How to allocate partial credit to a sales invoice?

Firstly thank you very much for a wonderful software, it’s been of immense help to me!

I issue Credit Notes as gift vouchers which customers can use over time. At times the customer only uses part of the credit note (e.g. $30 of $100) which means they should have 70 left in their credit note after the transaction.

I would like to use part of the credit to pay for a sales invoice but currently it seems there is no Amount field next to the Credit field in Credit Note edit mode. I.e. it allocates the whole amount to the sales invoice.

How can I achieve this?
If not possible, can you recommend a different way to handle gift vouchers to meet my two requirements? 1) Running balance and 2) Partial allocation to sales invoice.
Thank you …

When you give customer credit of $30 or $100, just issue credit note for that amount. Manager will automatically apply available credit to their next invoice.

What happens when you issue a credit note as a gift voucher and the voucher is never used, wouldn’t that credit note remain within Manager until ???.

You may find it simpler to not record any credit notes and just issue the gift vouchers. This way no accounting transactions are actually required until your customer presents the gift voucher for use.

If the customer only uses part of the gift voucher you could either a) have a panel on the gift voucher where the remaining balance is recorded or b) issue a replacement gift voucher worth the remaining balance.

When a customer uses the voucher for a cash sale, you would use the Cash on Hand tab and create an account called “Gift Voucher Sales”. With the Receive Money the first account line would as per your normal sale entry. The second account line would be to “Gift Voucher Expense” and the same amount would be entered with a minus in front so the transaction total is zero.

To use the gift voucher towards a Sales Invoice you would complete the sales invoice as per normal then you would add an extra line, the account would be “Gift Voucher Expense” and the amount would be entered with a minus in front so the transaction total is reduced by the value of the gift voucher.

Honestly, having a series of issued credit notes as recorded transactions within Manager which are unrelated until future transaction is very messy and a poor/bad accounting practice.

But these credit notes act as Gift Vouchers with preset value (of say 100) of which I have no way of knowing beforehand how much the customer would use in each transaction. I do not wish to force them to use the whole value in one transaction.
Vouchers are used to purchase inventory items. And have expiry date of one year from date of issue.

Then don’t issue any credit note. Customers don’t have any credit until they present gift voucher and if they do, just add negative line item to their sales invoice to decrease amount payable.

Okay thx lubos, I’m new to this and was following the suggested approach in Recording gifts and Gift Vouchers
Happy to go with your method but then how can I know how much liability I have as issued Gift Vouchers out there? How much is used and how much is left? (apart from manual written notes on the voucher itself)
Btw, these are kind of lottery give-away vouchers.

Thx, but per my thread with lubos these vouchers have expiry date, so they will be deleted after one year if not used. And I also wish to know how much liability we have due to the issued and unused gift vouchers out there.

The suggested advice in the link you provided relates to gift vouchers being “purchased” not gift vouchers being given away.

To track the gift vouchers, have a simple register with date, name, amount and running total column.
The total column less the total in the Gift Voucher Expense account ='s unclaimed liability.

You are right Brucanna. Based on yours and lubos’s comments I think I have found a nice way to do this and meet all my requirements without using Credit Notes. Here it is:

  • Created a Cash Account called Gift Vouchers
  • To issue a new gift voucher:
  • Go to Cash Accounts and view the Gift Vouchers account
  • Do a Spend money
  • Leave the account as Suspense and enter the voucher amount (it will be considered negative amount as this is a Payment transaction).

-To Spend/allocate the voucher to a Sales Invoice:

  • Of course the sales invoice must have been already created
  • Go to Cash Accounts tab and click on the balance amount of the Gift Vouchers account
  • In the list, locate the gift voucher that you want to use and click Edit
  • Add a line and select Accounts receivable
  • Then select the Sales invoice you want to allocate the gift voucher to
  • Enter the amount spent in negative amount. This will reduce the remaining liability of the voucher and also would credit the sales invoice.

So far it seems to work as I can see how much liability I have by looking at the Cash on Hand in Summary page, and for reach voucher I can also see how much is the remaining balance.
Thank you both.

@light, your approach does not represent good accounting practice. Suspense is an account which exists only to catch mistakes, most frequently because transactions are unbalanced between debits and credits, but also because inadequate account or customer/supplier information has been entered. Transactions in Suspense distort your true performance and position, negating the entire reason for double-entry accounting.

Further, these gift vouchers are not cash transactions at all. Tax auditors would go crazy, possibly accusing you of fraud.

From an accounting perspective, your gift vouchers represent nothing more than an offer of a discount in the future. They are advertising coupons. They are not actually liabilities, because there is no legal obligation to pay anything to anyone. Only if the customer presents the voucher/coupon will you extend the discount, and then only if they are also purchasing something else, which will be sold at the discounted price. A question to ask yourself is this: If you went out of business tomorrow, would you have any obligation to pay off a debt to these voucher holders? I think not. Another way of thinking about this is that such voucher holders would have no claim on your assets if you went into bankruptcy.

While I understand your desire to have one system keep track of both your real accounting transactions and this marketing promotion, cluttering up your books with non-accounting entries is just not a good idea.

One suggestion - call them Discount Vouchers, as that better describes their accounting functionality.

While your solution is unorthodox, getting rid of that credit note usage is a good thing while attempting to get the administration overview that you wanted - However there is a problem with your solution

Currently you are using the Suspense (which is bad) for the contra of the Spend Money.
Then you are adding a line for the Accounts Receivable entry which makes sense, BUT
The entry that you have put to the Suspense account will never change, as you never amend it.

In the following screenshots, I issued a Discount Voucher for a 100, raised an invoice for 50 and did a Discount Voucher payment of 40. The Cash Account for Voucher 1, looks like this

The BS/P&L looks like this after the 3 transactions - note the suspense account

The Accounts Receivable entry within the Cash on Hand transaction is only reducing the Voucher balance,
not the entry to the Suspense account .

If you want your solution to work, you need to put that “suspense” debit to a P&L Discount account, which is where the Discount would have ended up if you had “added a negative line item to the sales invoice to decrease the amount payable”

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@Brucanna’s example points out the problem quite well, @light. As I said in my previous post:

No subsequent proper entry corrects it. So the mistakes just pile on top of one another.

If a subsequent “proper” entry can’t correct a situation, what will - an “improper” one.

Correcting the suspense entry to P&L Discount for each Discount Voucher, properly corrects the situation. @light had merely overlooked the need to recognise the expense side of the voucher transaction - hence the suggestion of Discount Voucher rather then Gift Voucher as it better defines the marketing programme - forgoing future payment compared to giving something away.

The suspense account has done its job, highlighted a problem and once analysed the issue has been completely and properly resolved so there wont be any future piling up of mistakes. While this approach maybe considered as “cluttering up your books with non-accounting entries” by the purists - in fact @light is bringing to account (disclosing via accounting entry) potential future “financial” liability facing the business. A very proper action supported by accounting standards…

@light situation clearly illustrates how the BS/P&L can be used as active management tools if correctly set up.

@light - By using the P&L Discount (called Discount Promotion) the Cash on Hand Voucher entry better communicates the untaken Discount balance

What I meant to convey is that if an entry is in Suspense, future complete, balanced entries don’t address it. It just sits there. Of course, if you edit the entry that is in Suspense, you can correct it, but that was not what I meant by another proper entry. That is fixing the first one so it is proper.[quote=“Brucanna, post:13, topic:5533”]
@light situation clearly illustrates how the BS/P&L can be used as active management tools if correctly set up.

I totally agree, as long as you are not suggesting that being correctly set up involves deliberately putting transactions into Suspense. And I don’t think you are. As I understand your posting, you are recommending the use of a new Discount account instead of Suspense, right?

I think I understand now @Brucanna thx. I’m not an accountant (doing this as a volunteer for a community club) so let me make sure I’m doing it rightly.
I created a P&L Liability account called Discount Promotion.
Renamed my Gift Vouchers Cash account to Discount Vouchers.
Edited all my Discount Voucher records to use the Discount Promotion liability account instead of the original Suspense .
Now in Summary page I can see clearly how much unused Discount Vouchers are remaining:

But the amount of Discount Promotion liability account stays fixed for all vouchers issued so far whether used or not, as below. Which makes sense I guess because the vouchers are used against Accounts Receivable .

I’m quite happy with this as it meets all my requirements and also addresses the concern about the Suspense that both you and @Tut had raised.
Much appreciated … and please let me know if I might have missed something.

You are almost there. It should be a P&L “Expense” account not a BS Liabilities account. The Discount Voucher being offered is an expense to the business as its future income being forgone.

Usually discounts are offered at the time of the sales transaction: e.g. - You sell something for 600, this would be P&L Sales = 600. But if you offer a discount of 100, then this would be selling it for 500, so the P&L would be:
P&L Sales 600
P&L Discount 100
Net Result 500

In your case, you are offering the discount prior to a sale occurring, therefore you are taking up the “Expense” when the voucher is offered, Subsequently, the discount is past on by the reduction to the accounts receivable amount when a sale occurs.

Alternatively, you could allocate the Discount Promotion account to the P&L Income section so the business can see clearly the net rather then the gross sales. (my preference)

Oh yes, many thanks @Brucanna for your clear explanations. I’ve updated it now. Of course my net profit/loss would’ve been incorrect too.