a statement when received and all should reconcile. You can reconcile as often as you want it is just checking what I explained in the first paragraph.
It is not clear whether you have entered the payment into your records. If you are waiting to be able to import it, then there is nothing for you to do, nor is there any reconciliation to make. If you have entered it manually, just edit the payment form to show that the payment is still pending. That is, that it will be cleared at a later date.
Thanks @eko and @Tut.
Once a month I open our bank statement from the previous month, do a reconciliation, and manually enter any payments and receipts that appear on the statement but were not already recorded at the time of the transaction. The payment in question is one such transaction that I want to enter.
I realise that I could skip the reconciliation and do the next one next month when hopefully everything is resolved, but I like our account balances in Manager to accurately reflect the actual cash and bank balances in as close to real time as possible. Also, in the event of an audit, I believe that every transaction appearing on our statement should appear in our Manager receipts and payments. Since that money has left our account I would like Manager to show that. It has been nearly four weeks since we were debited, so that’s a significant time period during which those funds were not available to us. There could also be implications for our foreign exchange gain/loss (since the funds were in a foreign currency), and possibly other things I haven’t thought of.
What I anticipate happening is that the funds will be returned to our account and will appear on this month’s statement (I hope), and I could record that as a receipt. Then, we will need to submit the payment request again and hopefully that will be processed as normal.
For now I have entered the transaction and marked it as pending (thanks @Tut for the suggestion – don’t know why I didn’t think of it). However, I am not entirely happy with this as Manager now shows the relevant purchase invoice as being paid in full, which it is not and won’t ever be through this payment. So, that brings me back to my idea from my first post, which I’ll expand on slightly:
- Create a clearing account in Assets called “Payments in process” or something similar.
- Post the missing payment to this “Payments in process” account, thereby ensuring that Manager accurately reflects our actual bank balances.
- When we receive the returned payment, post this as a receipt from the “Payments in process” account, thereby offsetting the original payment and zeroing the account.
- Submit a new payment request to the bank and post this to the supplier’s accounts payable when it reflects on our statement.
So you are basically contradicting yourself because manually entering anything that as yet has not been an official cleared bank transaction be-it a reversal is actual not giving you the actual cash and bank balance but an expected one.
No, I’m only entering official cleared bank transactions, ie transactions that show on our bank statement and change the balance of the funds reflecting in our account. The outward payment has left our account. It appears on our statement as a debit.
In those circumstances, it seems like an issue to be resolved by your bank. From an accounting perspective, the payment is cleared.
OK. So then when the returned funds land in our account, how should I record that? As a receipt posted to the supplier’s accounts payable?
OK, thanks @Tut. I don’t like the fact that Manager shows the purchase invoice as being paid for in full if the supplier hasn’t received the funds, but I don’t think there is a perfect solution, and in the fullness of time as the payment is reversed and the new payment made everything will be resolved.
You were advised in earlier post by @Tut that you could change the payment to pending rather than cleared.
Yes, and I have done that. But Manager still displays the purchase invoice as being paid in full. Also, as @Tut later says:
I believe this is because it shows on my bank statement and the funds have left the account.
I tried as well in a test-business and also wonder why if changing it to pending with a date somewhere in 2023 is not removing the paid in full. Maybe @Tut can help.
After the recent changes to how clearance status is shown, cleared is cleared, regardless of date.
As it stands the payment is irreconcilable in your creditor accounts department - the creditor shows the amount due and because you (should) show this as paid the matter is an unresolved item. As long as the payment floats around it is of no use to transfer it to a new suspense account. Your communication with the bank, the creditor and your own personnel is ample enough to avoid losing track.