Open item accounts

Smile is an open item accounts receivable system. A basic understanding of how open item accounting works will help you understand how transactions and accounts receivable work in Smile.

Open item accounting is different to balance-forward accounting. Balance-forward accounting treats the balance of each account as a pool of money. When a customer makes a payment, the account balance decreases; when you issue an invoice to a customer, the account balance increases. However, in a balance-forward accounts system you cannot assign a payment to a specific invoice.

In contrast, an open item accounts system allocates every payment to an open item (a transaction with an outstanding balance). Transactions are allocated to open items until the item has a balance of zero and is closed.

In an open item accounts system, you can specify the invoices that a payment is allocated to. For example, a customer may not want to pay an invoice in dispute, but is happy to pay subsequent invoices. Using an open item accounts system, you can allocate the customer's payments to the later invoices and leave the disputed invoice unpaid.