Account Reconciliation

This document reviews the best practices for manual account reconciliation when a business uses BlueTape to process payments or leverage BlueTape Trade Credit or AR Advance.

AR Side of the Transaction

1. Pay Now Transactions

Whether you use ACH or card processing, your transactions for an open invoice will include two sections: 

1. Fee deducted by BlueTape 
2. Net amount deposited to your bank account

In addition to your bank record, you can find transactions for an open invoice in: 

• Your BlueTape account by clicking on Sales, then on Settlements.
• Your BlueTape monthly settlement report. To access this report, log in to your BlueTape account, click on Sales, then click on Statements. You may then select the desired month and download the report.

Whether this is card processing or ACH processing, you will receive ACH transfers in your bank account. When you see transactions in your bank statement, you should see ACH transactions coming from Aion or Aion BlueTape as reference. See the screenshot example below.

As an example, let's consider there is a $5,000 invoice that your customer paid via ACH. Your transactions for that invoice would be listed as follows: 

• Invoice Amount: $5,000.00
• Fee Deducted by BlueTape: $10.00
• Net Amount Deposited to Your Bank: $4,990.00

1.1. Tips & Best Practices

1. Set Up a Distinct Expense Account
   • Consider creating a dedicated general ledger account for “BlueTape Fees” and “Payment Processing Fees” so you can track these fees separately.
2. Automate Where Possible
   • Many accounting systems allow you to create rules that automatically categorize and split deposits into net payments and fee expenses once it recognizes the payor (in this case, BlueTape).
3. Verify Against Statements
   • Each month, compare your accounting records to your BlueTape settlement page or BlueTape’s monthly statements to ensure everything aligns.
4. Maintain Documentation
   • Store or attach supporting documents (invoices, statements) so you have an audit trail for each transaction.

1.2. Step-by-Step Account Reconciliation

Step 1: Identify the Payment

• Verify the fees and net amounts deposited to your account on the settlement page of your BlueTape account or in your settlement report. 

• Locate the customer payments and net deposits
  • In our example above, you will see in your bank statement (or merchant account statement) that $4,990 has been deposited by BlueTape.
  • This deposit corresponds to the original $5,000 invoice.

Step 2: Record the Payment in Your Accounting Software

In most accounting systems, you will start by recording payment on the open invoice for $5,000. However, you’ll need to account for the fee in the same step. Here’s how you can structure the journal entry:

1. Debit (increase) your bank account for the net amount received:
   • Debit: Bank Account >> $4,990
2. Debit (increase) an expense account for the processing fee (e.g., “BlueTape Fee”, “ACH Processing Fees” or “Bank Fees”):
   • Debit: ACH Processing Fees >> $10
3. Credit (decrease) Accounts Receivable for the full invoice amount (which closes out the invoice as fully paid):
   • Credit: Accounts Receivable >> $5,000

Result: This entry shows that your customer has effectively paid $5,000, but $10 went to fees, leaving you $4,990 in the bank.

Example Journal Entry: Using the $5,000 invoice example with a $10 fee:

Account	Debit	Credit
Bank Account	$4,990
ACH Processing Fees	$10
Accounts Receivable		$5,000

• Memo/Description: “Received ACH payment of $5,000 less $10 processing fee via BlueTape.”

Step 3: Mark the Invoice as Paid

• In your accounting software, link the payment record to the specific customer invoice.
• Mark the invoice as Paid (or Closed) for the full $5,000 amount.

Step 4: Reconcile the Bank Deposit

When you do your bank reconciliation:

1. Match the $4,990 deposit in your bank statement to the corresponding journal entry (or payment record) in your accounting software.
2. Ensure the difference of $10 is captured as the processing fee and is reflected on your expense ledger.

Handling Multiple Invoices in One Deposit

If a single bank deposit from BlueTape covers multiple invoices, you can still use the same reconciliation method:

1. In the Settlement page of your BlueTape account or your statement, find the total transaction amount that sums up all invoice amounts.
2. Identify the fee(s) deducted.
3. Split the total deposit amount + fee(s) across the relevant invoices, making sure each invoice is correctly marked paid and the total fees are properly expensed.

2. Trade Credit or AR Advance

Whether you are using BlueTape to offer trade credit to your customers or you use your in-house credit and then leverage BlueTape AR Advance to improve your cash flow, you can implement the following approaches to reconcile your accounts. 

2.1. Tips & Best Practices

1. Use a Dedicated Expense Account
   • Keep “Trade Credit Fees”, “Factoring Fees”, or “Finance Fees” in a dedicated account. This makes it easier to track your overall financing costs or the cost of offering financing.
2. Maintain a Clear Audit Trail
   • Keep copies of invoices and BlueTape settlement reports in a dedicated folder.
   • Attach or link these documents to the corresponding journal entries in your accounting software.
3. Monitor Fluctuations in Fees
   • If your rate changes, be prepared for variations. Set up a process to confirm the final fee percentage for each invoice cycle.
4. Consult Your Accountant
   • Trade credit and AR Advance (factoring) arrangements can be accounted for in multiple ways (as a sale of receivables vs. financing). We recommend you treat this as a sale of your receivables. Confirm with your CPA which method best fits your business model and GAAP or IFRS requirements.

2.2. Understanding the Transaction Flow

1. You issue an invoice to your customer (for example, a $10,000 invoice).
2. BlueTape issues an advance based on the advance rate for the customer. For example: BlueTape Advances 80% ($8,000) to you shortly after the invoice is approved for financing.
3. When the buyer eventually pays the invoice (to BlueTape), BlueTape deducts its seller fee (for example, a 2.5% seller fee would result in $250) and sends the remaining 17.5% (in this case, $1,750) to you as the final payment.

2.3. Step-by-Step Account Reconciliation for Trade Credit and AR Advance Using a “Due from BlueTape” (or “Receivable from BlueTape”) Account

Step 1: Identify the Advance Payment

• Verify the advance amount deposited to your account on the settlement page of your BlueTape account or in your settlement report. 

Step 2: Record the Advance from BlueTape

When you receive the advance, you’re effectively transferring the right to receive part of the invoice to BlueTape. In your accounting, you remove the full $10,000 from Accounts Receivable (Customer) and set up two new accounts. In most accounting systems, you will start by recording payment on the open invoice. However, you’ll need to account for the final payment, which will be paid once the customer pays BlueTape, and the transaction fee. Here’s how you can structure the journal entry:

1. Debit (increase) your bank account for the advance amount received:
   • Debit: Bank Account >> $8,000
2. Debit (increase) “Due from BlueTape” for the final payment and your fee (invoice amount minus advance amount) the remaining $2,000 difference:
   • Debit: “Due from BlueTape” >> $2,000
3. Credit (decrease) Accounts Receivable for the full invoice amount (which closes out the invoice as fully paid):
   • Credit: Accounts Receivable >> $10,000

Example Journal Entry: Using the $10,000 invoice example with a $10 fee:

Account	Debit	Credit
Bank Account	$8,000
“Due from BlueTape”	$2,000
Accounts Receivable		$10,000

Step 3. Record the Final Payment (Net of Fees)

Later, when the customer pays BlueTape in full, BlueTape deducts its fee (for example, a 2.5% seller fee which would result in $250) and sends you the final payment of $1,750. At this point:

1. Debit (increase) your bank account for the final payment amount received:
   • Debit: Bank Account >> $1,750
2. Debit (increase) an expense account for the processing fee (e.g., “BlueTape Fee”, “Transaction Processing Fees” or “Bank Fees”):
   • Debit: ACH Processing Fees >> $250
3. Credit (decrease) “Due from BlueTape” for the final payment amount and transaction fee: 
   • Credit: “Due from BlueTape”  >> $2,000

Example Journal Entry: Using the $10,000 invoice example with a $10 fee:

Account	Debit	Credit
Bank Account	$1,750
“BlueTape Fee”	$250
“Due from BlueTape”		$2,000

Step 4. Reconciling Your Bank Statements

1. Advance Payment Recon
   1. Match the $8,000 deposit in your bank statement to your accounting entry.
   2. Confirm it ties to the correct invoice(s).
2. Final Payment Recon
   • Match the $1,750 deposit to the final settlement entry.
   • Confirm the $250 fee is recorded correctly in your expense account.
3. Settlement Page on your BlueTape Account
   • In your BlueTape account, go to the settlement page. As shown in the following screenshot, you can see details of each transaction (invoice number and amount, advance amount, final payment, fees).

1. Monthly Statements
   • Your monthly statement detailing each transaction (invoice, advance, final payment, fees). Reconcile those statements with your ledger to ensure no discrepancies.