I am currently using SAGE to undertake some bookkeeping on behalf of a Health Clinic and I need to post salaries and wages entries. Please could somebody confirm that my understanding is correct:
- Wages paid to self employed therapists who work in the clinic should be posted to direct expenses.
- The wages paid to the receptionist should be posted to Overheads.
I am just slightly unsure about the therapists wages as they are self employed and not employed by the company. Would this make a difference to the accounting treatment?
Surely if the therapists are self employed then they wouldn't be getting wages, but rather invoicing for services provided?
Not sure how sage defines it, but direct wages are wages that can be directly associated with a particular product or service, overheads are those which cannot be directly associated. It is generally split for costing purposes and will make no difference to the financial accounting.
Assuming that the S/E therapists generate income for the clinic, then I would be inclined to put them in as a direct expense probably 6002 Subcontractors
Thank you for your reply. Yes I probably didn't explain this very well. My client has them listed as wages in her excel spreadsheet, but you are right they are invoicing for services provided. I am going to set a new code up for them and treat them as an overhead.
Thanks for your reply. Now I'm confused again direct expense or overhead?! They are directly generating income for the clinic which suggests that they should be a direct expense, however, they are S/E and not employed. As Kris has pointed out, it probably doesn't make very much difference as we are not using the data for costing.
Kris and I posted at the same time so I wasn't dissagreeing with him. As he says in the grand scheme of things it makes little difference to the profit.
Sage split costs into Purchases, which are basically the items bought for resale in the 5xxx range, and Direct expenses in the 6xxx range. I suggested 6002, as these are effectively subcontractors who are hired to generate an income.
When sage generates the P&L those costs appear before the overheads
Although it will not matter for the profit, where the expenses are placed may make a difference if any profit ratios are calculated.
