AR / AP Settlement

An AR/AP settlement offsets money a customer owes you against money you owe the same business as a supplier, so you net the two balances instead of exchanging cash. Use it when one party is both your customer and your supplier: rather than them paying your invoice while you pay their bill, you cancel one against the other up to the smaller amount. The accountant or the owner usually records a settlement.

A settlement moves no money. It reduces the customer's Accounts Receivable and the supplier's Accounts Payable by the same figure, clearing that much of their open invoices on one side and their open GRNs and bills on the other. It is the credit-only counterpart to a Customer Receipt and a Supplier Payment: those settle open items with cash, a settlement settles them against each other.

Find settlements under Finance → AR/AP Settlements.

Before you start

• The party must exist twice: once as a customer in Customers and once as a supplier in Suppliers. ZyncLedger does not link the two records, so you pick the customer on one side and the supplier on the other, and it is up to you that they are the same business.
• Each side must have something open to offset. The customer needs at least one open invoice (or other open item on their AR account), and the supplier at least one open GRN or bill. Raise those first if nothing is outstanding yet.
• An Accounts Receivable account and an Accounts Payable account are used. They prefill from the customer and the supplier, and each list only offers accounts of the matching type. The AR account also decides which of the customer's open items load, and the AP account which of the supplier's.
• No bank or cash account is needed, because no money changes hands.

Record a settlement

The settlement screen is a single form with two sides: the customer's receivables on the left, the supplier's payables on the right. You pick a party on each side, then apply equal amounts to the open items until the two sides match.

1. Open a new settlement

   Go to Finance → AR/AP Settlements and select New Settlement. The form opens full screen.

2. Set the date

   Enter the Date (required) at the top of the form. This is the date the settlement posts to the ledger, so it decides which period the offset falls in. Add an optional Description to explain what the settlement is for.

3. Choose the customer and AR account

   On the AR Side panel (left), select the Customer (required). ZyncLedger sets the AR Account to the customer's default and loads the customer's open items into the table below. Check the AR Account is the one you mean; it must be an Accounts Receivable account and it filters which open items appear.

4. Choose the supplier and AP account

   On the AP Side panel (right), select the Supplier (required). ZyncLedger sets the AP Account to the supplier's default and loads the supplier's open items. Check the AP Account; it must be an Accounts Payable account and it filters which open items appear.

5. Apply amounts to the open items

   Each side lists its open documents with their Amount and outstanding Balance. In the Apply column, enter how much of each item to offset. You cannot apply more than an item's Balance, and you must apply something on both sides.

   The two sides must offset to the same total: the summary bar shows AR Applied, AP Applied, and the Difference between them. ZyncLedger will not let you save until the Difference is zero and both sides carry an amount, so the customer's cleared receivable exactly equals the supplier's cleared payable.

   Let Auto Apply spread the amount for you

   Type the figure you want to settle into Settlement Amount in the summary bar and select Auto Apply. ZyncLedger fills the Apply column on both sides from the oldest item to the newest until it has distributed that amount, so the two sides match in one step. You can still adjust any row by hand afterwards.

6. Create the settlement

   With the Difference at zero, select Create Settlement. The settlement saves with a status of Posted and offsets the applied items immediately.

What it posts

A settlement posts one balanced journal and uses it to clear open items on both sides. No cash moves, and there is no tax, no revenue, and no expense: only the two control accounts change.

The net-off. For the settled amount, the settlement debits (reduces) the supplier's Accounts Payable account and credits (reduces) the customer's Accounts Receivable account. The debit equals the credit, so the entry balances. It also lowers the supplier's balance and lowers the customer's balance by that same amount. The entry flows through to the Trial Balance, the General Ledger, and the Balance Sheet.

What it settles. The Accounts Receivable credit is applied against the customer's open invoices, and the Accounts Payable debit against the supplier's open GRNs and bills. Each amount you applied is recorded as a settlement on the item it clears, moving that item from Open to Partial (offset in part) to Closed (fully offset). These applications post no further ledger entries; they simply attach the journal's two legs to the specific open documents so those documents close.

The three linked documents. ZyncLedger records the settlement as three real documents you can open from it: a journal (the debit and credit above), a settlement Customer Receipt that clears the invoices, and a settlement Supplier Payment that clears the GRNs and bills. The receipt and payment carry no cash; they exist to record what was offset against what.

Tips & gotchas

Related

• Customers and Suppliers are the two records the same party needs before you can settle.
• Invoice is the open receivable a settlement clears on the customer side.
• Goods Receive Note (GRN) and Bill are the open payables a settlement clears on the supplier side.
• Customer Receipt and Supplier Payment settle those same open items with cash instead of an offset.
• Journal is the balanced entry a settlement posts behind the scenes.
• Chart of Accounts holds the Accounts Receivable and Accounts Payable accounts a settlement moves.