Balance confirmations in practice - justification for non-compliance
How should the contractor be notified that the balance indicated by him is different than the amount owed to him shown in our books? What to write in this case on voucher B of the balance confirmation? Is giving the reason for non-compliance important?
Action - reaction, i.e. the process of confirming balances
The process of confirming balances requires the cooperation of the creditor - that is, the initiator and the debtor who is responsible for the reaction. More specifically, it consists in the fact that the supplier sends a document to the buyer, prompting him to confirm the state of receivables of one party and at the same time liabilities - in the case of the other party.
The balance confirmation generally results from the balances in the Accounts Payable Account.
Is there a "Balance Confirmation" print template?
The balance sheet regulations do not define the template of the balance confirmation document. The appearance of this print depends more on internal arrangements in the company. Most often, however, it consists of two similar-sounding sections, usually marked as A and B. The debtor should leave the first part for himself, and the second part should be returned to the creditor with an appropriate note.
If there is a match between the balance and the items it contains, as shown by the creditor on the balance confirmation document, and the debtor's books, it is necessary to confirm that the balance is not discrepant. In such a situation, it may be a good solution to include on the returned slip "B" the information: "balance is correct" along with the date, stamp and signature of an authorized person.
Balance does not match
In the event that the debtor finds discrepancies resulting from different entries and accounting vouchers in his books of account in relation to the state of receivables on the side of the creditor, it is required to notify. This can be done, for example, in the balance confirmation document that is sent back. The debtor should inform on section "B" or in the letter attached to it which items are not compliant and explain where these differences arise.
In the event that the balance does not match, you can leave the following note on the balance confirmation document:
"the balance is inconsistent, the indicated invoices (giving their numbers and amounts) were settled by bank transfer on ... / were not received by the company."
The specification of the identified discrepancies can also be presented on the statement printed from the accounting system. In addition, it is important that the information placed underneath the information should be signed by the authorized person, along with the date and company stamp.
Balance mismatch not always justified
In general, the amount of outstanding debts from one party (ie the creditor) should be equal to the amount of the liabilities not contested by the other party, ie the debtor. If the debtor receives the invoice late and records it in its books during the period following the date of issue of the balance confirmation document, this does not immediately mean that the balance is incorrect. In this situation, it would be more reasonable to say that the invoice was posted to the wrong period.
The seller may issue an invoice no later than the 15th day of the month following the month in which the service was provided or the goods were delivered. It is worth noting that in this way it only postpones the payment date for the buyer, and not the moment when the tax obligation arises, which usually determines the period by which the invoice should be booked.
Thanks to the method of confirming the balances, by explaining inconsistencies, the company has a chance to receive valuable information regarding, for example, the buyer's recognition of purchase invoices and investigate the reasons for their non-settlement. This, in turn, can significantly increase the probability of the debtor paying and reduce the amount due to the creditor.