Overview Between Open Item and Balance Forward Processing
Here are some suggestions to help you decide the method to use. Instead of using one method all the time we suggest that you choose either method per customer or supplier in order to optimise your processing. We use customers as an example:
- Day based terms require open item processing.
- Use balance forward processing for customers who pay you regularly and on time. If you invoice a customer a few times a month and they invariably pay you in the next period, there is no need to do extra work.
- If you create a cash sale account, use balance forward processing for that account.
- If you have a customer where there are queries on individual invoices, you need to leave queried items unpaid, and you would like these queries to show on statements each month, use open item.
- If you have a large number of transactions for a customer, and you need to reconcile each payment to individual invoices, use open item.
- If you often have credits, you may want to use open item processing to track these.
- If you intend to charge interest on overdue amounts, consider open item processing, since it will age interest charges more accurately.
- Open item ageing is more accurate than balance forward ageing