Hi there,
I am not an accountant but I am learning accounting slowly and gradually. I have a question: a company is my supplier and it has a employee who sells it’s items through my distribution setup. Company issues as a credit note to my business as a salary of it’s employee and I have to pay in cash. How do I handle this scenario in Manager?
Have I understood this correctly?
You have to pay the other company’s employee with cash from your company and in return you get a credit note which you can use when you purchase something from the other company?
This sounds very dodgy and in my opinion would be illegal in most countries
A supplier’s credit note is entered as a debit note in Manager. See Use debit notes for supplier returns and refunds | Manager. The effect will be to reduce the amount owed to the supplier under Accounts payable. If you pay the supplier’s employee in cash, that would be through a normal payment, posted to an appropriate expense account.
However, as just mentioned by @Joe91, this is very questionable practice. If the employee is the supplier’s, the supplier is responsible for payroll taxes, withholdings, and so forth. And the entire arrangement looks like an attempt to avoid legally required obligations. On the other hand, if the employee is yours, you should set them up and pay them as you would one of your own employees. Governments are normally quite particular about how businesses determine who is an employee, who is a subcontractor, and so forth. You should consult your tax authorities (or whoever handles employee and labor matters) for guidance.
1 Like
Thanks for your replies guys, @Tut & @Joe91. This is a common practice here in Pakistan, I may not be able to describe it in a detailed legal perspective. I have seen many multi-national companies doing this kind of practice. However, I will surely consult with some expert regarding this matter. Thank you!