First post here after registering. Please forgive if I am asking something that is quite simple for seasoned accountants or bookkeepers.
I have set up a new company in the UK which deals with sales of online subscriptions. The payment processor we use will retain 10% of the gross sales for 6 months and then return the funds to us, they also charge us a 14.75% processing fee. Admittedly I am only familiar with basic accounting but wanted to pick someone's brains on how to correctly set up my GL and correctly post an invoice.
If you would indulge me with an example:
Gross invoice
£100.00
to account 4000
Processing fee
-£14.75
to account 7905
Holdback
-£10.00
to which account?
Net amount paid to us:
£75.25
Then, in six months I would issue a new invoice where we will now have a returning holdback amount. Example on an invoice for £250 to keep numbers different:
Gross invoice
£250.00
to account 4000
Processing fee
-£36.88
to account 7905
Holdback
-£25.00
to which account?
Returning holdback
£10.00
Net amount paid to us:
£198.12
Please ignore VAT for now and take this as an exempt operation. Hope this question is not inappropriate or off topic for this forum and thank you in advance for any guidance you may be able to offer.
Richard
-- Edited by ricsut on Friday 10th of June 2016 03:07:51 PM
Treat it as funds owed to you. Suggest you offer then collateral instead eg % cash deposit/ cash backed bond or some such, instead of taking funds from each invoice As that's just very messy.
With the second invoice you need to process the payment excluding the holdback being returned.treat the holdback repayment separately. Sorry hate that word holdback , should be retention monies.
I'm assuming you are using sage of some description, given the numbers you quote, but not everyone on here does so that won't mean anything yo them.
I would suggest you get the advice you need on how to process this through your software direct from your Accountant. They should be able to provide some assistance on how to use the software, or at the very least the double entries required for each part of each transaction to enable you to key it, or get a bookkeeper who can ensure it's completed correctly from the start.
We cannot answer further on this forum, nor provide advice I'm afraid.
-- Edited by Cheshire on Friday 10th of June 2016 10:20:05 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
If I understand correctly you are using a card or online card payment processing merchant. My experience is .....
Payment made in full by the customer via the merchant who deducts their fees and the (I call it) a reserve amount. Usually 5 or 10% which is then released in the future (say 1 or 3 months). In my case the releases are made once per month.
I use Sage so this is the way I do it as I think it reflects what actually happens.
Set up a bank account for the merchant 12xx
Set up a nominal ledger account for the processing fees 79xx
Set up a balance sheet account 11xx for the reserves still owed to you
Using the newly set up bank account...
Post customers receipt in full (either to a Customer's account or as a bank receipt)
Post the fees deducted as a bank payment to 79xx
Post the 'reserve' amount as a Bank payment to 11xx
Post any released 'reserves' as a bank receipt to 11xx
When funds are transfered into your usual company current account post the bank transfer from the new bank account to the main bank.
Hopefully you can do this as a batch.
I print off and check all the transaction reports from the merchant on weekly basis as the merchant transfers weekly. Watching out for charge backs and failed transactions etc. And then post the weekly sales/receipts as above. There are hundreds of transactions per week.
If your transactions are fewer and are handled individually you may need to post them individually. Your choice as to what is best for you
Recording this way ensures your sales are recorded in full, you have a balance sheet account reflecting the balance of the 'reserves' being held and the processing fees are of course recorded separately from your normal bank charges.
Hope I've understood correctly and everything makes sense
thank you VERY much for your guidance. This is exactly what I was looking for. Thank you for taking the time to share your experience and to help a novice in bookkeeping.
thank you VERY much for your guidance. This is exactly what I was looking for. Thank you for taking the time to share your experience and to help a novice in bookkeeping.
Wishing you the very best,
Richard
Incredibly rude to thank one person, but not the other, who despite not obviously giving you the answer you thought you wanted, actually did, just not the sage references. Plus gave you some other advice.
Despite it being highly inappropriate to ask your question on here in the first place as this site is not for business owners to get free advice. Lucky you though got two responders giving advice for free, but yet you only thank one.
edited for typo
-- Edited by Cheshire on Saturday 11th of June 2016 10:08:24 AM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
And as if by magic after explaining to someone in another thread where a direct thankyou to one poster was appropriate an example of where a limited thankyou to a site member is not appropriate.
Richard, I'm glad that you have got the response that you felt appropriate from Anne and certainly thanking her about specifics of her answer is great where an answer amongst others really helps you. However, you cannot simply totally ignore the time and effort invested by Joanne in the response that she has given.
You may have been a victim here of the competence of your original question Richard as the question itself seemed to indicate that you have a fair understanding of what you are about so, in the absence of you having introduced yourself to the forum, Joanne answered it based on the assumption that you had a sound technical understanding.
Conversely Anne gave a comprehensive response making no assumptions about your knowledge base.
Both were really good well considered responses even though for you personally you may have found one more understandable than the other so naturally responded to that poster.
If in future you are hit with a similar scenario please by all means make special effort to thank one of the replies that you have receieved that gave you the exact answer that you needed, but do not simply ignore any others or you will quickly find that your questions posed on the site start to go unanswered.
Welcome to the forum. Would you now like to introduce yourself including an idea of your experience level and any bookkeeping or accountancy qualifications that you hold.
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.
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.
