It may be time to adopt a new Best Practice – Posting Sales to the General Ledger

At STENSON Bookkeeping Simplified we hear that one of the biggest headaches for many bookkeeping departments is when confidence in the financial records starts to erode…especially in sales reporting!

It often starts with…”those sales can’t be right, you must have missed something. I know we had more sales last month than that!”

What happens next?

You take time out of your day, which you can’t spare, and jump in and look for some factor in the monthly sales transactions that might prove or disprove the rather negative assertion that came your way.

This takes a lot of time out of everybody’s schedule which is OK if there are missing sales but it’s a giant waste of time if it turns out sales postings are correct.

In many cases, your investigations show no sales missing. However, you still sense that your investigation isn’t fully accepted.  The person that asked the question only reluctantly accepts your analysis. This is the third month in a row that this question has come up! Can you see the insanity?

The person that asked the question is looking at your financial reports he’s reminded of his concern….those sales are just too low!  The feeling that the books are understating sales never really goes away.

Here’s the problem

There are just too many things going on in a single posting of monthly sales that it is impossible to settle on a single characteristic that can correlate it to something that explain how sales are performing.

There are just too many reasons that can explain the sales posting.

It could be

-a real drop in units shipped/delivered,

-it could be less working days in the month,

-it could be customer credits, refunds, discounts, return of material

-or that dreaded catch-all customer mix, product mix.

The sales cycle may not be daily, weekly or even monthly; there may be prepayments and even deferred revenue to consider.  Comparing daily, weekly or even monthly sales values may not help

There are no standard reports that are prepared to keep the company informed of sales activity during the month on a regular basis, daily, weekly and business owners. Only reviewing sales days or even weeks after the end of the month when memories are failing when the focus of the company’s personnel has shifted to the issues of today.

Here’s the solution.

The problem can often be resolved by adopting a BEST PRACTICE FOR POSTING SALES.

Here it is:

1. Distinguish sales transactions between Separate Standard Sales Postings from Non-Standard Postings

Standard Sales Posting must be ONLY the unadjusted amount billed for products shipped or services provided as reported in an operational customer order sub-system. By the way… Once this sub ledger is approved by operational staff it does not change.

2. Non-Standard Posting must be posted to separate sub-accounts by type:
   1. Customer Credits/Refunds
   2. Customer Prepayments

• Deferred Revenue

1. Discounts
2. Raw of Material
3. Other/Miscellaneous

3. Prepare separate sales journals for Standard Sales Postings and each type of Non Standard transaction.
4. Make sure journals are approved as soon after the close for the accounting month as possible.
5. Make sure that the monthly financial reports are not the first time key managers see monthly sales postings
6. Before you issue the monthly financial reports, correlate each type of sales posting transactions to a previous month or some other characteristic to show how that type is performing.
7. Make corrections as needed.

At STENSON Bookkeeping Simplified we can provide your organization with the skills needed in today’s increasingly hectic bookkeeping environment to perform at its peak.   Use our Best Practice SOPs. Phone, text or email John L Mottram at 214-543-1855 for more details.