Start date no longer required

[lubos]

The latest version (21.8.41) no longer requires start date to set starting balances.

On balance sheet accounts and sub-accounts you can simply set starting balance such as:

And then in general ledger the starting balance is presented without any date such as:

We actually do not need to know the start date.

Why am I doing this now

I have realized the previous implementation of starting balances and cash-basis accounting was broken. If you have entered starting balances and had starting balance invoices which were crediting or debiting balance sheet accounts on line items then your cash-basis balance sheet was never correct. Let me demonstrate.

Let’s say we are setting up starting balances and have single unpaid invoice for $1,050 which includes VAT 5%. Your starting balances should look like this.

Your balance sheet on accrual-basis would look the same.

So far all good.

What should balance sheet on cash-basis show? It should show zeroes everywhere because unpaid invoice should deduct $1,050 from accounts receivable, $50 from tax payable and $1,000 from retained earnings.

But unfortunately it didn’t. It only deducted $1,050 from accounts receivable and retained earnings not affecting any other accounts which was wrong.

It means balance sheet on cash-basis was perpetually incorrect. Retained earnings were understated and other balance sheet accounts overstated.

Now, while fixing this bug I ended up with even more complex solution behind starting balances and cash-basis accounting which I was not confident will not contain new bugs down the line. So I scrapped all that and re-imagined how to re-implement cash-basis accounting and starting balances in the most simple and elegant way so I’m confident it’s actually bug free. The result is the latest version.

Removing start date concept allowed me to keep things simple behind the scenes and but it has benefits for end-users too…

1. It removes common trap which keeps re-occuring all the time. New financial year starts and many users go and change their start date. This would completely change their balances and unless they notice immediately, they don’t even know what has caused it.
2. Starting balances are not hidden and shown only after setting up start date which has to be decided by someone. They are automatically visible on every new balance sheet account and sub-account - makes it easier to make the system useful faster for business owner without getting accountant involved. Accountant can come and finalize the starting balances for reminder of accounts at some later point.
3. We do not need Starting Balances report under Reports tab which shows forever, even years after it’s no longer relevant. Simply use Balance Sheet report.
4. It solves Comparative balance sheet with starting balances idea

---

Now the bad news. This update requires starting balances to be set on cash-basis. Unfortunately, we never specified before whether starting balances should be set on cash-basis or accrual-basis.

This has created inconsistency where for some users nothing is broken and this update simply fixed their accrual-basis balance sheet. For others, it changed their accrual-basis balance sheet.

So if you have entered your starting balance figures on accrual-basis, they need to be edited so they are on cash-basis. For example, if your account balance is 500 more than it should be, then your starting balance is 500 more than it should be. You do not have to figure this out on your own.

1. Go to Summary tab
2. Click on Retained Earnings balance.
3. If you had entered starting balances previously, there will be Fix Starting Balances button in bottom-right corner.
   
4. This will give you list of accounts where cash-basis starting balance is different from current starting balance.
5. Click Update to accept and your balance sheet should be what it was before this update.

I know this is bad but look at it this way… the fact you are affected means your cash-basis balance sheet was always incorrect. Fixing your starting balances so they are entered on cash-basis will make both your cash-basis and accrual-basis balance sheet figures finally correct. It’s very important these bugs are fixed even if it causes pain because these are building blocks for other features and those features rely on bug-free implementation otherwise they would be broken too in unexpected ways.

[AJD]

I have started testing this changed functionality and the first question that I have is regarding the P&L statement of the period prior to starting date. It is not a very significant issue, but an issue none the less.

Previously, when a Start Date was entered, the P&L in the year prior to the start date did not report anything (all nil).

Now the P&L, in the period prior to the start date, shows amounts relating to starting invoices (both sales and purchases). As the outstanding invoices will more than likely represent only a part of the pre-start period transactions the Profit or Loss reported will be meaningless.

When the Guides are updated to reflect this changed functionality, will it be recommended that outstanding pre-start date sales and purchase invoices be directed to Retained earnings?

[Patch]

The lock date functions by preventing changes to all prior periods. As starting balance no longer has a date associated with it, I assume it is locked if any lock date is entered.

[lubos]

@AJD

Now the P&L, in the period prior to the start date, shows amounts relating to starting invoices (both sales and purchases). As the outstanding invoices will more than likely represent only a part of the pre-start period transactions the Profit or Loss reported will be meaningless.

That is correct. But I don’t see this an issue. You could make the same argument for P&L covering the entire year 2021 even though the report is meaningless because it doesn’t have all transactions entered for 2021 as the year hasn’t ended yet.

@Patch

The lock date functions by preventing changes to all prior periods. As starting balance no longer has a date associated with it, I assume it is locked if any lick date is entered.

Not yet but this is how it’s going to work. Once any lock date is set, then starting balances cannot be changed. This is not a problem as lock date would be always later than start date anyway.

[Patch]

@lubos

It means balance sheet on cash-basis was perpetually incorrect.

@lubos

Fixing your starting balances so they are entered on cash-basis will make both your cash-basis and accrual-basis balance sheet figures finally correct.

I suspect most users

• Choose then mostly only use cash or accrual accounting rather than both

• Those users who care about the accuracy of their balance sheet absolute amounts are likely to have reverse engineered Manager to determine how to enter data to get the desired results.

As a result I suspect the best way to introduce this is to enable users to specify if there default for each business is cash or accrual accounting then ideally add a system generated journal entry to maintain the prior reporting for their usual accounting standard. Alternatively a report could instruct the user to do the same thing.

[Ealfardan]

Thanks you for your efforts but:

@lubos

For example, if your account balance is 500 more than it should be, then your starting balance is 500 more than it should be.

Could you please be more specific on this? Because I will probably have to do manual adjustments before the final fix is released.

For example:

• what would happen to sales invoices?
• Should I enter receipts for partially paid starting invoices or do I check “partially” paid like it used to be?
• If starting balance invoices are regular invoices now and this results in accrual basis inaccuracies, does that imply that all transactions have this as well?

Also, how about returning the Starting Balances setting? No need for anything fancy, just a balance sheet format with comprehensive set of links where starting balances need to be entered. Like the olden days. That would be the perfect implementation for starting balances which includes the start date.

I would really be thankful to have such a feature.

[Ealfardan]

@lubos

That is correct. But I don’t see this an issue. You could make the same argument for P&L covering the entire year 2021 even though the report is meaningless because it doesn’t have all transactions entered for 2021 as the year hasn’t ended yet.

I don’t see this as an issue as well. That’s because my starting dates are 4-5 years behind me.

For new users, this could be turn off. Most new users would assume the partial P&L figures to be “wrong figures” and I don’t think anyone would bother to learn otherwise. They’d simply quit.

[Davide]

I hope it will not mess up anything as usual. This would be very annoying.

[AJD]

@lubos

You could make the same argument for P&L covering the entire year 2021 even though the report is meaningless because it doesn’t have all transactions entered for 2021 as the year hasn’t ended yet.

I see it differently. The current year will show all transactions that have occurred. The pre-start date report is not showing transactions that have occurred.

Anyway, the pre-start date invoices can be directed to Retained earnings which solves the issue.

[lubos]

@AJD

Anyway, the pre-start date invoices can be directed to Retained earnings which solves the issue.

No. They cannot because when they get paid, line items from these invoices will need to show in the reporting period they’ve been paid.

I’ve noticed this bookkeeping error in quite a few businesses when people thought they are taking clever shortcut, then wondering why their income on cash-basis doesn’t increase when the invoice finaly gets paid.

[Abeiku]

@Ealfardan

partial P&L figures to be “wrong figures”

How is that possible when they know they only entered unpaid invoices?

[Ealfardan]

@AJD

Anyway, the pre-start date invoices can be directed to Retained earnings which solves the issue.

But that means we should keep track of a start date somehow. But this isn’t the case with the new setup.

I too believe that start date is a vital information to keep.

@lubos

No. They cannot because when they get paid, line items from these invoices will need to show in the reporting period they’ve been paid.

That’s true.

But I would still keep the start date only to be used as a floor for report dates. This way you get the best of both worlds.

For BS based reports the floor would be the (start date - 1) and for PL based reports the floor would be the start date.

How about that?

[Ealfardan]

Most people are not accountants.

[AJD]

@lubos

No. They cannot because when they get paid, line items from these invoices will need to show in the reporting period they’ve been paid.

Yes, just tested this before I read your reply. Going direct to Retained earnings with pre-start date invoices distorts the cash basis P&L when the invoice is paid post start date.

I guess it is not really that important as will not be doing a prior year comparative P&L, but it is good that it is now possible to do a prior year comparative balance sheet without having to manipulate transactions

[rully_p]

Now I found whats the caused of my problem. Please DON’T CHANGE this thing. It’s ruined the whole historical P&L and BS.

[rully_p]

@lubos please don’t give people a nightmare update like this. I’ve been using manager since 2015. Can you imagine what suddenly happened with my P&L & BS when you did this change ? All numbers been screwed and how I could give explanation to my clients ?

[sonicgroup]

In the reports tab, the report of starting balance is gone. How do I make sure without a universal list of starting balance if the figures entered from previous business are correct?

[Ealfardan]

If you know the start date you can just use the balance sheet at your start date - 1 day.

[sonicgroup]

What was the problem if the report for starting balance still existed regardless of date issue. May be, the report could have been renamed as opening balances

[Ealfardan]

Because it’s really a balance sheet at a specific date with the same links except it has much less options, like:

• Subtotals,
• Divisions,
• Groups to collapse, and most important of all
• Show Zero balances so you can see what’s been left out.

Also, now you have the ability to use the starting balances as comparative balances. To me this is big improvement over the previous report.

Check this beauty

However, the two problems with this implementation are these:

1. Manager now doesn’t keep track of the start date
2. You need to enter your starting balances at cash basis.

The developer has already promised a utility to automatically correct the figures for point 2, but we will have to wait until such utility is released.