[GNC] best accounting practice for refund

Eric Rathhaus (general) rathhaus_law at yahoo.com
Wed Jun 26 21:51:10 EDT 2019


Hi Geert -

I already issued the invoices and processed my clients payments against the invoices.  These payments are for filing fees to the US government for which I subsequently cut checks. I created a job for this client that I use to invoice these fees alone. The size of the filing fees is too high for me to provide my client short-term loans to cover and then invoice later.  My client, in turn, won’t issue a payment without an invoice.  So I issue an invoice to my customer to get the prepayment. There are some complicated legal reasons why once per year some of the filing fees won’t be cashed by the government.  The rest of the year everything is fine as I just ensure the client paid all the invoices for the special job and then bill for my work and other expenses on invoices for each specific job.  This year I have over $12k of  funds I need to return to the client somehow.  In the past I created a credit note under the special job and sent my client a check.  This year they want me to use the credit to offset invoices for subsequent work.  I like the idea of creating a credit note under the special filing fee job I use for these payments and then applying the credit against other invoices I issue but I’m not sure if it will work from an accounting standpoint. 

> On Jun 26, 2019, at 1:29 PM, Geert Janssens <geert.gnucash at kobaltwit.be> wrote:
> 
> The way I understand your scenario I believe you can model what the customer 
> does almost one to one into gnucash actions.
> 
> 1. Customer prepays for expenses -> Create a payment for that customer using 
> Business->Customer->Process Payment
> You can choose to map this payment to outstanding invoices or not. If you 
> don't, it will simply register a prepayment for the customer.
> 
> 2. At some point you send an invoice to the user -> Create this invoice using
> Business->Customer->New Invoice... and post it.
> 
> 3. Now you can choose - does your invoice have (some of) the prepaid expenses 
> ? If so, apply (part of) that prepayment to your invoice using Business-
>> Customer->Process Payment
> After this there may be an outstanding balance the customer still has to pay.
> 
> 4. If the customer pays that outstanding balance, create the payment via 
> Business->Customer->Process payment.
> 
> Then repeat for the next cycle/invoice.
> 
> If you are importing your payments instead of manually entering them, you can 
> also select the payment in the respective account, right-click and choose 
> "Assign as payment..." instead of the above mentioned "Process Payment"
> 
> As Adrien also suggests at any time you could look at the Receivables Aging or 
> Customer report to see what's the customer's current balance.
> 
> Regards,
> 
> Geert
> 
> Op woensdag 26 juni 2019 21:52:43 CEST schreef Adrien Monteleone:
>> You have at least 2 options I can think of at the moment:
>> 
>> #1 - continue to issue credit notes in your system, but don’t send them out
>> or pay them with a check. When you have the next positive invoice, ‘pay’ a
>> portion (or all) of that invoice with the credit note. Simply process a
>> payment, select the credit note line and an invoice line you want to apply
>> it to in the top part of the window. GnuCash will offset the invoice with
>> the credit note for you. If the credit note is more than the invoice, it
>> will retain the left over as remaining AR credit to be used on subsequent
>> invoices. You can see the customer’s balance any time either by looking at
>> an AR aging report, or a Customer Report. Outstanding credit notes appear
>> in the Invoices Due Reminder window.
>> 
>> #2 - If your client regularly pays in advance based on an estimate and you
>> invoice later, instead of applying the payment to an invoice, apply it to a
>> Liabilities:Customer Deposits account. Then when you create and post the
>> final invoice, process a payment for it from this account. You could keep a
>> separate deposit account for each customer but that might get tedious. You
>> can run a report on the account sorted by payee to show that info and even
>> keep that report open in a tab if desired, choosing to refresh it as
>> needed. If this might only happen for pre-paid expenses, then you can still
>> use this method, but only for the pre-paid expense part, which you could
>> (or not) choose to invoice separately.
>> 
>> Regards,
>> Adrien
>> 
>>> On Jun 26, 2019, at 1:46 PM, Eric Rathhaus office <eric at ewrlaw.com> wrote:
>>> 
>>> Hi - I have a client for whom I have many jobs.  On some of these jobs,
>>> the client prepaid expenses that I did not use.  In the past, I’ve always
>>> created a credit note for a refund and sent the client a check.  However,
>>> my client prefers instead that I credit this amount towards future work. 
>>> I’m not sure how to accomplish this cleanly.  I could keep a running
>>> total of the amount and discount from the total prepayment until it’s
>>> used up.  But this seems clunky and maybe not the best practice.  Any
>>> other suggestions on how to account for the refund against future work?
>>> 
>>> Kind regards,
>>> 
>>> Eric W. Rathhaus
>> 
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> 
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