[GNC] Invoice system and Deffered Income

[Sergey Mende]

Dear Vincent,

Thank you very much for your quite comprehensive explanation and provided
references.
Now I see the difference and understand why this feature is implemented
this way.

In regard to suggested workaround, I probably would use the idea: anyway I
am using mariadb as a data storage with some extra functionality already
implemented in nodejs, so I can implement these extra splits creation
automation while keeping the "generic" invoices implementation functional.
I am just trying to use as many existing gnucash functions as possible for
the project I am presently working on.

Kind regards,
Sergey


On Tue, May 30, 2023 at 3:05 AM Vincent Dawans <dawansv at gmail.com> wrote:

> Hi Sergey:
>
> I think you are describing the ability to use cash accounting instead of
> accrual accounting. Gnucash does not offer this by default unfortunately.
> There is an old enhancement report about it
> https://bugs.gnucash.org/show_bug.cgi?id=95700 and even an old wiki page
> https://wiki.gnucash.org/wiki/Cash_Based_Accounting
>
> There is actually a not-so-bad workaround but it still requires some
> manual adjustments. So it's a workaround, not an ideal solution.
>
> It is very similar to what you have done so far as per your description,
> with the additional advice of putting all of your transitional accounts
> under a single top-level account. If you want to accommodate both invoices
> and bills you would have:
> Pending invoices and bills (TOP LEVEL of type asset or liability)
> -- Pending bills (type: liability)
> ---- Bills Payable (type: a/payable) This is the account where bills will
> be posted by gnucash -- it will be selected by default because it is of
> type a/payable
> ---- Deferred Expenses (type: asset)  This is the account you need to use
> inside bills in lieu of expense account. Ideally it should include sub
> accounts matching your expense accounts needed in bills, although not
> entirely necessary.
> -- Pending invoices (type: asset)
> ---- Invoices Receivable (type: a/receivable) This is the account where
> invoices will be posted by gnucash -- it will be selected by default
> because it is of type a/receivable
> ---- Deferred Income (type: liability). This is the account you need to
> use inside invoices in lieu of income accounts. Ideally it should include
> sub accounts matching your income accounts needed in invoices, although not
> entirely necessary.
>
> You can just do the Pending invoices part if you don't use the bills
> feature of course.
>
> The reasons why this structure is useful:
> - the low level accounts in that hierarchy under Pending bills and Pending
> invoices should always balance each other. If they do, you will see zeros
> under Pending bills and Pending invoices in the account view. If you don't
> see zeros, it means your manual adjustments are wrong OR your mistakenly
> used income/expense accounts (instead of deferred income/deferred expenses)
> in your invoices or bills. Without that check it will be hard to detect
> errors.
> - by not using actual income/expense accounts they will be excluded from
> the P&L by default.
>
> The BIG caveat:
> - After you process each payment, you need to enter adjustments between
> the Deferred Expenses and expense accounts (for bills) and Deferred Income
> and income accounts (for invoices);  Ideally you put the adjustments as
> additional splits in the same transaction processing the payment so there
> is an easy track record of it and no risk of getting the date wrong. If you
> have complex invoices with a lot of items going to different
> income/expenses accounts this is far from ideal of course as you have to
> adjust each account. You could also just use one "deferred income" account
> and one "deferred expense" account and distribute expenses and income to
> the correct expense/income account in the adjustment. In that case you need
> the info from somewhere else (the item description in the invoice, etc).
> Hence why this is a workaround. This is the part requiring the most manual
> work and the main part that would need to be automated for this feature to
> be fully implemented. How much work depends on how complex your
> invoices/bills are.
>
> Little caveats:
> - You need to exclude these accounts from the balance sheet, although the
> balance sheet is still balancing with them, it just shows an additional
> asset balanced by an additional liability of opposite value. Not what you
> want but still not unbalanced. Still best to exclude them in the report
> options. It's easy because they are all under one single main account.
> - You need to include these accounts in some reports such as Customer
> summary for instance. Easy enough to do in report options as well.
>
> Now the above workaround is the heavy-duty one when you want your books to
> be in cash-basis at all times. Personally, because I don't use the vendor
> bill option and do have that many invoices and only need precise reporting
> once a year, I just edit my unpaid invoices and push them to January 1st
> when I reach the end of the fiscal year. Not pretty but it does the job for
> me. But I could see that not working if you have a lot of invoices or need
> cash-basis reporting more often.
>
> There could also be a way to deal with this purely with reports. It would
> keep the registers in accrual mode as they are, not do any pending accounts
> and adjustments there, but then provide a cash-basis P&L and cash-basis
> Balance sheet reports that would do the adjustment. That would be the
> simplest way to provide at least some functionality without any manual
> entries. But the challenge would come from partial payments. If an invoice
> has several income accounts in it, and a partial payment is made, there is
> no way (for the computer) to tell which income account the partial payment
> should be applied to without additional info from the user. One could
> decide to either pay the invoice items in the order presented or distribute
> proportionally or any other way. Partial payment is an edge case but still
> has to be accounted for. The same would need to happen for bills as well of
> course. At the end this would still not be ideal since your main registers
> would still follow accrual so the info wouldn't match the report. For
> instance when closing books, profit/loss would be calculated as accrual in
> the register, you would only see the cash-basis in the report.
>
> The  alternative is to automate the workaround above and enable it on a
> per book basis. It's actually sort of similar to the type of per book
> selection and automation done by the trading accounts (for a completely
> different purpose). But it's a substantial amount of work to do it properly.
>
> Sorry if my explanations are confusing. It's hard to explain this sort of
> thing without visuals. I might try to update the wiki page with some of
> these ideas and some screenshots. Also it's possible there might be some
> other caveats I have not run into of course as each use case can be
> different.
>
> Sincerely,
>
> Vincent Dawans
>
> On Mon, May 29, 2023 at 2:46 PM Sergey Mende <sergey at mende.spb.ru> wrote:
>
>> Hi there,
>> I am trying to figure out if the existing customer invoice system is
>> suitable for my needs.
>> For simplicity, let's say I have the following accounts:
>>
>> Current (Bank)
>> Undetermined Income (Income, for bank account transactions just imported
>> from the online banking)
>> Deferred Income (Income, used at invoice creation to track invoices that
>> are posted and sent to the customers but not paid yet)
>> Income (for invoices that got paid, so the payment actually received as a
>> bank transaction and processed as a payment of an invoice)
>> Receivable (A/Receivable, for tracking invoices)
>>
>> The problem is that I don't like to see non-paid invoice splits in the
>> Income Register until the invoice payment arrives to my bank account,
>> imported and processed as invoice payment.
>>
>> The idea is to assign an incoming imported transaction as a payment for an
>> invoice from the Bank account Register and change the Income account
>> appropriately, so the paid invoice appears in the Income Register
>>
>> As I got from the docs, this mailing list and my experiments,
>> there is no way to change the Income account after the Invoice has been
>> posted and specifically at the payment processing step.
>>
>> Am I missing something?
>>
>> Thank you,
>> Sergey
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