How are other accountants/bookkeepers handling unsupported transactions?
I have a few smaller business clients with high transaction volume. When transactions come through without support, I park them in an expense clearing account and clear them out as receipts, invoices, or other support comes in.
That process works fine when the unsupported transactions are limited and the client later provides support. But I have one client where the unsupported items are mostly smaller transactions that have added up to over $300k across 1,600 transactions over 18 months. In comparison to this client’s revenue, that amount is material. At this point, the majority of those expenses are sitting in clearing because I can’t get this client to provide support.
Our terms and conditions state that the client is responsible for providing documentation like invoices, receipts, and other records. Coming from a corporate background in accounting, my position has always been that narratives can help explain or clarify a transaction, but they should not be the only support for it, especially when the unsupported activity is material in total. Understandably, some transactions may have insufficient or no support and may need to be supplemented with a narrative, but that should be few and far between.
It has also been difficult getting logins and access from this client. If we do eventually get everything we need and don’t have to disengage, there will still be a significant amount of historical cleanup required.
For those who run into this, where do you draw the line?
I’m trying to be practical, but categorizing a material amount of unsupported expenses based mostly on bank descriptions and client narratives is not appropriate support for the accounting records.