You deliver goods today, but the customer will pay later. When does the transaction appear in sales, and when does it affect cash?
Under accrual accounting in the normal system, an earned sale may be recognised before payment. The customer receivable represents the amount still owed to the business.
Consider a fictional example, excluding tax. On 5 October, goods are delivered and a GNF 10 million sale is earned. Revenue and the customer receivable increase by 10 million, but no cash is received that day.
The customer pays on 20 October. The receivable decreases by 10 million and bank or cash increases by the same amount. The payment creates no additional sale. This distinction shows both the activity completed and the money received.
Mistakes to avoid
Do not confuse an invoice, delivery evidence and a payment receipt. Issuing an invoice alone does not always establish an earned sale. Recording the payment as a second sale would artificially increase revenue.
Recommended actions
Reconcile the order, delivery evidence, invoice and payment. Update the customer account after each payment and have the accountant review discrepancies. Track sales and receipts separately.
Can your current records distinguish a new sale from payment of an older invoice?
Sources & verification
Text supplied by BS Conseils; English translation provided for this site. Examples and recommendations remain educational.
Supplied document : Services et publications(1).docx — English translation