The bare necessities of life...& business?



Sales Receipts / Sales Invoices


Is there a difference? Isn’t it all just money I have received?


You might think so, but the difference is quite stark. The same difference is seen with expenses vs bills or purchase invoices.


The difference is that one appears on your profit & loss report AND your balance sheet. The other ONLY appears on your profit & loss and remains outstanding. Do you know which is which? This will help determine whether you’re bookkeeping on your accounting software is actually any good and if the reports you are running are accurate or not.


The difference is to do with cashflow.


Sales Invoices are the usual invoice a business sends to other businesses to pay at their discretion (usually terms are given & agreed, this can be from 7 days, to 30 to due on receipt). Even though you have created this invoice and sent it to your customer, they have yet to pay this, and you still have yet to RECORD THE PAYMENT. The same goes for bills or purchase invoices, even though a company sends you one, payment may not be due for a while. So even though you record this bill on your software, you also then need to RECORD THE PAYMENT. See a pattern?


When you enter a sales or purchase invoice this immediately hits your Profit & Loss report, but this money won’t increase or decrease your company worth on your balance sheet UNTIL you record the payment (money actually in or out).


A great example of these can be seen in that you agree a service with a cleaning company, they come and clean and send you an invoice to pay with a 30-day term. This will be entered as a purchase invoice as well as then entering the payment of this when you eventually pay it. However, when you go to Tesco and buy some paper for your printer, you immediately pay for this and get a receipt. This will be entered as an expense. No other information needs to be recorded.


You might say, why bother entering the first one?


  1. Can you be entirely sure that you WILL receive payment for your sales invoice? Can you guarantee that you WILL pay that purchase invoice, or at least when?

  2. You could pay this in an entirely different business year, and this can have all sorts of consequences on your accounts!

  3. If you have minimal outgoings and you can keep track of them in your own head, kudos! However, larger companies have hundreds of different outgoings a month. Knowing what is yet to be paid and when, even on a weekly basis can really help you identify any cashflow problems you may have.

This again highlights the important of bookkeeping, GOOD BOOKKEEPING!


If you don’t have the brain or memory (this is me) to remember when money is due to be going out, this is where good bookkeeping can be a real lifesaver. Providing your data is up to date, you can run weekly reports to tell you what is due out in the week, to help you see whether you can spend more money available to make other out of the ordinary expenses or, have a good amount you can invest in new systems or avenues of business.

Good accounting software is essential for this.


Now we use QuickBooks, there are other providers available, but we have used others and we (just our opinion) prefer to use QuickBooks over the others. On QuickBooks, you can connect your bank account to feed in all its transactions automatically. You can also forward attachments via e-mail to QuickBooks as well as uploading receipts via your desktop or even its mobile app.


Now let me walk you through the process:


Purchase Invoice:

- A company e-mails you an invoice for a service they have provided you.

- You forward this e-mail to your QuickBooks documents e-mail.

- The attachment is automatically removed and uploaded to a QuickBooks section ready to be entered.

- You log in to your QuickBooks and double check some of the information it can read, enter it as a “Bill” with a correct “Due Date”.

- This bill / purchase invoice now has all the required information as well as a picture of the document attached to it.

- You then run a report next week to see any unpaid bills, this document is now among them, with a due date telling you whether it is due this week or next OR

- You run a report of unpaid bills that have a due date within the coming weeks date range.

- When you make a payment, this will show up in your bank feed in QuickBooks.

- It is clever enough to notice that this amount and the payee match or are similar to the unpaid bill as above. All you have to do is click “Match”

- QuickBooks in the background marks the invoice as paid, records the payment and matches it all to this online bank transaction, leaving you an airtight audit trail.


Expense:

- You buy your hand sanitizer from Tesco’s and have a receipt.

- You use the mobile app to “Receipt Snap” the receipt and upload a picture.

- You log in to QuickBooks on your browser and visit your bank feed.

- Next to the transaction from Tesco’s it sees in your bank account, it will say “We found a receipt that matched this transaction and added it for you”.

- You check that the receipt is in fact the right one (because robots may take over the world one day, but they can’t do accounts for toffee).

- Ensure the category is correct, this would come under something like office expenses or health & safety or staff costs etc. and add the transaction.

- QuickBooks now creates an expense that has a picture of the receipt as well as an online banking match for you to see it in your bank feed, again leaving you with an airtight audit trial.


What’s the use of an airtight audit trial? If the Tax or VAT man comes knocking or you need an audit or an accountant or bookkeeper to look at your books? You now have everything you need for them to be able to find the information they need themselves, meaning they 1, don’t need to bother you for more information and 2, don’t fine you for missing information. Now they don’t always do this so don’t be scared, but they could.


If you don’t have the time, brainpower, motivation or skills to be able to keep on top of your bookkeeping in this depth, feel free to book in a discovery call with us. Our support packages include us doing your bookkeeping for you as well as ensuring month ends are done regularly and everything is where it needs to be ready for investors to look at, tax time or end of year.


OR, even just accounting software can be crucial. Purchasing your software through us will ensure you get a 40% discount on your packages for the LIFE of the subscription. We also can set you up and give you some training to use this to the full.


I hope either way, this may have been helpful. We are all about awareness and education.


If you are just as confused as when you started, send me an e-mail saying I need to stop being so nerdy :p

7 views

Recent Posts

See All