Documents · Glossary
What is a statement of account?
A statement of account is a periodic summary of one customer's account: every invoice issued, every payment received, every credit applied, and the balance outstanding at the end of the period. It asks for nothing new. It restates what is already owed so both sides can agree on the number.
Nobody pays from a statement, and that is not what it is for. It exists so that two ledgers can be compared before anybody starts arguing about a single invoice.
Nuwan Madhusanka · Co-founder
5 min read · Published
| Statement of account | Invoice | Aged receivables report | |
|---|---|---|---|
| Covers | One customer, one period | One supply | Every customer at once |
| Sent to | That customer | That customer | Nobody outside the business |
| Asks for payment of | The closing balance | A specific amount | Nothing, it is a management report |
| Contains new charges | No | Yes | No |
| Typical frequency | Monthly | Whenever work is delivered | Weekly, for the finance team |
| Used for | Reconciliation and gentle chasing | Getting paid for one job | Deciding who to chase and how hard |
Reconciliation is the actual job
Two businesses trading regularly will drift apart. An invoice was emailed to somebody who left, a credit note was posted to the wrong month, a payment was allocated against the wrong job, a delivery was invoiced twice and only one copy was queried. None of these are visible from a single document, and all of them are visible when a month's activity is laid out in date order with a running balance. Sending a statement is an invitation to compare, and the reply is either silence, which is agreement, or a query, which is the cheapest kind of dispute because it arrives while everybody still remembers the transaction. Businesses that stop sending statements do not have fewer disagreements. They have the same ones, later and larger.
Two styles, and which to use
An open item statement lists only what is unpaid: each outstanding invoice, its date, its amount and its age. A balance forward statement opens with the closing balance from last time and lists everything that happened since, including payments received. Open item suits businesses whose customers pay invoice by invoice, which is most trade supply, because the reader can tick off exactly what is left. Balance forward suits accounts where payments arrive as round sums against a running total, which is common in retail credit and in agency billing. Mixing them produces the statement everybody complains about, where a payment appears but the invoice it cleared does not, and the reader cannot tell whether their record or yours is wrong.
The ageing summary, and how it changes behaviour
A row of buckets at the foot of the page, showing how much is current, thirty days over, sixty and ninety, is the part accounts payable teams actually look at. It does the collection work without a collection letter, because a figure sitting in the ninety day column is visible to whoever approves payments and is embarrassing in a way that a polite email is not. Keep the buckets consistent from month to month and base them on the due date rather than the invoice date, since ageing from issue makes fourteen day terms look worse than they are and invites a pointless argument about arithmetic rather than about the debt.
What to say on it, and what not to
State the period, the opening balance, the closing balance and the date the statement was produced, because a statement with no as at date is worthless a week later. Add one line asking for any disputed item to be raised within a stated number of days, which turns silence into something closer to agreement and is useful later. Include the payment details and a named contact. Do not include threats, interest charges that have not been agreed, or the word final, because a statement is a reconciliation tool and turning it into a demand destroys the one thing it is good at. Escalation belongs in its own letter.
When to stop sending statements and do something else
A statement is a routine document for a functioning account. Once an amount has crossed the ninety day column, the statement has already failed at its job and something with a deadline has to follow: a written reminder naming the invoices, then a final notice, then a letter of demand setting out the debt, the date and what happens next. Continuing to send statements past that point signals that nothing will happen, which is exactly what a slow payer is testing for. Keep sending them for the rest of the account, since the other invoices still need reconciling, and run the collection process alongside rather than instead of it. It also helps to decide the escalation points in advance, as a written policy rather than a judgement call each time. Thirty days a reminder, sixty a final notice, ninety a letter of demand, applied to every customer the same way, removes the awkwardness of choosing whether this particular client is one you chase, and it makes the eventual demand look routine rather than personal.
Questions people ask
Can a customer pay from a statement?
Many do, particularly where the account is a running balance, and it is convenient. It is worth encouraging a remittance advice alongside so the payment can be allocated to specific invoices, because a round sum against a statement total leaves the supplier deciding which invoices it cleared, and the two sides will not always decide the same way.
Is a statement a tax invoice?
No. It contains no new supply and carries no tax point of its own, so a buyer cannot claim tax credits against it. The invoices it lists are the tax documents. Some businesses print a note to that effect on the statement, which saves the question being asked by every new accounts payable clerk.
How often should statements go out?
Monthly is the convention and it matches most payment cycles. Weekly is worth it only for high volume trade accounts where the invoice count is large. Quarterly is too infrequent to catch errors while anybody remembers them, and by the time a discrepancy surfaces the people involved have usually moved on.
Should paid invoices appear on it?
On a balance forward statement, yes, because the reader is following a running total and needs to see the payment land. On an open item statement, no, since the whole point is a list of what remains. Deciding which style you are sending and sticking to it matters more than the choice itself.
What if the customer says they never received an invoice?
That is the most common reply to a statement and it is often true. Resend it the same day, note the resend on the account, and ask which address it should have gone to. Where it happens repeatedly with one customer, the fix is their accounts inbox rather than your sending process.
Does a statement restart a limitation period?
Sending one does not, by itself. In many jurisdictions a written acknowledgement of the debt by the debtor can restart the clock, so a customer who replies confirming the balance may have done more than they intended. That is a reason to keep such replies on file, and a reason not to rely on statements alone as a substitute for acting on an old debt.
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