What is a Statement of Account?
A Statement of Account (SOA) is a detailed financial document that summarises all transactions between a business and a customer over a defined period, usually monthly or quarterly. It presents a complete snapshot of the financial relationship, covering invoices raised, payments received, credits applied, and the final outstanding balance.
An SOA typically starts with the opening balance from the previous period and records every financial movement since then. This includes new invoices, received payments, adjustments, and the closing balance that shows the current payment due or overdue amount.
Each entry is listed with clear dates, reference numbers, and descriptions. This level of transparency helps both parties quickly understand what has been billed, what has been paid, and what still needs attention.
Why Do Businesses Use Statements of Account (SOA)?
SOAs are useful to sellers in several ways. They are used as gentle payment reminders, they assist in tracking accounts receivable effectively and also offer documentation to be used in accounting records. They minimise billing errors, provide a punctual payment, and assist in identifying the fraud or discrepancy.
To buyers, these statements assist in monitoring spending habits and ensuring that money is duly registered, and excessive charges are avoided by maintaining records of due dates. They also come in handy when doing audits or even fixing billing disputes.
Importance of SOA in Sales and Distribution
SOAs play a vital role in distribution and sales businesses to reconcile the secondary sales, validate the trade schemes, and carry out the monthly financial closings. They assist the sales teams in knowing the customer behaviour in terms of payment, slow-paying accounts and how to make good decisions regarding credit limits.
Frequent SOAs will ensure transparency and trust between the companies and their clients. They eliminate confusion, give a clear understanding of financial requirements and aid in resolving conflicts before they worsen. SOAs are even more important to ensure proper records and healthy relations between vendors and customers in those industries where pricing structures are complex, volume based, or have promotional programmes.
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