Factoring Companies Guidebook

Definition

Any cash, which has been posted to a customer account but which has not been allocated or matched to specific invoices. This would include cash that has been posted to a 'dump', 'suspense', 'unallocated cash' or 'unallocated credit' account.

Concerns

If cash has not been fully allocated some invoices will appear to be outstanding on the ledger, when in reality they have been paid. Until the cash is properly allocated, the invoices actually outstanding are difficult to identify, which could make collection of the sales ledger difficult in a gone concern situation. In effect, the unallocated cash shows that the ledger is un-reconciled and that errors may be present. These could take the form of overpayments or payments in error by customers, which may have to be refunded by the Client. It may also signify 'round sum' payments or 'on account' payments which may indicate cash flow or administrative problems at the Client or debtors. Advance Payments or Deposits may also be treated in this way.

Identification

Review the aged analysis for unallocated cash columns

Review the open item aged debtor listing for evidence of unallocated items.

Remittance advice testing will also provide evidence of the correct, or otherwise, allocation of payments.

Enquire about payment terms at the Client.

Treatment

All amounts included in the past due column should be added back to the age disapproval to ensure this is not understated.