I’m trying to read up on accounting treatment of billable expenses. Is there a rule or some document that explains the principles of billable expenses accounting as implemented in Manager? Thanks.
Only the three Guides on this topic. The concept of billable expenses is not really a basic accounting principle. It is a particular way of recording expenses that will be subsequently invoiced to a customer that is implemented by Manager. The way it works, these expenses are kept off your books. That is, the income you receive from the customer reimbursing you for them does not appear in an income account. And the expenses you incurr do not show up in your expense accounts, offsetting such income. In other words, the expenses are passed through to the customer rather than being recorded as expenses of your business.
There may be other accounting programs that do things the same way, but I am not aware of such a feature. This is one of the things I like most about Manager, as I often spend on behalf of my customers, but get immediately reimbursed through invoices.
Of course, you can accomplish all the same things without ever enabling the Billable Expenses tab. It’s an optional feature, but powerful for certain types of businesses.
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I really like the feature too.
What I’m trying to understand is why it is set up the way it is.
Reading online I found that GAAP guidelines say that you record expenses and credit them after payment from the customer. This is different from what Manager does by keeping them off the p/l part.
So, I was thinking maybe this method comes form another guideline?
None that I know of.
As long as there is a genuine arms length relationship between all parties, supplier / business / customer, then Billable Expenses “can” be acceptable as long as all parties are of equal tax status so that the nett effect of all the transactions are tax neutral.
However, if any of the parties are not at genuine arms length, particularly between the supplier and the business, or are not of equal tax status then Billable Expenses should NOT be used “especially” in the GST/VAT sphere as the transactions would not be tax neutral.
Have never understood the advantage of this especially as the “kept off your books” term also implies that any associated income (albeit it being neutral) is also kept off the books.
The customer has the sales relationship with the business and not the business’s supplier regardless of the item being purchased on behalf of or not.
By deduction, the customer will immediately reimburse an item purchased as a billable expense but wouldn’t necessarily get immediately reimbursed if the same purchased item was Sales invoiced. Interesting.
In closing, whilst Billable Expenses provides an “alternate” accounting methodology it shouldn’t be adopted if the taxation consequences of the transactions aren’t fully grasped, especially in the GST/VAT sphere.
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I agree with @Brucanna’s comments, especially the need to fully understand the implications in an offsetting tax environment like most VAT schemes. It can work, but may not meet local legal accounting and reporting requirements. The situation is simpler in first-user sales tax environments, where input/output questions do not arise.
Ok depending on if you run cash basis accounting or accrual. In cash basis its not technically recorded til you receive the money in hand or you pay out the money. Cash basis accounting is right here right now. Accrual system is get now pay later,sell now receive money later it is recorded as it happens regaurdless being paid or not. Now your assets ,OE ,liability, income, expenses act a specific way when debit and credit double entry system is used.
This is exactly what gets me thinking that while there is great convenience in crating invoices out of billable expenses in Manager, it might be a good idea to have an option on whether income and expenses should be off or on the books. 
Manager already has the options.
For on the books - use the P&L accounts
For off the books - use the Billable Expenses account
When you are referring to GAAP not everything is done that way. CPAs have the ability to use about 4different books to look for a guideline that fits just about any need. And depending on certain factors they have the ability to make it any rule to help make it fit.
Yes. In that sense.
But on the other hand it is very convenient to just generate an invoice out of the billable expenses. The same can not be said about generating an invoice
Try looking for The Yellow Book if you can find it there should be a reference to 3 others which are the standard books CPA auditors allowed to use to make just about anything fit literally. I just can’t think of the other book titles.
An Invoice is an Invoice, on the account line you either enter the Billable Expense account or a P&L account. Equally as simple and convenient.
There is an obvious convenience when creating an invoice from recorded billable expenses. They are marked by customer and an invoice can be created with just few clicks.
Creating an invoice when transactions are not marked as billable expense requires a lot of manual work of retyping entries and so on.
So, what I’m saying is, because of different jurisdictions and reporting requirements where expenses billed to customers should be present or not on the P/L statement, it would be a nice feature to be able to choose P/L or not, while at the same time keeping the convenience of creating an invoice with the same transactions with a few clicks.
You seem to think that invoice creation expedience (billable expenses - kept off the books) has more credence / importance from an administration perspective then full P&L disclosure (kept on the books).
As stated previously “as long as all parties are of equal tax status so that the nett effect of all the transactions are tax neutral” then you can consider Billable Expenses.
However, if the parties are not of equal tax status and you use Billable Expenses inappropriately then start praying you don’t get a tax audit.
Billable Expenses is an accounting solution, however taxation considerations pollute that solution.
That is both unworkable and unachievable. Transaction processing doesn’t have sub-set optionality.
I think that software should automate as much as possible. I don’t think that automation should in any way interfere with proper bookkeeping. On the other hand, automation or no automation, if I don’t know what I’m doing I will mess up the books regarding taxes or everything else.
I have no idea what do you mean by sub-set optionality. In my humble understanding of computer programing I believe it is possible to have a setting that will toggle a feature that will allow expenses billed to customers to show off/on books on a company level whilst keeping the feature for invoice creation expedience.
I believe this is a good feature to have because 1. as the above discussion shows billable expenses are treated differently in different jurisdictions and 2. automation is good to get things done faster.
Firstly, Manager doesn’t have any transaction automation, every step requires the user to take a “manual” action. However Manager does build “associations” where a user creates a linkage.
Once a user selects the account Billable Expenses, they can then link that item to a Customer (by manual selection) and that connected association remains throughout other Manager processes, which are manually actioned.
Secondly, upon entering a Purchase Invoice, being a billable expense item, the user doesn’t have optionality to select either a) BS account + Customer or b) P&L account + Customer which would enable the “on or off the books” to occur.
Furthermore, currently the BS > Billable Expenses account acts as a clearing account, whereas within the P&L you wouldn’t have clearing accounts as the expense and the income would be in separate P&L accounts.
However, enough on this.
What happens when a person must provide full discloser to the public which means no off the books. That’s proper bookkeeping
“Off the books” was a figure of speech, referring to the fact that transactions accounted for through Billable Expenses do not appear in your profit and loss statement. But they are still recorded and remain part of your accounting records. The difference is where they are posted. And they are fully auditable.
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Ok I must ask then what the purpose of doing that because to me it is miss leading to investors or public if they are looking at your loss/gains. If it expense it’s pulled from total yearly gains/losses in reality. It may not be directly linked to service/product but it’s still something the business must pay out. I do public funds bookkeeping on a service and do them by hand because I don’t have a program that will do exactly what I need and I show profit loss from directly linked expenses then profit loss when standard overhead is taken out.
Can you tell me if the ad still appear on this email? It’s coming from the one email app as well as phone so I switched email server but I’m on phone.