Task

Matching payments to invoices by hand

The unmatched remainder becomes permanent.

The easy payments match themselves. The ones that don't are where the cost is.

Not every business has this problem, and some should leave it alone.

Most of these can be done better. Whether it's worth doing is a separate question. What follows is one common form of the problem, described in general terms, because your version will differ. These are possible challenges, not a description of your business, and some should be left exactly as they are. If it sounds like your week, that's worth a conversation.

Watch: The Books Agree and the Details Do Not

Sound familiar?

A handful of payments each month match nothing.
The receivables list includes invoices that were paid months ago.
Several invoices get settled by one transfer.
Deposits arrive net of a processing charge.

What it looks like

Money arrives in the bank. Somebody works through the deposits and the outstanding invoices to decide which is which. Most of it is easy: an exact amount, a name on the transaction, and the software suggests the match. Then there is the rest: an amount that matches nothing, a name not in the customer list, a round number that is obviously several invoices at once, a payment a little short for no stated reason.

What it costs

Matching by hand stops when what is left is hard enough that stopping seems reasonable. That leaves a residue, and the residue gets carried. Next month adds its own on top and the old items sink. The receivables list ends up holding invoices paid months ago beside invoices that genuinely were not. Nobody can chase from it with confidence, and chasing a customer for money they already sent costs a relationship, so the list gets used only for recent entries. The business has then lost money not through the unmatched payments, which are in the bank, but through the real unpaid invoices hiding in a list nobody trusts enough to work from.

Where it goes wrong

Partial payments have no home. The payment sits unapplied, or is forced against an invoice and a small balance lingers.
One payment covers many invoices. Splitting it correctly means knowing which, and the transaction rarely says.
The paying name is not the customer name. A parent company, a property owner, a finance provider. The mapping lives in somebody's memory.
Fees come out before the money arrives. The deposit matches nothing exactly.
Matched in bulk under time pressure. Some accepted suggestions are wrong, and a wrong match is harder to find than no match.

What a better version looks like

Exact matches are placed without asking, so the difficult ones get the attention. The known irregularities are written down once and applied every time. Nothing gets forced: a payment that cannot be matched confidently stays visibly unmatched, because an honest unmatched item is a question somebody can answer, and a confidently wrong match is a problem nobody finds. The residue gets an owner and a regular time.

What still needs a person

A person works out what a customer meant to pay, decides whether a small shortfall is a dispute or a rounding difference, and calls to ask when the answer is not in front of them.

Questions worth asking about your own operation

How many payments each month end up unmatched, and what happens to them?
Could you trust the receivables list to start a collections call today?
Where is the record of which payer name belongs to which customer?
Who owns the leftovers?

If this sounds familiar

Bring me the version you actually have. I'll learn how the process really works before I suggest anything. If it isn't worth changing, or isn't a fit for me, I'll say so. Talk through a problem