Changes to how Manager handles starting balances of invoices?

1

I was doing a regular check on the accounts and noticed a dis-balance on the retained earnings account.

I tracked this back to the opening balance on the VAT liabilities account. This account was opened in 2018.

Further investigation showed that at the time of opening the balances, purchase invoices have been entered with taxes, where as sales invoices were entered without, and this reflected on the starting balance.

I think I’ve managed to solve the issue, but I am curios if any changes in Manager the past year or so may have produced this issue, as, I am pretty sure, there was no dis-balance let’s say last year on closing, from when I keep printed statements.

Currently running 21.11.95.

2

There have been several changes to methods for entering starting balances since 2018. But they should not have caused any incorrect balances. You say that purchase invoices were entered with taxes, but sales invoices were entered without. Are you referring to pre-start-date invoices? If so, those should have been entered as normal invoices, complete with tax codes.

The biggest change that might have caused you problems was elimination of start dates entirely. Read about that here: Enter starting balances | Manager. (There is a lengthy Note at the beginning of that Guide.)

3

Thanks for the reference @Tut.

It’s still not clear to me how is it possible to have correct balances on 31.12.2020, but no longer correct balances in 2021. The only changes I’ve made in that time is updating to newer versions and implementing custom VAT report.

Yes, I was referring to pre-start-date invoices. I don’t recall why the setup was made the way it was. I can speculate because the purchase invoices were withing the last VAT reporting period, while the sales were from previous periods.

Was it always the case that pre-start-date invoices should be entered as normal invoices, with tax codes, etc?

4

I can’t answer that with confidence, because I can’t see all your entries. But your statement that you were including tax codes for purchase invoices but not sales invoices seems like the key. That would especially be true if you entered starting balances for tax liability accounts directly. You could have forced the Balance e sheet to be correct, even if the underlying pre-start-date invoices were wrong.

Yes. Otherwise, Accounts receivable and Accounts payable starting balances would not have been correct (because the invoice totals would have been wrong, regardless of what else was done with the tax liability account).

I don’t know if you saw it, but there was an article about this in the September 2021 newsletter. I quote excerpts below. (Some portions are omitted.)

Manager used to handle this situation by ignoring pre-start transactions except for the purpose of determining starting balances. You were required to enter unpaid, pre-start invoices…Only financial inputs needed to determine customer and supplier balances in Accounts receivable and Accounts payable were captured…

But wait. If other accounting packages need a start date, how can Manager get away without one? Go back to basics. If you were migrating from another accounting system and were willing to enter every single transaction from the older system, all your starting balances would be zero. You would have no need for them, because the historical transactions you entered would bring your accounts up to date, just as though you had been using Manager from the beginning.

Since that would be so tedious, you can now record only the pre-start transactions you want to enter. Often that will mean just unpaid invoices. But any transaction can actually be entered. To make up for everything you choose not to put in, starting balances substitute for all the historical transactions you leave out. [Emphasis added.] Consequently, nothing must be ignored by the program. So there is no need to define an arbitrary start date. Since Manager has no other use for a start date marking the beginning of your accounting records, we put an end to it.

What that tells you is that, under the new approach, you need to include tax codes on both purchase and sales invoices to get the portion of our tax liability account’s starting balance related to those invoices correct. Plus, you may need further adjustment if some of the pre-start invoices’ tax has been accounted for to the government but other portions have not. That sounds like exactly what happened in your case.

The remedy would be in two steps:

  • Correct your pre-start invoices to include tax codes in all cases.
  • Adjust your tax liability account’s starting balance to make its balance match the old accounting system.

I know you are experienced enough to remember to save a backup before starting down the correction path. But it is worth mentioning.

5

Thanks for the clarification @Tut. I will keep this in mind.

  • Correct your pre-start invoices to include tax codes in all cases.

This is the first thing that came to mind, but the balances on the sale invoices are from various periods and I sense further untangling will be needed if i start to change those.

6

I don’t think so. Presumably, you included proper taxes on the sales invoices when first created in your prior system. So those historical actions were correct at the time. If you correct the pre-start sales invoices in Manager (hopefully not very many of them), all you will need to do is adjust the starting balance of your tax liability account to match the closing balance from the old system. That is what I find so elegant about the elimination of the start date. We can now easily force things to fit.

In fact, you probably would not need to correct the sales invoices at all, but just force the tax liability balance to fit. But I would not be comfortable doing that, because there would then be sales invoices in Manager that did not match what was sent to the customer.