Hi, I can’t figure out how to allocate different expenses from an invoice so that it shows in the right expense accounts. Here what I do:
Normally our quotes and invoices show only one amount, as our customers are not interested in how much of the total is fuel, material, service etc. But to show these in the summery, do I need to edit my invoice (after it was send to the customer) and split it all up?
I’m sure there is a better way to do this. Thanks for help.
One of the basic principles of accounting is that you should never edit an invoice after it is sent. If you do that, and there is some form of dispute or auditing question, you have no reliable record.
Your invoice doesn’t necessarily need to be linked to a quote. You could give your customers simple quotes and still allocate expenses on the invoice, if you so desire.
In that case, good accounting practice would be to include the proper allocation of accounts, line item by line item. The only other legitimate way to do what you describe would be to laboriously make transfers via journal entries. Obviously, that would be a nightmare.
However, there is no reason you need to account for all your expenses to customers if they aren’t interested. You could take an approach as simple as allocating the entire sum invoiced to Sales. Your expenditures for fuel, materials, etc. would be separate transactions that only you would see.
Thanks Tut, we had a chat here about it and came to the same conclusion. What would be the best way to do it? I mean I use purchase order for big things we buy for individual customers and put it in dispersement , but with fuel, material etc. could I do it just with allocating it via the bank statement?
First of all, purchase orders are separate from your customers, and they have no impact on your financial position or performance. They are simply a professional way to order materials from suppliers. They do make it easier to produce a enter a purchase invoice when you are billed by your supplier. The purchase invoice, in turn, is meant to be used when you buy on credit and pay later. It will produce an account payable. If you pay immediately upon delivery or presentation of your supplier’s invoice, you should just Spend Money from a bank account.
Disbursements are meant to be used when you make expenditures on behalf of your customer that you expect to be reimbursed. Examples are travel, supplies or materials directly applicable to a job, etc. Think of them as billable expenses. (Some of us, in fact, have advocated for changing the tab’s name to Billable Expenses. @lubos is still working on this capability, so we’ll see where he goes with it.) The advantage of Disbursements is that things that go in there are not meant to be recorded as expenses of your business, like rent, insurance, office supplies, and so forth. They are things that the client could have paid for directly, but it was more convenient for you to do it for them.
For more general things, like vehicle fuel, materials that might or might not all end up in a client’s project (like consumable supplies, such as reels of cable, boxes of fasteners, reams of paper, rolls of tape, etc., just Spend Money from a bank or cash account and allocate the cost to the appropriate expense account. If you want, you can enable Tracking Codes and keep track of individual projects that way.