I have a question. Where can I find the summary of the advance payments of the customers and the disbursements. For example: The customer paid 150 in advance and the disbursement of that customer is 50. The advance payment minus the disbursement, the 150-100=100. I want to see all of this (especially the 100) in a summary, where can I find that?
@ummu, I would not use
Disbursements to handle such transactions. Disbursements are payments you make that you expect to later bill to a customer. In the situation you describe, the customer has made an advance payment to you. You should probably issue a credit note to that customer. Then, the next time you issue a sales invoice, all or part of it will be offset from the
Customer advance payments account rather than going to
To record customer advance payment, he should just allocate the amount received to
Customer credits account. When he issues invoice, customer credit will be automatically allocated to that invoice.
Issuing credit note on top of allocating payment from customer to
Customer credits account would result in double-up.
You’re right, as always, @lubos. I didn’t think it through far enough. That is what comes from never having customers who pay in advance.
Does that mean that I don’t have to use the disbursements tab at all? Can you give me an example about the customer credit. Imagine that I have a customer and I invoice a quote to my customer before I start to the service. There are 2 lines: the first one includes the service and the second one the costs of the service (they are both advance payments, but the service price is not going to change, the costs of service will change if we didn’t estimate it good enough). After that, I make for example research costs for the customer and those costs are less than the advance costs payment. Where do I see the rest of the advance payment? When I select receive money I can choose sales by the first line, that is correct, the second line shows me disbursements recoverable including tax. That has to be customer credits right? I do something wrong, just don’t know what. How does these two lines connect with each other without using the disbursements recoverable option.
When I select the customer I see an overview of the disbursements recoverable and the customer credits, but these two are not connected. It seems like they are acting individually. By the way thanks for your answer about the VAT by the billable expenses, it works.
Thank you for trying to help, I appreciate it.
That’s correct. Disbursements are when you pay money to 3rd party on behalf of your customer and you are planning to get reimbursed by your customer. This doesn’t look like what you are doing.
No, when you select an account, select
Customer credits account, then select customer. Don’t select
Disbursements recoverable which are accounts for different purposes.
When you allocate payment from customer to
Customer credits account, it will show as a liability on your balance sheet (it means you owe money to customer). It will also show on
Customers tab for relevant customer.
When you issue an invoice to customer, Manager will automatically allocate any available credit to that invoice. If invoice is less than customer credits, then invoice will be paid in full and reminder will continue sitting in
Customer credits. If invoice ends up being more, customer credits will get fully used and the difference will be what customer still owes on invoice.
I’m planning to do a lot more work on guides in upcoming days to explain all kinds of workflow including this one.
Thank you, but I am still confused about this. Its better if I wait for the guides. Do you think that the guides will be finished on Monday?
I have one more question about the disbursements income and disbursements recoverable. I was trying to tell, that I need an overview of the disbursements income minus the disbursements recoverable. When I select the disbursements tab, the only thing I can see are the disbursements recoverable. When I create a sales invoice, I split the money in sales and in disbursements income. When I receive the money it comes to the disbursements income account. Why is there a disbursements income account, if we cant use it to compensate the disbursements recoverable?
I posted this in another thread “Disbursements Tab” but I’ll post here also. Hope it answers your question:
I’ll try to give a quick overview.
Manager uses the term ‘Disbursements’ to mean monies disbursed for
costs that can be recovered by billing to a customer. Monies could be
disbursed by (I) “Spend Money” - i.e. payments recorded from a Bank
Account, (ii) supplier invoice purchases or (iii) reimbursement of
Since these are recoverable outlays the “Spend money”, "invoice line"
or “expense report line” should be coded to Disbursements (to record a
billable asset) rather than to an expense account since they are ‘not
expenses to you they are pass through costs’. Thus this functionality
covers and includes “billable expenses”.
On the disbursements tab you will see all recoverable disbursements
for a customer awaiting billing. Some may come from Spend money, some
from supplier invoices and some from expense reports. Pick and combine
all the lines you want to Invoice and bill the customer.
Thus the general accounting is:
“Spend Money”: Dr Disbursements (recoverable) xx / Cr Cash at Bank
"Supplier Invoices": Dr Disbursements (recoverable) xx / Cr Accounts Payable
"Expense Reports": Dr Disbursements (recoverable) xx / Cr Expense Claims payable
Upon Invoicing (assuming no mark up):
Dr Accounts Receivable / Cr Disbursements (recoverable)
Note that none of the above touches the P&L. There are two P&L related scenarios:
- Mark-ups - If you edit the invoice and increase the amount to be
billed to more than the outlay was for the original disbursement you
have “marked it up”, so the accounting for the invoice line that you
marked up would be (using an example of disbursement of 100 billed for
Dr Account Receivable 110 / Cr Disbursements (recoverable) 100 / Cr Income from Disbursements 10 (your profit)
- If prior to billing you discover that you will be unable to
recover a disbursement and need to write-it off you can write of the
Dr Disbursement Write-Off’s / Cr Disbursements (Recoverable)
Another interesting thing is that the invoice functionality when
performed from either the Disbursements tab or Billable time tab will
allow you to select both billable disbursements and billable time, so
you can now combine billing for time and expenses on one invoice if you
wish. Nice work here by Lobos as always.
Hope that helps explain why the disbursements do not appear as income
when creating your P&L. It’s all just expense reimbursement of
costs incurred on behalf of your customer, it’s not a sale/revenue
(Unless you mark them up of course to get some ‘income’).
Hope that helps.
@alasdair, your general description is great. But you may have given the impression that a user must enter the income from disbursements as a separate line. Actually, Manager does this automatically if you invoice the customer for more than the original disbursement. Likewise, if you write off a disbursement, it automatically shows in the
Unrecoverable disbursements expense account.
One characteristic in this developing capability is that if you mark up the disbursement and later write it off,
Disbursements income increases by the full, marked-up amount instead of just the mark-up, while
Unrecoverable disbursements shows only the original, unmarked-up amount. Thus, you are left showing net income equal to your mark-up. I would be curious to learn @lubos’s thinking about this. I question whether it is proper to show income in this situation. As is, to rid your books of the unrecoverable mark-up, you would need another journal transaction to clear it to bad debts or some similar account. Perhaps I’m thinking about this in the wrong way.
Did not mean to give that impression. I had written ‘if you edit the invoice and increase the amount to be billed’. Certainly can clarify that, just edit the amount on the existing line. Thanks.
@lubos, @alasdair, @Tut: thank you so much for your input/comments on this forum. They are very helpful and I have learned a lot from them. However, I’m confused with regards to the new Disbursement tab. Probably, it is merely a semantic issue.
Let me give you an example. Assume I’m working on a project for which I will invoice a client a sum of 2000. For the project, I outsource part of the work to a freelancer for a sum of 500. When the freelancer is done, he sends me an invoice. What is the invoice of the freelancer? Is this expense called a disbursement? If not, what is it called?
Another example. Assume for an other project I will invoice a client a sum of 2000 as well. For the project, I have to buy some goods for 100 (e.g. plugins or a theme for a website). Are these expenses called disbursements? If not, what are they called?
They look like disbursements to me, because in a way these are expenses that you pass through to a client.
The reason I’m struggling with this, is because when doing a tax declaration, I have to specify my net turnover (I’m not sure I’m using the correct word: the total sum of sales invoices without VAT), and the sum of direct costs including among others the cost price of products and the expenses of outsourced work. However, when using disbursements, and when producing reports in Manager, I cannot find the net turnover (i.e. the total sum of sales invoices without VAT) and the cost price of the net turnover. Both in the single-step and multi-step p&l statement, all I can find is the difference between the invoiced total and the disbursements total.
What do I do wrong? Didn’t I look at the correct place? Or do I maybe have to activate a plugin? Should I use the disbursements tab for the examples described above or should I process the expenses differently? Any help into the right direction are much appreciated.
Good questions, @tomasz. Here is my input, for what it is worth. (I hope it is worth more than you are paying for it. )
Your freelancer’s invoice could be entered as a purchase invoice, especially if you don’t plan to pay the freelancer until your customer pays you. That way, your liability would show as an account payable. When creating the purchase invoice, assign it to
However, when you create your sales invoice to your customer, items picked up from the
Disbursements tab will show in detail. As a result, your customer will see that you are outsourcing work to the freelancer. You might not want that to happen, for example, if you try to present the image of full capability but occasionally need support from others. In that case, simply allocate the freelancer’s invoice to
Contract labor or some similarly named account. Conceptually, the freelancer’s cost to you is no different than rent, office supplies, or accountant’s fees. These are costs of doing business so you can deliver whatever your customer is buying.
I personally don’t think freelance labor is a good use of the
Disbursements was conceived, and is being developed, for straight pass-through expenses such as travel costs, materials used directly on a single job, and so forth. Your customer inherently sees the specific items. Hopefully, they are not surprised by them.
Your plugin example is similar. That could be a disbursement, and your client will see its cost on your sales invoice. You might or might not mark it up. (The invoice will not show the markup amount, only the marked-up price.) But you could also treat it as an ordinary expense, especially if it is something you can re-use on other jobs.
I regret I can’t offer you any insights on your VAT questions. We don’t have VAT in the United States; the entire concept quickly confuses me.
That is correct. Keep in mind, you are writing-off already invoiced disbursement. What happens in this case, the invoice still exists and it still credits
Disbursements income but since the original disbursement is no longer associated with that invoice (it has been written-off instead) the whole amount on invoice gets posted to income. It doesn’t break double-entry accounting principles. It does look weird though… why? Well, because once disbursement is invoiced, there is never ever any reason to suddenly write it off unless you also delete the original invoice.
If customer complains about disbursement on invoice, issuing credit note is the correct course of action.
The question is, why does Manager allow to write-off disbursements which have been previously invoiced? Well, if you make a mistake and invoice 10 disbursements and later you realize one was to be written-off actually (or remain still uninvoiced) without affecting original invoice, you can just write it off (or set the status back to “Uninvoiced”) and Manager recalculates figures on remaining 9 invoiced disbursements.
As @Tut said, this is not a “Disbursement recoverable”… it is simply an expense that would go to “Subcontractors” expense account or something like that.
Disbursements are really only for pass-through expenses. Let’s say your client wants to register a domain name or purchase SSL certificate. You can either tell client to purchase it themselves or purchase you can purchase it for them (which is often better choice as you are more qualified to do it). Disbursements allow you not to forget payments to 3rd-parties on behalf of your client.
Paying subcontractor is not a disbursement since your relationship with subcontractor is hidden from your client. Just like your relationship with you ISP, utility company, landlord etc.
I’m sure tax authority will have some exclusions. For example, lawyers are known to pay a lot of expenses on behalf of their clients but those expenses shouldn’t inflate their turnover.
Anyway, I don’t think any of your examples fall under the scope of disbursement. If you purchase libraries, themes or plugins, just allocate these expenses to regular expense accounts. It’s not like client is going to pay you separately for those purchases as you have probably agreed on the final price for the whole project and that is what client is going to pay you for.
If client agreed to reimburse you all expenses you incur during working on a project on top of paying for your time (e.g. travel expenses, plugin purchases, domain names, SSL certificate etc) then use disbursements (and billable time).
@lubos, your explanation of what happens when you write off a marked-up disbursement makes sense. Since my post, I’ve played a little more with the tab and am only now realizing that more things are going to
Disbursements income without human intervention than I thought. I suppose that a markup, even if later written off as a bad debt, is similar to any service: an attempt to generate revenue without an explicit underlying inflow or outflow of funds. Certainly if the customer pays the invoice, you would have to count the markup as profit, just like profit on an inventory sale or delivered service. If they don’t pay, it’s a bad debt and needs to be written off.
Regardless of what is happening in the background, the summary amounts all remain correct in representing the company’s position. I guess that validates things.
You explained it better than myself.
[quote=“lubos, post:18, topic:2281”]
You explained it better than myself.
[/quote]That is high praise. Thank you, @lubos.
I’ve been converting old disbursements and invoices to use this new capability. (I thought it better to do it now, before the year goes on and the task becomes overwhelming.) This leads me to some questions and observations. Not all are directly related to
Why, when I look at transaction lists for bank or cash accounts, is the View button grayed out for “Transfer money” entries.? This makes tracing problems somewhat harder.
Why is the View button grayed out when drilling down from the
Summaryfor any transaction originating from an expense claim?
Why, when drilling down from the
Disbursements income(and I suspect
Unrecoverable disbursements, though I haven’t actually tried that), are transactions matching money received against invoices completely inaccessible? Both Edit and View buttons are grayed out; and Transaction, #, Description, and Contact are all blank. Occasionally, the amount will be recognizable as matching a disbursement. But when an invoice contains several disbursements, the total is shown, which will be a number one has never seen by itself. This can make tracing problems virtually impossible.
Why, when editing a sales invoice, can you not select the
Work in progressaccounts? You can only select the
Disbursements incomeaccount. So if you fail to check everything you want to invoice when creating a new sales invoice from either
Disbursements, your only recourse is to delete the invoice and start over.
Lastly, I want to repeat the point I’ve mentioned several times before. It would be very, very useful to be able to add billable time or disbursements to an invoice created from the
Sales Invoicestab. I suspect this is tied directly to the answer to #4 above.
At this moment, having a customer see me outsourcing work to a third party or not is not my biggest concern. I’m not creating invoices to be issued to customers in Manager yet. However, you raised a good point. In some cases this is not desirable.
I understand and agree that the freelancer’s costs are no different than rent or office supplies. The thing is that I also have projects that span multiple accounting periods. In these cases I should register costs and revenues that are directly related to each other on the profit and loss statement within the same financial reporting period. So, if I outsource work to a freelancer, I should not recognize the freelancer’s invoice as an expense at the moment I receive the invoice but rather at the moment I issue an invoice to my customer.
Before moving to Manager, I used to create the following series of journal entries (for the example given in my previous post):
Dr Work in progress 500 Dr VAT to be claimed 105 Cr Accounts payable 605 Dr Accounts receivable 2420 Cr VAT to be paid 420 Cr Fees from work in progress 2000 Dr Direct revenue expenses 500 Cr Work in progress 500
Given these journal posts, I would produce the following p&l:
Fees from work in progress 2000 Net sales 2000 Direct revenue expenses 500 Total direct expenses 500 Gross profit 1500 etc
When the imbursements tab became available, I thought I could use this tab for the purpose so that project related purchase invoices would be recognized at the moment an invoice would be issued to a customer, something similar to how billable time and sales invoices are handled. But I believe now that I have to fall back on manually entering journal entries. Correct?
If correct, it would be nice if it would be possible to allocate a purchase/freelancer’s invoice to the account
Work in progress. Then when issuing an invoice to a customer, it would be nice if particular purchases allocated to
Work in progress could be selected to be allocated to an account such as
Direct revenue expenses. This would be very helpful, because no manual journal entries need to be created and because it would allow to easily find related translations. Would that be possible?