This article will go through the new accounting method for payments and deposits
Existing Dealerships do not have to change to the new method but if they choose to change to the new method, there will be no going back
Before making that decision, please ensure that you totally understand the new Payment Accounting Method Conversion and if it is right for your Dealership
Payment Accounting Method Conversion
The goal of this new accounting method for payments and deposits is:
to drastically reduce the volume of journal entries hitting the Customer Deposits General Ledger (GL) so that only entries related to actual customer deposits on Customer Orders hit this GL account
to allow the Customer Deposits GL to be a liability account
to facilitate easier banking entry reconciliation against what is currently the Undeposited Funds GL by drastically reducing the volume of journal entries hitting this GL
to generate cash reconciliation journal entries including entries for cash over/short amounts
What current issues will this new method be addressing
The main issue is related to the volume of journal entries that are being posted to the Customer Deposits and Undeposited Funds GL accounts. Currently all payment and deposit entries are recorded as individual journal entries to both of these GL accounts. When CO invoices are finalized and posted to QB/Xero additional entities are generated in the Customer Deposits GL to pay for these invoices
For the Customer Deposits GL account this can make it very difficult to reconcile when there are variances that have existed for a period of time
For the Undeposited Funds GL account, because of the high volume of entries, this makes it very difficult for a user to reconcile their banking entries against the individual entries being posted to this GL
Also, a number of customers are not happy with the fact that because of restrictions imposed by QB we’ve been forced to restrict the Customer Deposits GL to always be an asset account because it is used for making payments against sales receipts
Lastly, we have a Cash Reconciliation tool which allows the user to reconcile the payments processed in Blackpurl each day against the actual funds received but doesn’t in any way account for this reconciliation in the accounting package especially with regards to cash over/short
What will Change
NEW GL accounts related to Deposits, Payments, Checkout and Cash Reconciliation
Instead of having every payment and deposit flowing through just two GL accounts, multiple possible GL’s in the case of Undeposited Funds, this new method will make use of just four GL accounts:
Customer Deposits GL
This is the existing GL account you already have
With this update the only entries that would hit this GL account would be entries recorded in the deposits section of Customer Orders
Credits when deposits are added to a CO and debits whenever they are refunded or used in checkout. The offset GL for deposit or deposit refund entries will be to the Cash Reconciliation Clearing GL. But when a deposit is used in checkout the offset GL will instead be the Checkout Clearing GL
The balance of this GL account will reflect the current balance of deposits on Customer Orders
Here are some sample journal entries related to this GL account:
Checkout Clearing GL *NEW*
This is a new GL account you will need to add to your chart of accounts
The only entries that would hit this GL account would be entries recorded in checkout. Credits when payments are record in checkout or deposits are used in checkout. Debits when refunds are recorded in checkouts.
With the exception of deposits used in check out, the offsetting entries will be to the new Cash Reconciliation Clearing GL
The balance of this GL account at the end of any day will be zero unless for some reason a payment is added in checkout without the user finalizing the checkout
Here are some sample journal entries related to this GL account:
Cash Reconciliation Clearing GL *NEW*
This is a new GL account you will need to add to your chart of accounts
This GL account is used as the offset GL account for all entries posted to Customer Deposits GL and the Checkout Clearing GL similar to how the Undeposited Funds GL account worked before. This is demonstrated in the examples above for the Customer Deposits and Checkout Clearing GL’s
Entries will be cleared out of this account by new journal entries generated from updates we’ve made to the Cash Reconciliation tool
Here is an example of the new journal entry from Cash Reconciliation tool where there was a mixture of payments received for various payment methods and there was a variance between the actual values and what was processed through BP:
As you can see all of the cash/credit payment methods are summarized in the Undeposited Funds GL for the total actual amounts entered in the cash reconciliation tool. The Cash Reconciliation Clearing GL is cleared out for the total amount of all payments recorded in BP. The over/short value from the reconciliation tool will be posted to its own GL account
The memo descriptions shown above are only rough examples. We will ensure that each accurately reflects the source of the entry.
The balance of this GL account will reflect the total payments and CO deposits for those days where the Cash Reconciliation has not been closed and finalized
Undeposited Funds GL
This is the existing GL account you already have
As you can see above from the flow of entries through the other accounts and with the Cash Reconciliation tool being the only way entries are made into the Undeposited Funds GL, this keeps the entries found in this GL clean and easier to reconcile with entries from the bank account as seen in this example for one particular day:
Cash Reconciliation Tool
Once this new method has been enabled the Cash Reconciliation tool will also be updated to post a journal entry as part of the “Reconcile day” action. The purpose of this journal entry is to clear the day's entries out of the Cash Reconciliation Clearing GL and post one or more entries to the Undeposited Funds GL
This journal entry will contain a minimum of two line items but could include a number of line items depending on the payment/deposit activity for the day
Some of the values will use the actual values processed in Blackpurl while others will use the “Actual values” entered by the user in the reconciliation tool
Summarized line items and Cash over/short:
For each cash/credit payment method which has an “Actual Value” entered for the day, a line item will be included that will record the “Actual values” entered by the user in the reconciliation tool. Any amount in Cash over/short will also be included as a line item
Using the reconciliation below as an example:
The following line items would be included in the journal entry:
Cash Reconciliation Clearing line item:
The final line item in the cash reconciliation journal entry will offset the Cash Reconciliation Clearing GL for all payments received in Blackpurl for the date reconciled as seen in this example:
Now that the cash reconciliation tool is posting journal entries when a date is reconciled and closed, we will also accommodate a scenario where the user may need to reopen a reconciliation so they can make corrections to it.
For this we have implemented a “re-open” action similar to the one we have for CO invoices, VO’s and VR’s
As part of this reopen process we’ll first check to ensure that the original cash reconciliation journal entry is still intact in the accounting package and that none of the line items within it have been reconciled by the accounting package
Doing this will allow us to know if the cash reconciliation journal entry can be safely removed from the accounting package
How to enabling this feature
Once you fully understand the above details, you will need to create the new General Ledgers in your Accounting Package:
- BP Cash Reconciliation Clearing
Please ensure that it is an Asset type GL
- BP Checkout Clearing
Please ensure that it is an Asset type GL
- BP Cash Over / Shorts
This can be an expense or a Cost of Goods (COGS) type GL
- BP Gift Card Liability
You may already have this liability account, however if you need to create a new GL, please ensure that this is a liability type GL
Once they are created in your Accounting Package, log back into Blackpurl and sync your Chart of Accounts
- From the Blackpurl Header > click
then System settings
From the System Settings dashboard, select Accounting Integration
- In the Accounting Integration section > click straight into 2. Chart of Accounts
Then click
Once Blackpurl has confirmed the syncing then you can continue onto the next steps
- From System Settings > Accounting Integration - Accounting Provider there is a new section called Payment accounting method conversion
- Simply click on
to start the action button
This action will present you with a screen and at the top of it will be a couple of notifications/warnings as seen here:
As you can see, the actual conversion will not happen immediately because we cannot change this accounting method while you are actively using the system
Instead it will occur overnight and be in place for the start of your next business day
- Work your way down the conversion document and fill in the missing GL accounts fields with the new GL you have just created in your Accounting Package
- Lastly you will need to indicate your understanding by checking the checkboxes that:
Once this new method of accounting for payments and deposits is enabled it cannot be turned off
Going forward the only entries posted to your Undeposited Funds GL account will come from reconciled cash reconciliations
Any previously reconciled cash reconciliations cannot be reopened
Any unreconciled cash reconciliations for dates prior to conversion will not generate a journal entry when reconciled
- Once you have assigned all GLs and verified that you understand the action, then the option to Schedule the Conversion
- At the start of the next business day, the conversion will be complete and the new Payment Accounting Method will begin