All 23 Cash Application questions
More in Cash Application
What is the difference between a payment and a receipt in AR? What does it mean to post a receipt 'on account'? What happens to the AR balance when a receipt is applied? How does automated cash application (auto-matching) work? What are customer deductions (chargebacks) and how are they managed? What is a lockbox and how does it help cash application? How are returned/NSF customer payments handled after they were applied? How is customer credit balance or prepayment handled in AR? How are bank fees and card-processing fees on receipts accounted for? What is a suspense account and how is it used in cash application?
Advertisement
Accounts Payable & Receivable › Cash Application

How do you handle a short payment or overpayment during cash application?

Intermediate

Answer

For a short payment, apply the cash received and leave the residual open (or open a deduction/dispute case) to investigate the reason. For an overpayment, apply to the invoices and record the excess as a credit on account or a refund liability. Both should be researched—short pays often signal disputes or deductions.
Invoice 1,000, customer pays 950:
  Dr Bank 950  Cr AR 950; residual 50 stays open as a deduction case.
Real-world example A customer short-pays $50 citing a pricing dispute; the residual is logged as a deduction and routed to the dispute team.

Common follow-ups: What is a deduction/short-pay case? | How are overpayments cleared?

Collections & Bad Debts Reconciliations Cash Application
All 23 Cash Application questions