A receivable balance can agree with the ledger and still be wrong. It may include disputed invoices, cut-off errors, unapplied receipts, unrecorded credit notes, balances without enforceable rights or amounts that are no longer recoverable.
1. Reconcile before analysing
Reconcile the receivables sub-ledger to the general ledger and explain every reconciling item. Unapplied cash, unidentified deductions and manual journals should be visible—not buried in a net balance.
2. Build a reliable ageing
Ageing should use the contractual due date where appropriate, reflect credit terms and separately identify disputes, retention, related parties, advances and unusual balances. Reconcile ageing totals to the ledger.
3. Test cut-off and existence
Review invoices around period end, dispatch or service evidence, acceptance terms, returns and subsequent credit notes. External confirmations can support existence and terms, but non-responses require alternative procedures.
4. Assess recoverability
Recoverability is not determined by ageing alone. Consider payment history, current collection activity, disputes, customer financial condition, security, market conditions and subsequent receipts. Under applicable frameworks, expected credit loss requirements may require forward-looking information and segmentation.
| Signal | Finance response |
|---|---|
| Repeated broken payment promises | Escalate, reassess expected recovery and document evidence |
| Invoice dispute | Separate commercial dispute from credit risk and assess revenue validity |
| Subsequent receipt | Trace amount and date; assess what it evidences at reporting date |
| Long-outstanding credit balance | Investigate misposting, advance or refund obligation |
5. Close checklist
- Sub-ledger to GL reconciliation.
- Ageing validation and exception report.
- Customer confirmations or alternative evidence.
- Subsequent receipt testing.
- Dispute and credit-note review.
- Impairment or expected credit loss assessment.
- Related-party and classification checks.
- Disclosure and concentration-risk review.