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  #1  
Old 01-23-2017, 06:27 PM
JeffW012 JeffW012 is offline
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Receive Payment Written Off in Previous Period

We just received payment from a customer who deducted $135 as a shipping non-conformance penalty from payment of the original invoice several months ago (spring 2016). We issued a credit memo for "non-compliance penalty expense" and applied it to the invoice at that time. However, we disputed the customer's claim, and now (Jan 2017) they have agreed that we were correct and have paid us the $135. We need to reduce the expense account (non-compliance penalty) by $135 - right? But how? I can't seem to wrap my brain around how this should be recorded in QB to accurately reflect income from this customer and accurately reflect our "non-compliance penalty expense".

Last edited by JeffW012; 01-23-2017 at 06:31 PM.
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  #2  
Old 01-24-2017, 05:12 AM
Rustler Rustler is offline
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We need to reduce the expense account (non-compliance penalty) by $135 - right?

No. The write off was expensed in the previous period, the payment is this period

so the payment received is income in this period, deposit the funds and use an other income account as the source (from) account for the deposit

Posting income and expense in the same account if not appreciated by auditors, with the rare exception of asset sales where the account is titled something like, Gain/Loss on asset sales
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Old 01-24-2017, 12:14 PM
JeffW012 JeffW012 is offline
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Thank you, Rustler.
When we run reports to see profitability of each customer account, we want to be able to see how much of the costs of various chargebacks are attributable to which customers.

I gave only 1 example of a small amount, but we actually have several retailers (chains) that have the practice of issuing "chargebacks" for various reasons and deducting them from payment of invoices. Before I came (about a year ago), there was not staff to address these chargebacks; so a large number of invoices were just left open in A/R. For banking and for taxes the open A/R needed to be cleaned up; the owner and I worked together on Extremely old invoices and "discounted" them for sales allowances, damaged merch., or bad debt. However as I researched remaining old, open invoices (old but not totally ancient), I began to see that a lot of them were open due to deductions that could be grouped into several categories; the owner and I agreed we should set up expense accounts for these categories so we could better see where to apply additional resources to prevent the chargeback deductions. That's when we began using credit memos (debiting an expense account) and applying to the invoices.

However after researching further, I found that a significant amount of deductions can & should be disputed. So now we're starting to collect payments for a number of the invoices that were paid (with a credit memo). Today we address deductions much more promptly - leaving short paid invoices open while we dispute, or if unable to dispute, we'll issue a credit memo and apply to the invoices.

I didn't understand your statement "Posting income and expense in the same account if not appreciated by auditors". Do you disagree with the practice of issuing credit memos - debiting expense accounts?

Last edited by JeffW012; 01-24-2017 at 12:19 PM.
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  #4  
Old 01-25-2017, 04:03 AM
Rustler Rustler is offline
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Do you disagree with the practice of issuing credit memos - debiting expense accounts?
No. I must have misunderstood yesterday, I got the impression that income and expense for non-compliance was posting to the same account.
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  #5  
Old 01-26-2017, 07:34 AM
JeffW012 JeffW012 is offline
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Rustler, thank you for your patience and for being such an active help in this forum; I seriously appreciate it!!!

I hate to sound dense, but I'm really having difficulty understanding exactly what to do. If I create an invoice for the individual customer with a line item of "other income", then our reports for this customer will make sales appear greater than reality. Is the only way to record this payment receipt a journal entry? And if yes, will a journal entry reflect the income as coming from this specific customer; so it offsets the loss earlier incurred by this customer?
Thank you again for your patience and help!
BTW, only our CEO, not even our CFO, has QB access to make these entries; so I'm hoping there is another way besides journal entries.
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Old 01-27-2017, 04:05 AM
Rustler Rustler is offline
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I could care less about sales by customer in my business model - sorry, I keep forgetting others have repeat customers

Create an item called disputed charge income, select an income account or maybe make an income account named the same

use that item on a sales receipt for the customer - the customer transaction report will show the disputed charge.

Since you are doing this as a catch up type of thing for historical holdbacks, I would enter the original transaction number in the memo block and what ever else you may want in the future

If you already made the deposit I mentioned to start with, note the date and delete it and then use the disputed charge sales receipt back dated
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Old 01-27-2017, 10:03 AM
JeffW012 JeffW012 is offline
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Thank you.
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