I have a client who runs a practice. She has a self-employed (associate) person who rents a room from her.
He uses my clients card machine to take his customer payments and then at the end of the week (or at some point) she pays him back his card takings via bank transfer.
At the minute I have recorded all of this in the suspense account - what is the proper way to deal with this??
I did think about not recording it at all as the money is paid back to him BUT it does make it all quite messy that way. (bank rec's when the money has not been paid back to him until the beginning of the next month and also would make the clients card payment income look messy as it's all bundles together)
If anyone know the best way to deal with this I'd love to hear from you. I don't know if it make any difference but I am using Xero (not quite sure how to make a journal on Xero yet)
Sorry, this one started in another thread didn't it.
Just lift this bit from your post in the other thread to here :
She has a self-employed person who rents a room from here, he is not any part of the business. He just uses her card machine to take his payments from his client, she does not take an commission from him. As his car takings go into her bank she transfers the money back to him at the end of the week.
I though about not recording it at all but I think it would start getting messy that way, if she hasn;t paid him back by the end of the bank statement month when reconciling it will be out.
I have it in suspense for the minute.
Right, think about whats actually happening.
This is not a sale and should not go anywhere near your clients P&L
The money exists but it never belongs to your client... So it's a loan.
Think of the chain of events (and ignoring machine charges as you have not touched upon those at all).
Tennant makes a sale on clients machine. Lets say £100.
Your client recieves the £100 that does not belong to them.
Treat that as a loan. (Dr Bank £100, Cr Tennant Loan account £100)
Client pays tennant their money (Cr Bank £100, Dr Tennant Loan account £100).
It doesn't get messy, doesn't even go near the P&L. You just end up with a creditor for a biy longer if its not sorted out by the end of the period.
This gets more complex if your client is baring card charges for the tennants transactions but you have not mentioned that at all in your question.
I don't use Zero so cannot comment on that part.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I had a client who had a beauty salon, and sold bags for another lady, doing the same thing. She would keep a note at the side of the till, to show her daily sales and her associate's daily sales. She would enter these notes into a monthly spreadsheet, and then I would post that into sage like this...
Cash receipt £x to salon sales
Cash receipts £x to loan account
I would do a bank transfers from cash, to bank, using the bank statements - to accounts for the card bankings
Then I would do a bank payment to loan account when appropriate.
-- Edited by FoxAccountancyServices on Thursday 22nd of May 2014 11:47:19 AM
Is she using a merchant account? If so, you can't let someone else use your card machine to take payments. Below is a FAQ from a merchant account site:
If I have a friend who has a merchant account, can I use their account instead of getting my own?
No, this is against the Visa and MasterCard rules and regulations. Using another merchant account is called "factoring" or "laundering".
I would get her to check her agreement with her card company. There may be a clause stating that no one else can use it.
Thank you Zoe, that's very useful to know - I will check up on that.
Thank you Michelle, sounds like a very similar business so that's easy to follow.
Shaun thank you for your fantastic help again!! and thank you for taking the time for such a detailed reply - AND explaining it all to me, such a big help.
Also I am a right in thinking that I need to set up a loan account as a 'bank account' ?? that's what I always do - but not entirely sure it's right - maybe I need to get the bookkeeping textbooks back out!!
