Entering delayed cash payments

I am operating a photography company and have a question on how to handle sales from a Smugmug account that holds on to payments until a dollar threshold is reached.

By following the guides and posts here, I set up two cash accounts, one Sales - Cash, and one Sales - Credit Card and use them for my cash and credit card sales. Sales made on my Smugmug account however might get paid months after the actual transaction, unless I request an earlier payment, and I would like to track these sales to see what I have due to me. Would the best way be to set something like this up to have a third cash account called Sales - Smugmug for example and record sales in that cash account as they occur, and then once I get paid by Smugmug, do a transfer to my bank account as I would do for the cash and credit card sales cash accounts?

I would create a new bank account called SmigMug. Enter receipts into that for sales made through that site. When the transfer occurs, it would be an inter account transfer between the smug mug account and your bank account.

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correct

You may be confused, or you may just be using imprecise terminology. But it sounds like your two accounts should be income accounts, not either bank or cash accounts. Make sure you understand the difference.

A Smugmug account should not be a cash account, but a bank account. Only petty cash or cash tills are cash accounts. Those represent physical money. A Smugmug account is essentially like a credit card, but in reverse, representing money held by another business entity.

I was setting the cash accounts up based on this post as well as a few others that said the same thing.

I use the Receipts and Payments section and receive cash and checks into my Sales - Cash account, the item number enters the sale into an income account of Sales - Sports for example. I probably want to change the account names so it doesn’t get confusing later, but the Sales - Cash account is a form of payment, and the Sales - Sports is an income account.

I was thinking of Smugmug as a form of credit card payment that takes a long time to get paid rather a bank account. I will set it up as a bank account. Thanks for your help!

Thanks for the clarification, @ischgl99. Let me make a few points:

  • It is fine to have a cash account for cash transactions with physical money. But you cannot deposit checks into a cash account. Those have to be deposited to a bank account. (There is one variation on my statement: you might take checks to the bank, cash them, and hold the cash in a cash account. But I very much doubt you are doing that.)
  • Physical cash, on the other hand, can be deposited to a bank account rather than held in a cash fund. So, if you are receiving physical cash for some sales, you may not need a cash account. You might be able to just use a bank account. The determining factor is whether you hold the cash longer than your next visit to the bank.
  • Yes, it would be advisable, in my opinion, to rename accounts. Cash and bank accounts are not sales accounts, even though that is where you deposit proceeds of sales. They will also be where you withdraw money to pay expenses, fund your personal draw, etc. Renaming them will prevent confusion later with accountants, auditors, etc.
  • A credit card account—for your business—is one that you use to pay for things. It should be set up following this Guide: https://www.manager.io/guides/7035. Normally, the only incoming transactions will be refunds for things you have purchased.
  • Smugmug is like PayPal, without the ability to pay for things. It receives and holds money from your customers. So it should be set up as a bank account. When Smugmug pays you, enter that as an inter account transfer to your regular bank account.

Thank you Tut for your detailed response. I actually did my first check deposits correctly, then I saw it recommended somewhere to put them through a cash account and got things all mixed up. Thanks for straightening me out on that.

I will have to think a bit more what I want to do with my physical cash account. I will play with my test business and see if it makes sense to do it in a cash account or directly in the bank account.

Thanks again, you have been a big help!