You can check the accuracy of your accounts payable to vendors and your accounts receivable from customers using balance confirmations. These enable you to detect and correct any discrepancies which may exist between your records and those of your business partners and to make any necessary individual value adjustments.
In the SAP system, there are several different methods of confirming balances, depending on the purpose of the confirmation. These are:
· Balance confirmation
Here you notify the business partner of the individual amounts for which you require confirmation. You ask for a reply, irrespective of whether the amounts correspond or not.
· Balance notification
Here, as above, you notify the business partner of the individual amounts to be confirmed. However, the partner sends a reply only if he or she does not agree with the balance stated.
· Balance request
Here, you ask the customer or vendor to notify you of the amount on your account according to his records.
For each of these procedures, the system prints a letter and a reply slip. Depending on the procedure used, the reply slip will contain a list of open items, or simply a number of fields for the business partner to fill out (balance inquiry).
You may want the business partner to send the reply slip to different addresses, depending on the purpose of the balance confirmation: If your internal auditing department reconciles the balances, you would ask that the reply be sent directly to your firm. If an external auditor has requested the balance confirmation, you would request that the business partner send the reply to the external auditor. You can specify the address individually for each report. You must define a reply address, even if this is the company code address and you do not use an alternative.
Generally, you do not send a balance confirmation to every single customer or vendor. The system allows you to select, which business partners you want to write to before running the report. To do this, you specify the following criteria:
· You specify whether head office accounts and branch accounts, one-time accounts, and/or all other accounts are to be included.
· You can make the selection dependent on the overall balance on an account, or on the sales achieved in connection with the account.
· You can specify that only every nth customer or vendor out of those which you have selected is to be included.
· Using the other selection fields, such as Name 1, you can create further selection criteria. If you have already created a selection variant for the program, you should adjust it accordingly.
By combining these selection criteria you can limit still further the customers and vendors to be included in the balance confirmation.
At the end of each report, the system produces a check list. You can also choose to create a results table and an error list. These lists remain with your accounting department (or with the external auditor) where they are used in evaluating the replies. These lists are described briefly in the sections below:
· Check list
The check list contains data on the report, such as the date the letter was issued and the reply date. For each customer/vendor, the list contains the individual address data from the master record, as well as the amount to be confirmed. The list provides a useful overview of all the customers/vendors you have written to, allowing you to keep a record of who has replied to balance confirmations and requests. Otherwise, you may need to send them a reminder note.
· Results table
The results table contains general specifications on the report, such as the reconciliation date. It also allows you to summarize the replies in three different categories: No reply received, reply with balance not confirmed, and reply with confirmation. You can further categorize these last two.
You use this table as an aid in evaluating the replies and uncovering weaknesses in your own book-keeping. For example, if a lot of letters are returned without having reached their destination because the customer/vendor's address has changed, you should check whether your master records are being properly maintained.
· Error list
If the program discovers errors while running the report, it creates an error list. This list is therefore not always output.
· Selection cover sheet
You can choose whether or not a selection cover sheet is issued.