Correcting accounting errors

The problem is that the invoice is found to have overcharged and hence, is too high.

If the invoice has not been paid:

• If the accounting settings do not prevent you (e.g. the invoice has already been journaled), change the invoice status to draft and modify it.
• If this is not possible, simply a create a negative adjustment, linked to the invoice.

For example if the invoice is for $1000 and it overcharges by $200, then the adjustment amount is minus $200 and this can be applied to the invoice line item that was too high.

If the invoice has been paid:

• create the same negative adjustment as above
• create a refund for the same amount; this is a positive number
• return the refund amount to the company

For example, an invoice is for $1000 and it overcharges by $200. The company paid $1000 against it.

To correct this, the adjustment amount is -$200. The refund is entered as +$200 and $200 dollars is mailed or transferred back to the company:

invoice	1000
payment	-1000
adjustment	-200
refund	200
Net value of invoice Net paid for invoice Amount owing for invoice	$800 $800 $0

The problem is that the company's payment was more than they owe you.

When you add a payment it has to be fully allocated to one or more invoices. It cannot 'float' in the system with the company who paid considered to be in credit.

If you receive a sum of money from a company that is greater than the amount that they owe for an invoice, there are several ways to handle this.

The simplest solution is to enter the correct invoice payment amount in Case Manager and handle the return of the extra payment amount separately in your accounting software.

If you don't want to do this, you need to be aware that Case Manager prevents you overpaying an invoice. To get around this, first create a temporary adjustment to increase the invoice.

Thus, to manage an overpayment accounting issue completely in Case Manager:

• Add a temporary adjustment to bring the invoice total up to the full payment received.
• Create a payment transaction for the amount received and linked it to the invoice.
• Delete the temporary adjustment.

The invoice is now overpaid, i.e. the amount of money owed for the invoice is a negative number.

• Create a refund transaction for the excess payment amount against the invoice. This is a positive amount.

This transaction records that money effectively moves out of your business and hence, increases how much money is owed for the invoice.

However, it does not affect the invoice's costs or the tax totals.

• Return the excess amount back to the company as a cheque, or equivalent.

As an example, if the invoice is for $990 and the sum of money received is $1000:

• An invoice adjustment is added for $10.
• A payment of $1000 is entered against the invoice.
• The $10 invoice adjustment is deleted,
• A refund transaction is added for +$10.
• $10 is mailed or transferred back to the company.

invoice	990
add adjustment	10
payment	-1000
delete adjustment	-10
refund	10
Net value of invoice Net received for invoice Amount owing for invoice	$990 $990 $0

Overpaid invoices

Note that if you do overpay an invoice by any means (e.g. you do not add the refund transaction in the scenario above) the invoice has a negative amount owing.

Overpaid invoices appear in reports as unpaid (amount owing is not equal to zero) so that you are made aware of them and can rectify the situation.

The problem is that you received a payment and applied it to the wrong invoice.

If the payment has not been journalled and the payment was applied against one invoice:

• Simply delete the payment made in error and add a payment to the correct invoice.

If the payment has not been journalled and the payment was allocated to more than one invoice, things are more complicated. Deleting the payment deletes all the payments at the other invoices too. So you would need to re-enter all the payments for the other invoices also. If that is too difficult, you can follow the strategy for a correcting a journalled payment below.

If the payment has been journalled:

• Select the erroneous payment and add a refund transaction for the same amount.

Include a note about why the refund was made and which invoice the new payment will be applied to.

Note that unlike an ordinary refund, here you do not transfer any money back to the bill payer. Instead apply the refunded amount to another invoice.

• Add a payment to the correct invoice.

An example of an erroneous payment:

invoice	1000
payment	-1000
refund	1000
Net paid for invoice Amount owing for invoice	$0 $1000

Case Manager cannot create the equivalent of a credit note for a company, i.e. a receipt which can be offset against future invoices.

If you really do not want to return the refund amount to the company in the scenarios above, you could follow our instructions but skip the step of actually returning the money. Thus, you have the refund completed in Case Manager and the invoice is balanced. However, you have an unallocated amount of money from the Bill To company, i.e. the refund amount, sitting in your actual business accounts.

You then make a note in a spreadsheet file (or similar) that you have set up for this purpose. You could also create a task for the appropriate user noting this information. When a new invoice is created for the same company, you enter a 'dummy' payment of the refund amount in Case Manager, pay it against the new invoice and update your spreadsheet accordingly.

You should decide whether to use this strategy in conjunction with your accountant and keeping in mind the way that you perform bank reconciliation and other accounting functions at your business.