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Accounts, Cashbook, Reconciliation Adjustments

The best procedure, as far as possible, is to ensure you don’t need to make adjustments during the reconciliation process (see “Accounts, Cashbook, Reconciling (Insurer and Adviser Accounts, etc”) by only posting accurate data from your policies. In the event that you’ve posted an incorrect sum you should first re-find it in the applicable Leger and then delete it with the yellow “Bin” button. Next, re-find the policy in question, correct it and then re-post it (see “Policies, Posting to Accounts”). Note two important points…

  • when you delete a policy-related invoice in either Ledger the system will automatically prompt to delete all associated ones (e.g. for associated pay-aways)
  • your ability to re-post to the accounts (and to delete invoices) will depend on your user access rights being set-up accordingly (see “Set-up, Users”), as the standard setting prevents re-posting
  • Warning!

    Be warned that if you do make adjustments to policy-related commission or premium invoices during the reconciliation process (see “Accounts, Cashbook, Reconciling (Insurer and Adviser Accounts, etc”) then you should immediately use the Cashbook’s “Signpost / Jump to / Policyholder’s policies” option to also adjust the source policy data accordingly. If you fail to do this then you may suffer from discrepancies between reports generated from your accounts data and those based directly on your policy data. The best procedure, as described above, is to delete incorrect Ledger entries and then re-post again from the corrected policy, which will keep your data fully synchronised. Note that to facilitate this there are “Jump to policy” options available from the “Signpost” buttons in the Cashbook and both Ledgers.

    Adjustments – Typical Reason & Choices

    The main reason why you might need to adjust an invoice during the reconciliation process is because the third party who’s paid that invoice may have sent you a different figure, typically just a few pennies short. In such a case you have the choice, as shown below, to either “Reconcile amount shown immediately” (i.e. leaving the remainder as still outstanding) or to “Adjust figure in Ledgers to…” the lesser amount (i.e. write off or forget about the missing pennies). Clearly where the sum is small you will probably opt for the second choice, and vice versa.

     

    Adjustments – Implications & Write-offs

    For non-insurance businesses that are not VAT registered there are no ramifications from making small adjustments to invoices during reconciliation.

    For insurance-related businesses you do not have to worry about associated invoices for pay-aways (e.g. if Norwich Union pays £20 less commission than expected for a policy, then after you opt to “Adjust figure in ledgers” you’ll be prompted to automatically adjust all associated pay-aways pro-rata. So if Jane Potter was due to get 60% of the Norwich Union commission her invoice would automatically be reduced by £12). On the other hand you do need to worry about keeping your policy data in line with your accounts data, otherwise reports (e.g. listing commission sums) from different parts of the system will show different figures. 

    For non-insurance VAT registered businesses, in the case of a customer who, for example, has paid £10 less than the original £1,000 invoice, and you don’t intend to pursue the matter further, the best procedure is to create a credit note for the missing £10 (which will reduce the overall amount due while reconciling) and send a printed copy of that credit note to the customer. In the credit note you could choose to use the same nominal accounts as the original invoice (e.g. Computer Sales and VAT) or to allocate the missing amount to one for write-offs (e.g. Write-offs and VAT). In the former case your Computer Sales nominal would be “invisibly” reduced, while in the latter, in your Trial Balance, etc, you’d see the original Computer Sales figure plus the amount forgone through Write-offs. In either case your VAT liability would be accurately preserved.

    For an example of adjusting a General Insurer’s account, see “Accounts, Cashbook, Reconciliation Adjustments (General Insurance)

    Example of Adjusting A Life Assurance Company’s Account

    In the above example, you can see that Norwich Union owes the brokerage a total of £2,379.34. However the cheque they’ve sent is for £5.66 less, because they believe the commission for Pudd P should be just £504 exactly. You’ve decided to write-off the missing £5.66, of which 60% was due to the adviser, Jane Potter (i.e. reduce your associated pay-away to her from £305.80 to £302.40). To do this you create an entry in the Cashbook for the received £2,373.68, then reconcile the two exact sum as described in “Accounts, Cashbook, Reconciling (Insurer and Adviser Accounts, etc”, after which the “Reconcile Account for…” screen will look like the example below.

    When you double-click the Pudd P line to reconcile it, the system will only allow you to reconcile the amount of your overall remaining “Balance” (shown at the bottom right of the screen), which in this case is £504 and therefore £5.66 short. If you leave the “Reconcile Options” set to “Reconcile amount shown immediately” then the £5.66 will be left still “Due”, or outstanding, for Norwich Union to pay at a later date. If you consider this unlikely then you can re-set it to “Adjust figure in ledgers to amount below”, as illustrated below, in which case the missing £5.66 will effectively disappear.

    You’ll then be prompted to confirm that you mean to lose the £5.66, after which the following dialogue will appear.

    If you’d like the associated pay-away/s (i.e. in this case the £60% to Jane Potter) to be adjusted proportionately, then ensure that the “Adjust adviser and lead commission” box is ticked and click the “OK” button. This will complete your reconciliation of the Norwich Union account, and as you can see from the example Purchase Ledger screen below, Jane Potter’s invoice for Pudd P’s pension commission has been reduced from the original £305.80 to £302.41.

    However, be warned, if you don’t also use the “Signpost” button option to jump to the policyholder’s policies and adjust them too, as shown below, then they may retain their original (now incorrect) values.