Rightio, so, this might be a bit rambly as I don’t know the correct terms to be using, but I hope you can help.
(I’m a computer repair guy, not a finance guy, and my brother is a subcontracted social worker who knows nothing about computers, so this is a blind leading the blind situation) (also, Australian)
So, my brother has to send out invoices, as he is a subcontractor.
The invoices just need to show the total, and price per hour, which I have successfully managed to set up.
The invoice should NOT show any collected or included tax, just the total.
But at the same time, I need the reports to keep track of a 0.35%tax, so my brother knows how much tax to pay the ATO at the end of the financial year.
Every tax option I’ve found in Manager causes a tax amount to show on the invoice down near the total and this is not wanted.
So currently, my brother uses Manager to send invoices for the full amount, but then has to manually use Excel to keep a log of the 0.35% tax, as this tax rate is NOT to appear on the invoices he sends to the contracting company. As it’s a tax my brother pays, not the company being invoiced.
I hope you’re able to follow that.
Nutshell:
how to keep track of 0.35% tax, without it appearing on sent invoices?
Example:
Invoice for $100, with no tax percentage or amount on it.
However, internal Reports need to show 0.35% of that goes into an account in which tax is paid to the ATO from. The rest is profit.
Does that make sense?
How can I set this up? Or is my computer illiterate brother going to need to continue using Excel to handle this?
(You may need to explain it to me like you would to a child, I have zero financial experience, I just do tech support)
Well, if there’s no way to automatically do it, it might just be easier for him to keep using excel to keep track of it, as my sister set him up with a pretty good excel file.
Invoice number - invoice total - running total - tax amount - running tax total
All he has to do is enter the invoice number, and the invoice total, and the excel file works out the rest for him.
Still, it would be useful if something like this was an automatic function within the reports system in manager.
Can I ask if there is a reason that the 0.35% on every invoice needs precise tracking, as you are doing.
Why not just assign all the invoices subject to the tax to a single sales account. At the end of the fiscal year multiply the total in the account by 0.35% and transfer that amount to a Tax liability account. Or, the calculation and transfer can be done on monthly, weekly, or even daily totals if you feel the need for the tax liability to always show its current amount.
@DazzaJay if you mean by 0.35% tax a marginal or average rate of income tax of 35% of the taxable income (assessable income less allowable deductions) then that cannot be tracked on invoices. It’s best if you ask your accountant to teach you how to estimate income tax payable periodically and then set aside the estimated tax payable in a special bank account.
Yeah, currently he puts money earned, and the invoice number into excel, and it spits out a running total on what he has to keep aside in another account for the ATO.
I have no idea how any of that works, I’m just tech support, and I’m blindly trying to set up manager so that it works in a way that is simpler for my brother, as up until now, even his invoices have been made entirely in Excel. (You can imagine how unprofessional they look).
I’m just trying to automate almost everything so that he can do stuff easier. But if he still has to keep track of that tax in excel manually, then that’s just what he will have to do.
@DazzaJay, what you describe is like a mechanical engineer trying to design an automatic hammer-banging machine without first knowing the purpose of a hammer is to drive a nail. Your prospect for success is slim.
I did say “the blind leading the blind” in the OP, did I not?
All I know is, he has an excel sheet.
He enters the invoice number and the total amount of that invoice, and the excel sheet spits out a number based on a specific percentage, and that’s the amount he needs to keep aside to pay to the ATO.
I thought it seemed pretty simple to do. It certainly looks like it should be simple. Take the amount from an invoice (all invoices for the financial year), then in the report, have an extra column showing “this is how much of that income needs to be paid to the ATO” based on a configurable percentage.
Sounds like reserving an estimate of income tax.
That is a valid thing to do however to achieve any goal you do have to know what the gaol is.
If you want to reserve money for a major liability such as income tax, I recommend
Construct you “Profit and Loss” chart of account to show a sub total “Taxable income”
Make a “Profit and Loss Statement” report which shows “comparative columns” for the periods throughout a financial year you want to update the income tax reservation. Duplicate and edit this report to cover other financial years. Creating a report comparing successive financial years is also useful.
At the end of each period look at the above report and create a journal entry to transfer money from a Profit and Loss “Income tax expense” account to a Balance sheet “Tax income estimate” account. You can use the ATO tax calculator for this or use a nominal percentage such as 35%
When income tax is actually paid for that year, in the payment enter lines to reverse the estimate and replace it with the actual amounts
That’s sounds pretty close to, if not exactly what I’m looking for.
Will spend the next few days setting it up, (as I have until Monday to get this thing running, and post my brothers now fixed laptop back to him (new keyboard, new SSD))… As well as creating some super easy guides that I’ve made for him so he can use it…
Excel is actually a very advanced and different application. It is much better than any accounting application for financial modeling, budgeting, ad-hoc calculations, and complex analysis. It therefore has a vast library of built-in functions (e.g., SUM, VLOOKUP, IF, INDEX, MATCH, POWER QUERY, and advanced statistical tools). You have complete control over formulas, allowing for custom calculations that may not be possible in accounting software.
Manager like other accounting applications is designed specifically for accounting and financial management. We use Excel for financial analysis and Manager for transaction recording, financial reporting, tax compliance, and audit trails.
@eko wrote what I was thinking. Basically, accounting software can only add and subtract (debits and credits). Within entry line items, it can multiply (quantity by unit price, amount by tax rate, etc.) It performs some division (total cost by quantity and so forth) on reports. I am probably overlooking something, but hopefully you get the point.
Manager is not a numerical analysis tool. It won’t tell you what to do or when to do it. Its purpose is to record what has happened.
This was its response: (not sure if it’s accurate or just halucinating, as it recommended Manager to me in the first place when I gave it a list of requirements I needed, including this feature.)
Manager.io lacks a native feature to calculate taxes purely as a percentage of income without involving invoices. For full automation, you’d need to: - Use accounting software with accrual-based tax tracking (e.g., QuickBooks, Xero), or - Export your Manager.io data to a spreadsheet and use formulas to auto-calculate the tax (e.g., link a Google Sheet to your Manager.io reports).
Final Recommendation: Consider providing feedback to Manager.io’s developers requesting this feature (e.g., a “non-invoiced tax” option).
@DazzaJay Sorry if my explanation will be long. We must remember that any accounting software, whether it is accrual-based or cash-based, will take into account all the recorded numbers. Income, expenses, taxes, etc. Even if it is only 1 cent, any accounting software will always treat the number as an important number. Including this Manager software. We need to realize that Manager as an accounting software that already has dual posting automation for accounts and ledgers, which no longer requires a general journaling process or manual adjustment journals or the traditional ones that were learned in school before, Manager will always record the numbers inputted into 2 different accounts from the Chart of Accounts (COA). 1 Account for the Debit side and 1 Account for the Credit side. Or at least record the numbers in the same 1 account but on 2 different sides. 1 side for Debit and 1 side for Credit. Because accounting requires numbers on the Debit and Credit sides, this is what I previously called dual posting. Manager and most modern accounting applications today have made it easier with only 1 posting, but will automatically do dual posting to the debit and credit sides. This is the posting process that we must know and understand that applies in this Manager application. When we adapt to a particular accounting software, we must find out how the software performs the posting process on the debit and credit sides of all accounts in the COA.
Back to the topic of your desire not to record Tax, but still want to track 0.35% of the total Sales Invoice. I wonder actually. What type of tax are you discussing? The first possibility, because this is related to Sales Invoice, means the type of tax is some kind of VAT or similar Added Tax. But this type of tax is not a tax that must be paid by you but is charged to the customer. If the bill is reversed, your customer reports and deposits it, if your customer pays you with the Added Tax and you report and deposit it to the tax authority. And this must be stated in the Sales Invoice. The second possibility is Withholding Tax. Income Tax that will be deducted by your Customer from the total Invoice, meaning this reduces the amount of payment from the customer to you. In some cases, this type of tax sometimes does not need to be listed, but if the Withholding Tax regulation requires your customer to deduct Withholding Tax from you, they must do so. And you still have to record it in your bookkeeping. However, this type of tax is also not a type of tax that you must pay, but you can claim it as a tax that has been deducted in your tax report and you are entitled to receive a withholding certificate from your customers. Or the possibility of all three is Monthly or Annual Income Tax that applies to Companies or Individual Taxpayers with a tax rate of 0.35% of total income. This is a type of tax that is indeed a tax obligation for you, however, this type of tax will not be directly related to the Sales Invoice and should not be included in the Sales Invoice. However, in essence this tax is a tax that must be paid to the tax authorities by your brother and you want its automation, right?
If the type of tax you are discussing is a type of tax as in the third possibility that I mentioned, of course this tax recording should not be included in the Sales Invoice. In terms of the Final Annual Monthly Income Tax which is your obligation as a business actor, this type of tax should not be recorded on the Sales Invoice.
The easiest way and I also recommend it is as said by @Joe91
Why do I also suggest this? Because first it cannot be automated in Manager. Because Manager is a general accounting application to accommodate all types of businesses in any country, therefore its functions are general and not specific to the financial or taxation regulations of one country. As for localization to accommodate the needs of a country’s regulations, currently developers invite users who have specific needs for their country’s regulations to create certain custom localization features.
Second, based on the first condition, I think the steps as @Joe91 said are the right steps. Because in this case, I can say that accounting software that is indeed general for use by global users will be difficult to automate, unless they have integrated it with the rules of a particular country. You can use Excel or Spreadsheet, that’s a good thing as an additional recording and tracking function. But, in the context of proper financial reporting, you still have to record in the Manager application so that your financial reports are truly accurate. Shouldn’t the taxes paid still be recorded as expenses by your brother? I suggest following the steps explained by @Joe91
Because as I said before, when you decide to record numbers in an accounting application like Manager, it will treat those numbers as important and unmissable numbers that will be used in financial reports, and the numbers in these financial reports must be accurate, actual and can also describe your financial position to be used as one of the tools for determining your business direction policy. When you decide not to record any figures, Manager or any accounting application will clearly not care about the figures, because the figures do not exist and do not need to be displayed in any financial report, and you will not get the right financial report, nor can you get insight into your overall financial position.
So the point is, keep recording the taxes you have to pay in Manager. However, there is no automation that can cover your wishes directly when you create a Sales Invoice. And if it is true that the type of tax is like the third possible assumption that I mentioned earlier, then the tax is not directly related to the Invoice, at least in this Manager application, that is the condition for treating the tax. Once again, I apologize profusely to everyone here for my long explanation. If it is possible to talk directly, it might be more comfortable, but due to space and time constraints, only this forum can connect us all as Manager users. I just want to provide additional explanation and general description as additional insight. Hopefully it can help and sorry if there are any mistakes or shortcomings, please correct me.
I do believe he is trying to keep track of his earings to be able to cover his PAYG (Pay As You Go) payable to the ATO.
My advice would be to stick with excel and keep recording it separately. The ATO is really only interested in your profit and the end of the financial year. This is the figure they go by when calculating your payment/refund. You could set up a sweparate account and transfer the 35% into it on a regular basis and put it under Drawings.
I use Manager to roughly estimate income tax payable.
To estimate a reasonable amount to reserve only major income and expenses need to be correct so can readily be calculated via a Manager chart of account layout.
Actually submitting data to ATO for income tax requires more precision so is more difficult to achieve from Manager. The facility to do so easily is in the ideas already
Although in another post you suggested having used AI to “recommend” what your brother should use, the response of using full-fledged accounting software such as Manager is flawed. Despite your commend regarding another AI advise note that Manager has same functionality as XERO, QB, etc. Just add the following line to your AI chat. “I understood that Manager is similar to XERO and QB, so you seem to be mistaken”.
Anyway, as the interest seems to be with looking more professional and thus having better looking Invoices and maybe a better way of handling these, it should have advised either a Wordprocessor invoice template or some open source software such as https://invoiceplane.com/ that even is available via a one-click install on Softaculous available in many CPANEL web hosting solutions.
I agree with @VACUUMDOG for your brother to stick with the spreadsheet as he knows how to use it and use an Invoicing template or app for customer eye-candy.
