Trust you are well. I need assistance with taking on Customer balances which has a credit balance and understand the logic of hiding Credit Notes before the Start Date.
I have searched the forum, but could not find a relevant post. I have also referred to the Guides for taking on balances and appreciate the fact that the normal way to take on a Sales Invoice which has been partially paid is to create it with the outstanding balance.
However, in practice, although it is the exception, Customers may have a Credit Balance, i.e. the Customer Overpaid on an Invoice or Inventory was Returned and a Credit Note issued after a Customer has paid the Invoice in full.
So now we have a challenge, Credit Notes are ignored prior to the Start Date of the business and the Customer balance is therefore incorrect.
Also Credit notes are hidden from the list view (although it is included in the counter on the Credit Note menu).
I can think of a work-around by creating these Customers as Suppliers, but this only makes sense if the business is to refund the amount to the Customer. Often, the Customer will be happy to leave the credit on his account for future orders.
Also take the New Customer Portal into consideration where a Customer would expect to see that his account is in Credit.
I would appreciate your thoughts. My guess is that this is per design and not necessarily a bug, or is it?
They are not ignored. They are used to set the starting balance of a customer. There was a problem because they were ignored entirely, but that was fixed many months ago.
EDIT: It turns out pre-start-date credit notes are not used to set starting balances. See my further comments in post #5 below.
You need to update your software. This was just changed a few days ago.
Thank you, I will update to the latest version to resolve the hidden Credit Notes problem, but I can confirm that on version 21.5.51 the Credit Notes prior to Start Date are not included in the Starting Balance calculation, or are you saying that the latest fix of a few days back also resolves the problem of the Credit Note amounts not being included in the Customer Balance (which was fixed many months ago)?
I have upgraded to the latest version, I have an Invoice before the start date of 800.00 and a Credit Note of 300.00 before the start date and my customer balance is 800.00
You are right. I have now had time to simulate your situation in a test business and review the relevant Guide: https://www.manager.io/guides/5494.
First, your customer did not have a credit balance on the start date. They had a 500.00 debit balance. (500.00 remaining in Accounts receivable.) But that is irrelevant for this discussion
Second, the Guide clearly states:
If an invoice has been partially paid, only its remaining balance due should be entered.
A sales invoice against which a credit note has been issued has been partially paid. From a technical standpoint, the credit note was not a financial transaction of the business under Manager. Therefore, it is ignored, and only the sales invoice’s reduced balance is used to set the start date.
I have also had time to review the history of changes affecting credit notes over the past couple years. My recollection about them being added to customer starting balances was flawed. What I was remembering was related to establishing average cost of an inventory item when a sales invoice was from before the start date, but a credit note was issued immediately after. See this topic for discussion and resolution of that issue: Credit Notes posting incorrectly when pre-start date sales invoices exist - #8 by Tut. This fix was implemented about 18 months ago. I apologize for combining these issues in my mind.
I will edit my earlier post in this thread to correct the record.
First, yes it is irrelevant, I cannot see why the system should treat a credit note any different for a customer where there is only a credit note vs customers with a sales invoice and a credit note.
Yes, I have acknowledged that in my original post, please refer back to that.
Also, the credit note and invoice on a customer account may not be related. I have pointed that scenario out as well: Invoice is fully paid, inventory returned and then a credit note issued against a fully paid invoice. This will result in an invoice with an overpaid balance. Is the recommended approach for this scenario to create a sales invoice with a negative balance? Will this correct the opening balance? Could there be other consequences of doing this?
The reference to the other post of 18 months back relates to a problem with inventory costs, although it is good to understand how that fix was implemented, it is irrelevant to my current problem.
Now that we both understand the scenario better, please advise what your suggested solution is to take on opening balances for customers with credit balances?
A pre-start-date sales invoice serves two functions:
Establishes the starting balance for that customer in Accounts receivable.
Provides a basis for credit notes—especially when inventory items are returned—after the start date, not before the start date.
They will not contribute to income.
Pre-start-date credit notes, on the other hand, did not occur under Manager. Actions relevant to them might as well have happened to another company. If they reduced the balance of a pre-start-date sales invoice without fully discharging it, then the reduced balance of the sales invoice goes towards the customer’s starting balance.
No, you did not. You showed that you entered the full, original value of the sales invoice, not the reduced balance. If you had entered the reduced balance, the customer would show a correct starting balance of 500.00.
This hypothetical scenario is not well enough defined to give an answer, so there are several points to make:
If a sales invoice was fully paid before the start date, it should not be entered as a pre-start-date invoice, no matter when the credit note is issued.
If a credit note is issued before the start date, it is also not part of Manager’s records, but of the prior accounting system’s. In this scenario, no entries are made in Manager.
If a sales invoice was fully paid before the start date and a credit note is issued after the start date, the sales invoice is not entered in Manager at all. In that case, you would not be able to apply the credit note to the sales invoice, but would have to leave it unallocated. It would contribute towards a negative (credit) balance in Accounts receivable for that customer. The credit will be applied to the next sales invoice issued.
If a sales invoice is partially paid before the start date, it should be entered as a pre-start-date invoice at its reduced balance due. If there is a credit note before the start dated, that should just reduce the balance due more, but the credit note would not be entered. And if the credit note is issued against this partially paid, pre-start-date invoice after the start date, it should be allocated against that invoice. The invoice will not normally become overpaid, because the credit note would not be issued for more than the balance due. If, for some bizarre reason, you were issue a credit note for more than the balance due on a partially paid, pre-start-date sales invoice, you would leave the credit note unallocated to a specific invoice and allow the automatic allocation to take care of things.
Thank you for the valuable feedback, once again it provides me with a better understanding of the way Manager works, but it does not address the problem of a customer with a credit balance on the Start Date.
Taking this statement in my first post into consideration, let me provide you with more detail in terms of dates which may demonstrate my challenge:
In the legacy accounting system an invoice was issued on 25 February 2021. Customer Balance would be 800.00 on this date.
The customers pays for the stock in full on 27 February 2021. The Customer Balance would be 0.00 on this date and the Invoice reflected as Paid in Full.
The stock is delivered on 28 February 2021, but on delivery the customer returns the stock for a credit. The business accepts the return and process a Credit Note on 28 February 2021. The Credit Note is applied to the invoice to correct stock levels. The balance of the invoice will be negative 800.00 (-800.00) and reflect as Overpaid with 800.00 The customer balance will be in credit with 800.00 or negative 800.00 (-800.00) on 28 February 2021.
All the above happened in the legacy accounting system.
Now in Manager the Start Date is 1 March 2021.
The opening balance of the Customer is in Credit with 800.00 (-800.00)
How do I take on this customer in Manager to get the balance correct?
Should I process a Sales invoice with a negative amount 800.00 (-800.00)?
Scenario 1: The business needs to refund the credit balance to the customer and makes a payment to the customer on 2 March 2021. Can I allocate a payment from the bank account to a Sales Invoice with a negative balance?
Scenario 2: The business needs to keep the credit and allocate it to a future sales invoice when the business receives the correct stock. The business receives the correct stock on 10 March 2021 and create a new Sales Invoice for R800.00 Can I allocate the credit on the overpaid Sales Invoice from the legacy accounting system to this new Sales Invoice?
So my question again, what is the correct way to take on a Customer Balance in Manager which is in Credit?
This is the key to your situation. With this further information, it turns out all the discussion about sales invoices and credit notes was a distraction. Neither the sales invoice nor the credit note should appear in Manager. This is a combination of the first two bullet points in my previous post. The 800 you owe the customer on your start date of March 1, 2021 is simply a credit for money. Inventory is not involved. So you enter the 800 in the Available credit field when defining the customer. This is covered in the Guide: https://www.manager.io/guides/5494.
In your Scenario 1, enter a payment. Post it to Accounts receivable > Customer. Leave the invoice number blank.
In your Scenario 2, do nothing (other than defining the available credit when setting up the customer) until the customer orders again. The credit will automatically reduce the balance of the next sales invoice.
It does not matter how your legacy accounting system treats the transactions that occurred while you were using it. Whether there is an overpaid invoice or simply a credit balance does not matter for Manager. There will be no overpaid invoice in Manager, just the available credit of 800.
Hallelujah! A distraction in deed, I should not have elaborated with any detail in the post, but repeat the subject in the body.
And this answer would have been spot on:
But seriously, thank you for you indulgence, it has cleared up a number of use cases for me and I hope this will be useful for others users as well.
Most importantly, I never read the first part of the Guide with the necessary attention as I interpreted the Available Credit as a Credit Limit balance and not a money credit.
