Ok Iove the program and slowly getting my head around the accounting terminology and processes.
I’m after some suggestions on how to process commission on sales (I think that’s the way it will seem).
Basically small business operating at weekly markets. We sell our own products as well as on behalf of a few others.
Our own products portion of daily takings can enter into our sales-market income account fine. But other products we either pass on the whole takings or take a commission of those sales, say 20%.
On say a monthly basis we pay out these people/suppliers for the income they have gathered from sale of their products.
What would be the easiest way to track these product sales (as bulk $, not using inventory at all) and can manager automatically calculate the commission received, etc and place it in some type of holding account?
Initially I though about adding the people who provide the handmade products as suppliers then create a purchase invoice for the amount owing and pay it accordingly. The problem I found was how to record the amount in a method for each ‘supplier’ without creating a sales-income account separately for each supplier. On the can on hand receive money page from memory you can only select income or expense accounts. Should I create a general account for income-sales of external suppliers? Or is there a better way to handle this?
So two questions, how to track and pay for items sold and is it possible to automatically calculate and track commission from those sales. I suppose part b is determined by how I handle part a
I’m trying to keep the question as general as possible so the concept can be applied to others looking for answers in the future, rather than nail it right down to my individual case.
When you sell these commission products the value should be posted (Receive Money) to a BS Liability Trust Account, as you are holding the monies in trust on behalf of the owner. You could open a separate Trust account for each supplier.
To pay the owner Spend Money, if commission is involved, then when Spending Money do a Add Line - Account = Income Commission account and the amount would be entered as a minus (-30.00).
There is no automatic calculation of the commission. On the Receive Money and Spend Money you can select Income/Expenses/Assets/Liabilities/Equity accounts
thanks for the response @Brucanna. i have run through the process on my test business and it all seems to work accordingly. Im just wondering how this will scale as the business grows? eg if i ever get many many more suppliers onboard will creating a liability account for each one create undue clutter for the chart of accounts?
i have just realised that the goods are probably equivalent to ‘on consignment’ which might be a better way to put it. if the business was to get bigger to trade from a shopfront, still selling goods on consignment, would this still be the best and easiest method to record and track the sales, etc or would something like Purchase Invoices be a better method? crediting to suppliers as their good have sold.
the concept of a negative payment seems odd but i (surprisingly) completely understand how its applied in this circumstance
On Consignment - would be the perfect description. Glad you have been able to grasp and implement the Trust Account concept and you are quite right to consider the impact of having an increasing number of consignees. Using Purchase Invoices would be messy as they are a non-monetary transaction - purchasing on credit - whereas your consignee sales are in cash, therefore very difficult to link up.
However, an easier method would be to consider the Suppliers Credits account as the Trust Account. This way you can Receive Money and Spend Money (with the commission deduction) in exactly the same way as you are doing now with the Trust Account while having the benefit of having your Consignees listed as Suppliers.
This method would eliminate the need for multiple Trust Accounts but it would mean having a “negative” balanced Asset account. No big deal and for your purposes you could even rename it to “Consignee Trust Acct”. Perhaps (with a question mark) with the proposed Custom Control Accounts feature you may be able to shift the account from being a BS Asset to a BS Liability account just to neaten things up.
thank you so much @Brucanna, i have just had that moment of penny drop and everything balancing along the way. Supplier Credit was indeed the best method for my case and will scale into the future. also its dead easy to enter
my next task is working out how to enter and track gift vouchers - a new thread for that
thanks again
