Selling user access to subscription services

I like this software so much for my main business, I decided to create another company file for my part time hobby as well.

I have a quarterly subscription I pay to a supplier, which provides me with a quantity of on on-line service to sell to clients in smaller portions.

I’ve tried to set this up under Inventory Items but the logic isn’t quite right as there is no parity between the 1 bulk package I buy, and the multiple small packages I sell. The nett result is that I end up with significant negative number of the small packages “in stock”, as every time I sell one, there is no indicated “stock” level to deduct it from… The bulk package I buy could theoretically be broken down into any number of smaller packages, so there is no logical way to indicate how many small packages are represented by each bulk package.

There must be a better way to record this structure, I just don’t see what it is.

Thanks in anticipation

There is a concept called Inventory Kits. See:

The way you can use inventory kit is to tell Manager than inventory kit represents 0.01 qty of different inventory item. Then you sell your customer inventory kit, not the inventory item you are purchasing.

However, what exactly are you purchasing and selling? Inventory is for physical goods. Not for services.

It is a webhosting service. I buy disk space and bandwidth on a quarterly basis, and domain names registrations/renewals as required. Most of my clients buy their hosting package on a 2 yearly basis to align with the .au domain registration period.

So the domain registration fees are a simple buy / sell transaction. The webhosting however is more complicated as a client has effectively pre-paid for a share in 8 consecutive future wholesale hosting purchases.

It may be simpler to just consider the quarterly purchase as a fixed cost of running the business and the sales as service sales that don’t align to anything in particular. What I’m trying to achieve is a means of having reports showing what future hosting costs are committed to based on past sales so that expenditures don’t “accidentally” eat into resources required to keep the service running.

@pcal, several accounting factors could influence how you do what you want:

How often do you invoice and expect payment? If you sell 2 years’ service at once, you could issue a sales invoice and recognize the revenue then. The disadvantage, as you suggest you realize, is that there is nothing to show you owe delivery of the service. So you could, instead, have them sign a contract and make a payment that you allocate to Customer credits, without issuing a sales invoice at that time. Then, set up recurring sales invoices to be issued monthly or quarterly. Manager will automatically “pay” the invoice from the customer’s credit. The balance in Customer credits would be an indication of total future wholesale requirements, but would not show their time phasing.

If the customer does not pay in advance, but periodically, use the same approach of recurring sales invoices, but without the intervening step of customer credits. This approach gives no indication on your books that you must provide the service. But that problem is no different than a carpenter has, who must decide how much lumber to buy, or a chef who must decide how much fish/meat/vegetables to buy each day. You will need some estimating/forecasting mechanism outside of Manager. A simple spreadsheet incorporating a chart would do that job.

Your idea of using inventory doesn’t solve this problem, because inventory is not predictive. It records how much of something remains. From an accounting perspective, the fact that you’ve agreed to provide something in the future is not really a transaction, but a contract. Exactly how you handle it will depend somewhat on whether you are doing accrual or cash accounting. Under cash accounting, you can’t account for your future obligation at all. Under accrual, you might create liability accounts, just as you would for a loan. You should probably consult an accountant on that. One issue will be what your customer’s recourse is if you should fail to deliver the service? (A bank loan would probably be collateralized. Internet service would not be, so there may be no actual financial obligation beyond return of any advance payment.)

I’m having Billable expenses in my mind when it comes to reseller webhosting. But I may not sell for the same price I make a purchase invoice, what happens in such case for billable expenses?

How can the process of buying a (one) reseller webhosting package and selling it to (four) customers be handled in manager?

Could someone post a manager backup file with some examples of a reseller webhosting business which pcal has mentioned.

If you are buying one webhosting package and sell it to 4 different customers, then billable expenses are not suitable for this. Billable expenses are when customer basically agrees to reimburse you at later date for your expenses while working on their assignments. This is not what’s going on in webhosting business. So don’t use billable expenses.

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Then how do I do this? Purchase Invoice Items > Sales Invoice Items?

Yes, exactly. Although you do not necessarily need to use invoice items. Those are just shortcuts for commonly bought or sold goods or services.

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Anyone willing to give me a dummy database file which i can check the process of how you actually do this in Manager?

A database won’t show you the process that was followed, only the result. Whether you even treat the web hosting package as inventory depends on how many times it can be sold. If, for example, 4 is the limit, buy it once but treat the purchase as having been for four units. Sell them as you would any other inventory. If you can resell the package endlessly, don’t treat it as inventory. Just buy it and record it as an operating expense. When you sell, allocate the line item in the sales invoice to either the inventory on hand or a standard income account.

These are simple transactions. Be sure you have read the Guides and then, if necessary, ask specific questions.

You are dealing with a Service not Inventory therefore you should ignore any relationship to quantities. The buying of the reseller webhosting package is as @pcal states “a fixed cost of running the business . . . . . that doesn’t align to anything in particular”. Therefore in Manager the buying can be processed by the Suppliers and Purchase Invoices tabs.

Manager has a number of processes for handling the “sales” it really depends on the pricing/invoicing formats required. @Tut provides some discussion on the options above. It’s strongly recommended that you use accrual accounting for such a business, as the BS/P&L reports would provide a far more effective management tool.

A comparison would be: Renting a commercial property which could be “re-rented” in various sizes to a number of customers - the initial renting would be a fixed cost and each re-renting would be a stand alone sale.