How to Determine if Accounts Receivable is in Balance?

Step 1

Determine where you want to start. This is normally the date for which you are reasonably sure the AR figures are correct. If you are unsure, you need to go back to the point at which you are comfortable with the figures. If necessary, you can go back to the very beginning of your system (Ex: 1/1/2000). Just remember that the farther you go back, the more difficult it will be to look at the figures and know intuitively if they are correct or not.

Once you’ve decided where to start, you will need the Ending AR Balance for this date. Run the Aged By Total report and use the following parameters;

Age Report based on: the date you’ve chosen

Age On: Posting date

View the final page and record the total AR balance which we’ll label “Beginning-AR”.

Step 2

Determine what the Ending AR balance should be based on the transactions which occurred between these two dates. Run any Revenue Report, such as Revenue By Item using the Beginning and Ending Dates you’ve chosen.

View the final page and record the Submitted, Nonallowed, Adjustment and Payment totals. The AR balance that we expect (“Expected-AR”) will be determined by the following formula;

Expected-AR = Beginning-AR + Submitted + Nonallowed + Adjustment + Payment

Step 3

Determine where you want to stop. This is normally the end of the month, or the current date; but it could be another date of your choosing. Run the Aged By Total report again with similar parameters for the Ending date. View the final page and record the total AR balance which we’ll label “Ending-AR”.

Compare the Ending-AR with the Expected-AR. If the two numbers agree, you are in balance from the Beginning through the Ending date.