Forum Message

Customer Balances

Like most businesses, we create invoices and receive payments. Sometimes the payments received match the invoices one a one-to-one basis, sometimes a payment is for more than one invoice, and sometimes the payment is 'on account'.

Recently I received a payment from a Customer who had a zero balance with no invoices outstanding (because we encourage some regular customers to make regular fixed monthly payments).

I posted this payment as a 'Money received' from the Customer (but not against an invoice, as the wasn't an outstanding invoice).

I am surprised to find that when I run a report of 'Customer Balances', this payment does not show. Why is this ? Surely the payment should show and the balance should be in credit ?


Posted by Alan Rick on Jan 17, 2011 7:02 PM GMT

Hi Alan,

If you create a Money Received transaction with the Type set to 'General Payment' then Solar Accounts assumes the customer received the goods or service on the day of the payment. The customer balance is therefore unaffected and the transaction will not show in the Customer Balances report.

To record a payment on account, the simplest approach is to create a Credit Note with the Account set to Cheque Account and the VAT Treatment set to 'Out of Scope'. Later, you can allocate the credit note to a new invoice.

Regards,


Posted by Mark McLaren (Solar Accounts) on Jan 18, 2011 2:03 PM GMT

Mark - I am afraid your response just does not make sense to me.

What is the relevance in stating that Solar assumes that the customer received the goods or service on the day of the payment ? Why should the system make that assumption ?

The fact is a Payment was received and no invoice had been issued. This is a payment on account. We know who the payment was received from, so why doesn't it show in the Customer Balances report where all other invoices and payments show ?

If it doesn't appear in the Customer Balances report, how am I supposed to maintain a record of what the customer owes ?

Your suggested use of a Credit Note does not seem to be an obvious or straight forward book keeping transaction for dealing with a payment on account. The credit note, whilst giving a temporary correct balance on the customers account, will have to be deleted and replaced by an invoice and a payment later when it is the appropriate time to raise an invoice.


Posted by Alan Rick on Jan 18, 2011 3:05 PM GMT

Hi Alan,

For most users of Solar Accounts a payment from a customer without an invoice is simply a sale, not a payment on account. This is why the Money Received window does not affect the customer balance.

I agree that using a credit note for a payment on account is not intuitive. However, we think it is the best approach in the current version of Solar Accounts. We aim to improve the way payments on account are handled in future.

Note that the credit note does not need to be deleted when your customer makes a purchase - you can just allocate the credit to an invoice.

Also, if you are VAT-registered you should be aware that HMRC requires that you account for VAT when you receive a payment in advance, not when you issue the invoice. Solar Accounts does not do this automatically. If you don't receive the prepayment in the same VAT period as the invoice, you will need to manually increase the Box 1 figure on the earlier VAT return and reduce it on the later return. Again, we recognise that this is not ideal and hope to improve this area of Solar Accounts in future.

Regards,


Posted by Mark McLaren (Solar Accounts) on Jan 19, 2011 8:54 AM GMT

Mark - thanks for your help on this one.

As you know I am a very happy user of Solar, but I am very surprised at the way your product handles cash advances.

Whilst using your suggested approach of a Credit Note does enable the Money Received to be reflected in the Customer Balance, it has the effect of reducing the Sales (which is not the case) and, as you say, the system does not handle the VAT properly.

May I request that you provide a fairly urgent fix for this accounting error ?

Thanks, Alan


Posted by Alan Rick on Jan 19, 2011 11:17 AM GMT

Hi Alan,

Yes, payments in advance are a weak spot in Solar Accounts.

Note that the Account on the credit note should be 'Cheque Account' so it will not reduce your sales income.

We hope to provide a fix for the VAT problem in future, but we cannot make promises about when it will be available. As it stands, you will need to remember to make adjustments to the VAT return figures if the prepayment is made in an earlier VAT period to the sale.

Regards,


Posted by Mark McLaren (Solar Accounts) on Jan 19, 2011 1:10 PM GMT