Difference Between Payer and Payee?
A payer is the person or an entity who pays, whereas payee is a person or an entity who receives money. Likewise, Customer is a payer whereas vendor is a receiver.
Lock-In-Ledger Accounting Scale has divided payer and payee into four different categories to maintain separately, which is tagged “User Management”. The user-name field is created under user management to include payer or payee in each accounting voucher to distinguish whom the money was paid and who had received.
User Management:
User management is the combination of four unique categories which are explained in a detail below.
- Customer – Represents a payer
- Vendor – Represents a payee
- Employee - Represents staff
- Others – Other than customer, vendor, and employee, it is framed under the “Others”.
Prior to create an accounting voucher one of the above-mentioned users are being added under user management because the username is required to create a voucher.
Without adding a payer or a payee name, an accounting voucher cannot be completed such as a cash received voucher or cash payment voucher because payers and payee names are required to create an accounting voucher which is later used for reconciliation.
Each payer and payee accounts are reconciled to make sure that every business activity is recorded under correct names and accounts to follow up receivables and payables.
User Management Aging Reports:
Each user must be reconciled frequently to follow up and variance in accounts must be fixed immediately.
Each user must show as follow in aging report:
- Customer – Balance must be positive in the balance sheet because it's an asset for company.
- Vendors – Balance must be negative in the balance sheet because it’s a liability for company.
- Employee – Balance must be negative in the balance sheet because it’s a liability company.
- Others – Balance must be negative in the balance sheet because it’s a liability company.
