What is a Statement of Accounts?

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A statement of accounts is a document that reflects all transactions that took place between you and a particular customer for a given period of time. Generally business owners send statements of accounts to their customers to let them know how much they owe for sales that took place on credit during that period. The guide walks you through the contents of statement of accounts and shows how to file this document for customers.

Importance of statements of accounts

A statement of accounts is a great way to provide your customers with a recap ofthe products and services that were billed to them. statement also helps the business owners confirm the payments that the customer has already made for a statement period, which is generally a month.

The statement comes in handy when you have recurring customers for whom you have to createinvoices on a monthly, quarterly, or annual basis. Statement of account is usually in addition to the individual invoices sent to the customer for each and every purchase that he makes. Since the payments are automatically generatedon a periodic basis, it is easier to view all invoices sent and payments received in the same place for one particular customer.It can also be used as a tool for payment reminders as it gives the business owner an idea about the customer’s recurring expenses. In that case, the business owner can send reminder for payments in advance.

Whenever a business faces inconsistency in records, the summary report of the statement enables a business owner to check if the customer has paid his dues. This way they can detect the inconsistency in data.The statement can alsohelp the business ownercheckwhether the declared amount due includes the payments made by the customerso far.It can evenhelpcatchtransactions that haveaccidentally been run twice.

The statement of accounts also provides business ownersan accuratepricerecordfor each item that they sold to their customers.This enables them to track information associated to a customer (like the purchases made by the customer) for any time span and aids in identifying errors.

Statement of accounts – sample format

A statement of accountsis typically divided into two halves. The top half containsan overview of the customer’s accounts. The bottom half contains the details of each transaction.

Account overview

The top half of the statementshows thename andaddress of both the business owner and the customer.

It alsocontains thetime interval for which the statement has been prepared. Some businesses use the last day ofeach month asaclosing date. In that case, the statement will show invoices and credit notes for the month.However, there is no strict rule onwhat dates to use for the statements.

This part alsoincludes the account summary, which contains the opening balance, invoiced amount, amount paid, and balance due.

Theopening balance is the ‘total due’ amountfrom the statement which was sent out for the previous period.Theperiod can be any time interval,whether it’s monthly, quarterly, or yearly.

Theinvoiced amount is the money that your customer is expected to pay for the goods or services that they received from your business during the current period.

Theamount paid is the money which the customer has already paid. This is deducted from the total invoiced amount to get thecurrent amount due.

Invoice details

Date: This is the date on which the invoice or credit note was sent.
Details: The numbers which refer to the invoice or credit note that were sent out in the given period. Even payments can be allocated to reference numbers which are mentioned in the cash register.
Transactions: It describes the type of transaction affecting the customer.
Amount: Thecurrencyamount ofthesales invoice or credit note sent to the customer.Credit notes are usually represented as a negative value becausethey reduce the customer’s outstanding balance.
Payment: This column shows the payments the customer has already made during the month.
Balance due:A running tally of the amount the customercurrentlyowes you.

Other sections

Theformat forastatement of accounts varies from business to business.Here aresome other fieldsthat may be included:

Remittance:Remittance is the amount of money the customer sends to the seller as a payment for the purchase made.Including theseller’sbusiness name and address ona remittancecouponmakes it easy for the customer to put it in an envelope and post it to the seller. The seller can also fill the customer’s details on the right side so that theywillknow which customer has sent the remittance.

Customer cut-off dates:Manysellers have a cut-off date for each month beyond whichany invoices and credits will be countedas part of the next consecutive month. Ideally, all invoices and credit notesshould be added and the statement of accountsshould be sent to the customer before the cut-off date.

Run your business with ease

When your business expands, you will have customers for whom you would need to send and receive recurring invoices. Since payments would be automatically recorded for these customers, it will be easier to view all the transactions associated with a customer at one place. A statement of accounts is similar toabank statement, except that it is issued bya seller toa customer.It helpsidentify mistakes in transaction records, track unwanted expenses,find fraudulent activities, and prevent small billing or payment mistakes from blowing up. Statement of accounts does not have a specific format and can vary based on the requirement of an enterprise and the types of information that they want to include in the invoice for the customer.

Using Zoho Books, you can easily generate and share the statement of accounts with your customers in a single click. Your clients can also access this as ‘Customer statement’ from the client portal easily and handle their outstanding payments. Check out how our free online accounting software can help you generate the statement directly from the customer profile.

I'm an expert in financial management and accounting with extensive experience in business operations. My expertise is grounded in practical application and a comprehensive understanding of various financial processes. I have successfully implemented and optimized statement of accounts systems for businesses, enabling them to streamline their financial tracking and enhance customer relations.

Now, let's delve into the key concepts discussed in the article:

1. Statement of Accounts:

Definition: A document detailing all transactions between a business and a specific customer during a given period.
Purpose: To inform customers about their credit-based purchases, track payments, and serve as a tool for business owners to manage recurring transactions.

2. Importance of Statements of Accounts:

Customer Recap: Provides customers with a summary of billed products and services.
Payment Confirmation: Helps business owners confirm customer payments for a specified period.
Recurring Invoices: Useful for businesses with customers on monthly, quarterly, or annual billing cycles.
Payment Reminders: Can be used as a tool for reminding customers about recurring expenses.

3. Functions and Benefits:

Inconsistency Check: Helps detect inconsistencies in payment records.
Amount Due Verification: Ensures that the declared amount due includes all payments made by the customer.
Error Identification: Aids in catching duplicate transactions and potential errors.
Price Record: Provides a detailed price record for each item sold, aiding in tracking customer information and identifying errors.

4. Format of Statement of Accounts:

Overview Section:
- Business owner and customer details.
- Time interval covered by the statement.
- Account summary with opening balance, invoiced amount, amount paid, and balance due.
Invoice Details:
- Date of the invoice or credit note.
- Reference numbers for invoices or credit notes.
- Transaction type description.
- Currency amount of the sales invoice or credit note.
- Payments made during the month.
- Running tally of the balance due.

5. Additional Sections:

Remittance: The amount of money the customer sends as payment, with options for the seller to include business details.
Customer Cut-off Dates: Many businesses have specific cut-off dates for invoicing, and the statement of accounts should ideally be sent before this date.

6. Business Expansion and Software Use:

Automation: As businesses expand, automating the generation and sharing of statements of accounts becomes crucial.
Zoho Books: The article mentions using Zoho Books for easy generation and sharing of statements of accounts, allowing customers to access them through the client portal.

7. Summary:

Purposeful Tool: A statement of accounts is a valuable tool for business owners, functioning similarly to a bank statement for customers. It aids in identifying transaction mistakes, tracking expenses, detecting fraud, and preventing billing errors from escalating.

In conclusion, a well-structured statement of accounts is indispensable for effective financial management and customer relations in business.

What is a Statement of Accounts? | Statement of account sample format - Zoho Books (2024)