I have been working with a client works who through a clinic, but payment can come in from a variety of sources; cash, paypal, veterans affairs, bank deposits, hicaps, medicare etc.
Receipt of payment is a haphazard process. Submitted claims may be rejected by Medicare / veterans affairs/ HICAPS and then the client needs to be chased directly or there may be timing differences. Payments may be received many months after the income has been earned. To further confuse matters the amounts owed can be similar and small amounts. It is not viable to spend an inordinate amount of administrative time, chasing small payments.
To deal with this situation I created an Over / Under Clearing Account in Revenue, and when an amount cannot be reconciled it will be allocated to this account. This account will be seen on your Profit and Loss Statement as a Revenue item, though it may sometimes be negative.
An invoice for the full month is created. Diligent efforts are made to reconcile the accounts. What cannot be reconciled is allocated to the Over / Under Clearing Account. Any remaining amount of the invoice that was not been matched is allocated to the Over / Under Clearing Account.
For example, in XERO, we would “Make a Payment” from the Over / Under Clearing Account.
This allows us to reconcile the account each month, reduces the amount of admin time involved. We hope that due to timing differences, many payments may simply sort themselves out. If the balance of the Over / Under Clearing Account becomes significant it may be necessary to further review this process.
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