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Bookkeeping: Do you Pay From Invoice Or Statement

Guest post by: John Stewart

Article Overview: A common bookkeeping mistake made by many small business owners is to pay an invoice twice. When cash flow is tight, you want to do everything you can to ensure that you are not paying invoices twice - and one way of doing that is never to pay from a statement.

Bookkeeping: Do you Pay From Invoice Or Statement

A bookkeeping client asked whether he should pay his supplier from the invoice, or the statement. A common bookkeeping mistake made by many small business owners is to pay an invoice twice.

Why would you pay an invoice twice?

Here's a common example: One day the business owner sees the invoice come through the mail, and he gets around to paying it a couple of weeks later.

Meanwhile the supplier sends out the monthly statements, which the business owner then places in his intray with the intention to pay some bills in a few days time.

The next day, one of his sales staff requests a product that is out of stock, so the business owner picks up the phone to the supplier, who says that there is some money outstanding which needs to be settled before another order can be placed.

In a panic, the business owner pays the total amount that is shown outstanding on the supplier's statement - not realising that one of the invoices listed had been paid two weeks earlier

This simple error would have never occurred if the business owner followed our advice, which is, as bookkeepers we always say pay from the invoice - NEVER pay from the statement.

Why not pay from the supplier's statement?

When you always pay from an invoice, then there'll be no risk of wondering whether you've paid that invoice or not - and when your bookkeeper comes to enter the data into the accounting software package, be it MYOB or Quickbooks, the bookeeper will know what you've paid and what you haven't.

When you receive a statement, it may list invoices that you have since paid, and you could end up paying them twice. But surely the supplier would tell you that you've paid the invoice twice. Maybe, or maybe not.

By sticking to the rule of always paying from an invoice, and never a statement, you can see what the invoice relates to.

Why do your suppliers issue a statement?

The supplier will send out a statement advising you of which invoices have been paid and which are outstanding in that reporting period.

Nothing wrong with attaching the invoices that you are going to pay, and put them with the statement - as long as you ensure that the amount you pay is not the amount requested on the statement, but the total amount of the invoices that are attached to that statement.

When cash flow is tight, you want to do everything you can to ensure that you are not paying invoices twice - and one way of doing that is never to pay from a statement.

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Article Tags: accounting, bookkeeping, invoice, statement, suppliers invoice



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