What's the best way to track customer activity?

Customer / client activity when dealing with invoicing and receipt of payment (at a later date) are known in accounting as your Accounts Receivable (A/R).

Accounts Receivable is what's known as a sub- ledger, which is further defined below. In accounting software the Accounts Receivable may be referred to as a module.
The accounting software is designed, once set-up properly, to automatically handle the Accounts Receivable portion of the transaction.

For the invoice the Accounts Receivable is a debit while the GST (if applicable) and Sale or Service are credits.

For the receipt, assuming the deposit is put in the bank, the Accounts Receivable is reduced or credited while the bank is a debit.

The A/R primarily has two components: Invoices (discussed below) and Receipts (to be discussed in the next issue).

Component 1 - Invoices

When you choose the invoice screen, it is divided into two sections; (a) general information including:

• Customer name
• Invoice number (which is usually automatically populated)
• Date of the invoice

• Details of the invoice
• The amount of the invoice (before taxes)
• The applicable taxes
• The revenue account name or number to attach this sale / service to.

As tempted as you may be to enter the sale only once the cash is received, perhaps to save time (one transaction instead of two) or to claim the GST on the sale only after the funds are collected, this is not correct, as there are rules in accounting (GAAP) that transactions must be entered as they occur.

Therefore, there is one entry for the sale and at a later date, when the payment is received, another entry for the deposit.

Subsidiary Ledger (sub ledger)

Sub-ledgers work closely with control accounts. These ledgers contain the details of each sub-ledger. An example of a control account is Accounts Receivable.

On the Balance Sheet the A/R has one total while the sub-ledger will contain all the details totaling this amount. Details would include: each customers' name as well as the outstanding invoice number(s), date(s) and amount(s)

When you set-up the customer take the time to enter as much information as you have, ie. full address, fax, phone number(s), a special contact name including their proper title and any other relavent information, ie special dates.

There are some things you may want to change depending on the relationship you have with the customer. For example, you can also choose a specific credit limit especially for new customers. Once they have been consistent and timely with their payments, you may increase it.

Learn: