How are overpayments and underpayments handled?
Published
The two cases, with entries
Overpayment - a 14,500 invoice and the customer sent 15,000:
| Account | Debit | Credit |
|---|---|---|
| Bank | 15,000 | |
| Accounts receivable (closes the invoice) | 14,500 | |
| Customer advances / customer credit balance | 500 |
The excess is a liability - cash with no supply behind it yet. Its two options: offset against a coming invoice (the usual) or refund by payment voucher. It is never revenue - that "windfall" surfaces at the first statement reconciliation with the customer.
Underpayment - a 14,500 invoice and 14,300 arrived:
SAR 200 remains a live receivable at its original ageDiagnose before treating: a transfer error? a discount they assumed? a disputed line? a bank commission deducted en route? Each diagnosis has its path: claim the difference, issue a credit note if the discount is rightful, or record a commission expense with its document.
The trivial-difference policy
Few-riyal differences (rounding, small commissions) cost more chasing than they are worth. The sound policy: a written threshold (say SAR 5) below which the difference is written off with a documented entry:
| Account | Debit | Credit |
|---|---|---|
| Allowed discounts and differences (expense) | 3 | |
| Accounts receivable | 3 |
A written threshold plus a dedicated account = disciplined mercy; write-offs without a policy = a small back door that widens.
Frequently asked questions
A credit balance for a customer who no longer trades with us?
Refund it - it is their money. And aged credit balances get reviewed periodically instead of accumulating forgotten.
A customer who habitually shorts every invoice by a few riyals?
A pattern, not chance - met with a statement and a conversation; silence converts the trivial threshold into a standing, unannounced discount.