Reconciliation of Mutual Settlements and Offsetting: Identifying Balance Discrepancies and Documenting Non-Cash Barter

Reconciliation of Settlements and Mutual Offsetting: Identifying Balance Discrepancies and Processing Non-Cash Barter

In everyday trade, goods and money constantly move between stores, wholesale customers, and suppliers. A wholesale customer may purchase goods with deferred payment, a supplier may provide raw materials or finished products on consignment, and sometimes the same business partner acts as both a customer and a supplier. In these situations, businesses need to accurately track mutual obligations, regularly verify outstanding balances, and record non-cash transactions.

• How can I quickly generate and print a reconciliation statement with a business partner for a specified period?

• Why are there discrepancies between the total outstanding balance and the detailed settlement statement?

• How can I perform mutual offsetting (non-cash barter) with a business partner without any actual movement of funds through the cash register or bank account?

• How can I correctly link a payment to a specific incoming or outgoing invoice if the payment was applied to a different document?

Basic Concepts and Accounting Principles

To accurately manage financial and inventory transactions, the software uses the following basic concepts:

• Goods and Cash Balance (GCB) — the relationship between the value of goods shipped or received and the amount of payments made between a retail business and its business partner.

• Settlement Card (Reconciliation Statement) — a chronological report showing all goods invoices, returns, financial payments, and settlements for a selected period, including the opening and closing debt balances.

• Mutual Offsetting (Non-Cash Barter) — a business transaction that allows parties to offset equivalent mutual claims without actually transferring or withdrawing cash or non-cash funds.

In Torgsoft, settlement accounting follows management accounting principles: every goods invoice or financial document automatically changes the business partner's outstanding balance.

Business Partner Directory: Configuring Partnership Types

To generate reconciliation statements and process barter transactions correctly, it is important to configure the business partner's record in Settings → Business Partner.

Partnership Types

The software provides three main partnership types:

1. Supplier — a business partner from whom goods are received under incoming invoices.

2. Customer — a retail or wholesale customer to whom goods are shipped under outgoing invoices or sales transactions.

3. Supplier-Customer — a business partner with whom you trade in both directions (you purchase their products and sell your own goods to them).

Opening Debts

When migrating data or starting to work with a new business partner, the opening settlement balance is entered on the Opening Debts tab of the business partner's record:

• Debt Type: select «I Owe» or «Owed to Me».

• Parameters: specify the amount, accounting currency, accounting center, and company.

The opening debt is recorded in the system and included when calculating the total balance in the reconciliation statement.

Generating a Settlement Card

The main feature for viewing and analyzing settlements is available under Payment → Balance with Partners.

Step-by-Step Guide to Generating the Report

1. Open Payment → Balance with Partners.

2. In the Partnership Type filter, select the required category (Supplier, Customer, or Supplier-Customer).

3. Select the required business partner from the list.

4. Click Settlement Card.

5. In the window that opens, specify the reporting period (start and end dates).

6. If necessary, select the Accounting Center filter (to view settlements for a particular store or warehouse) and configure the following options:

•   Do Not Show Automatic Transactions — hides technical system entries.

•   Exclude Consignment Invoices — excludes goods supplied on consignment from the calculation.

7. Click Refresh.

8. To print the document or export it to PDF or Excel, click Print.

Report Structure

The Settlement Card displays:

• Opening debt balance;

• A chronological transaction table: transaction date, transaction type (incoming/outgoing invoice, payment, return), accounting account (cash register or bank account), and the amount by which the debt increased or decreased;

• Closing debt balance;

• Additional indicators (for example, bonuses if a loyalty program is used).

Identifying and Resolving Balance Discrepancies

Sometimes the total outstanding balance displayed in Balance with Partners differs from the actual records or the business partner's reconciliation statement. Below are the main causes of such discrepancies and ways to resolve them.

1. Payment Linked to the Wrong Invoice or Supplier

 Cause. When recording a payment or importing a bank statement, the payment was linked to another supplier's document or applied to an earlier invoice.

 Solution:

• Open Document → Incoming Invoice Register.

• Find the required invoice and use Link Payment to Invoice to reassign the payment document to the correct goods receipt.

• If necessary, unlock the closed accounting period (if the transaction occurred earlier) and repost the payment.

2. Impact of Hidden Accounting Centers

 Cause. The system contains several accounting centers (stores/warehouses), some of which are hidden from the current user because of role-based access settings. If a transaction occurred at a hidden accounting center, the outstanding balance displayed to a restricted user may be incorrect.

 Solution. Generate and verify the reconciliation statement using an unrestricted user account («Owner») that has access to all accounting entities across the retail network.

3. Effects of Deleting Statistics for Closed Periods

 Cause. When running the Delete Statistics for Closed Periods maintenance operation, all previous documents are consolidated into a single opening debt balance as of the last day of the period being deleted. If the deleted period contained product returns from different sales or inconsistent foreign currency equivalents, the opening debt is calculated based on the remaining balances.

 Solution. To review changes over time, use the Settlement Card, which records the resulting opening debt balances after statistics have been cleared.

4. Using Non-Balance Financial Analysis Categories

 Cause. The payment transaction was created using a non-balance financial analysis category or without identifying the business partner.

 Solution. Make sure that balance-affecting categories are used for partner settlements (for example, «Settlements with Suppliers» or «Customer Payment»).

Processing Mutual Offsetting (Non-Cash Barter) Without Moving Funds

Step-by-Step Mutual Offsetting Procedure in Torgsoft

1. Set the partnership type. In Settings → Business Partner, set the partnership type to Supplier-Customer for the relevant partner.

2. Verify the offsetting amount. In Payment → Balance with Partners, check the outstanding amounts in the corresponding columns (debt under outgoing invoices, “Goods Shipped”, and debt under incoming invoices, “Goods Received”).

3. Record the offsetting financial transactions. To settle the debts without moving actual cash or bank funds, create two balance-affecting financial transactions for the same offsetting amount:

•   Transaction 1 (settling the customer's debt). In Payment → Financial Document (or through business partner settlements), add an incoming payment transaction from the customer for the offsetting amount (for example, UAH 15,000). To maintain accurate actual cash balances, process the transaction through a specially created internal/transit cash account for offsets or directly through the invoice settlement window.

•   Transaction 2 (settling the supplier's debt). In the same section, add an outgoing financial transaction (supplier payment) for the same amount (UAH 15,000) from the same transit cash account.

4. Result in the system:

•   The total customer payments and supplier payments each increase by UAH 15,000.

•   The business partner's overall outstanding balance in Balance with Partners becomes zero.

•   Actual cash balances in bank accounts and physical cash drawers remain unchanged.

Working Through an Intermediary

If settlements for goods sold are handled through a third party (an intermediary), Torgsoft provides a dedicated Marketing → Intermediary mode. Here, an intermediary record is created with the commission percentage, while invoices are issued to the intermediary's customer. Torgsoft separates the debt for goods from the debt for sales services, allowing final payments and commission offsets to be recorded correctly.

Tips for Keeping Settlement Records Accurate

1. Maintain a disciplined period-closing process. After completing monthly reconciliations with business partners, close the accounting period in the system to prevent accidental changes to documents from previous dates.

2. Check document currencies. When trading with foreign currency equivalents, verify the exchange rate recorded in the invoice to avoid exchange rate discrepancies when payments are made in the national currency.

3. Keep reconciliation records. It is recommended to attach saved and signed reconciliation statements as files or retain them in an archive to help resolve disputes quickly in the future.