DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Using Expense Accounts and Tracking Codes effectively for reporting?


#1

Sorry for the really long question, but I would really like feedback to see if I have properly understood tracking codes and account expenses.

I provide IT Maintenance, Hardware and Software Sales, Broadband Services (Internet and Email services), Backup Services and lastly installation services such as network cabling. Those are my divisions.

For IT Maintenance, I could create tracking codes such as IT support and Callout Charges and enter the income under the sales income account. I would probably also need to add Petrol Mileage expense account under IT Support tracking code(as in cost of petrol used).

So out of sales I could see how much income is generated from IT Support and Callout Charges with those tracking codes! I suppose that I could create IT support sales income account and Callout Charges Income account and a couple of other accounts, but I think in this instance tracking codes will suffice as I am trying to track income by divisions such as IT Maintenance Support.

For an installation project, I would need to buy say a projector and whiteboard and install the equipment. So I would need to create an inventory item for that projector and whiteboard and I would need to create a Projectors Tracking Code and a whiteboards tracking code.
I would also need to create an installations expenses account and create a tracking code called projector installations.

Then when I invoice the client, I could charge them for installation and assign the installation part of the invoice to the projector installations tracking code and assign the sale of the projector and whiteboard to the projectors tracking code and whiteboards tracking code.

So what I should be achieving is the ability to see how much net profit I have made on sales division (projector and whiteboards and other similar tracking codes) and I can see what my net profit is on Installation Services division by adding Projector Installations tracking code and network cabling tracking code etc.

I am not sure if this is right. Essentially what I want to achieve is the following:

  1. How much does each division make. I would need to add the projector installations, network cabling installations tracking codes etc together to work out how much I make from installations in total. It would be useful to have an installations tracking code and a sub tracking code for projector installs, network cabling installs, wireless installs etc.

  2. How much net profit does the company make (excluding petrol expenses which is a form of equity and not really an expense sort of). I assume that the profit and loss statement would answer this question effectively?

  3. Which is the most profitable client? As far as I can see, if I look at the clients tab I can see all my clients so would easily be able to view the most profitable client for that financial year.

  4. How much money do I make from each client. As above point three.

  5. What are my cash flow requirements for each month. I think that I would need to use the cash summary and create comparative columns for each month?

  6. Calculate my overall delivery fee costs as compared to my delivery fee charges to ensure that I make a profit in delivery fees. Could I create a delivery fee inventory for each supplier and add my markup to the delivery fee for client and create a tracking code called delivery fee?

  7. Which products do I sell the most of. Inventory Quantity Movement looks like what I need to calculate what I sell the most of.

  8. Which products are the most profitable. Inventory Profit Margin looks like what I need to calculate most profitable products.

  9. Need to calculate the overall profit of a particular installation project including the cost of sales etc. Cannot see any way to do this using the current tracking code setup. How to do this?

  10. Conversion rate of quotes to sales orders. This feature is coming soon as others have requested a status column.

  11. Breakeven income for annual basis – Is there a budget forecast report to add up all the operating expenses for the year to calculate the breakeven point?

  12. Vat analysis – Tax audit and Summary in reports can provide this information.

  13. How much I owe suppliers Can see from Summary Page

  14. How much clients owe me! Can see from Summary Page

  15. Tracking of inventory in terms of ensuring that all products bought from suppliers have been invoiced to client if the product is for a client. By buying from suppliers and adding to the onhand inventory and by selling to clients and adding to the sales on inventory it is easy to ensure that all goods bought for clients are actually invoiced as your inventory will decrease when you invoice client.

I understand that if I buy a product to be delivered straight to client, then I am not supposed to be using the inventory module, but I actually find the inventory module quite useful for points 15, 7 and 8. It also helps to distinguish cost of sales purchases from purchases bought for my company to use!

Thank you for any feedback. I am trying to understand when it makes sense to create an expense account and when it makes sense to create a tracking code and I am hoping that I have got it right here?


Purchase Invoice Item missing tracking codes
#2

Wow! What a list. You have things fairly well in hand, it seems. But I can offer a few comments. Understand, these are just my ideas. I am not saying you are right or wrong to do things the way you explained.

Your explanation for IT Maintenance sounded like a perfect setup and an excellent use of Tracking Codes. But when you got to installation projects, it seemed to get too complex. As long as you are using tracking codes to separate income and expenses by division, I do not think you also need separate income and expense accounts. However, in #9, you expressed a desire to track profitability by project. To do that, I think you should reserve the tracking codes for projects and create separate income and expense accounts for the divisions. Now that we can customize groupings on the balance sheet, you should be able to lay out a nice report.

I think you should consider the Disbursements tab for the hardware you buy for immediate installation. It will show up as a separate asset until invoiced, so there is no risk of buying something and not invoicing. Your use of inventory features for this is unnecessary. Disbursements automatically creates accounts for markups and write-offs, as well. But don’t get me wrong: inventory will work, and that’s the only way to get the various inventory analyses you mentioned.

Lastly, vehicle expenses are easily handled through Expense Claims. This works especially well if you are claiming according to a standard rate for distance traveled, because no money will actually have been paid, but the expense is usually tax deductible.


#3

I am going to such pains to get Manager setup correctly because I want to get my accounting sorted out properly from day one as its going to be very difficult to change it in a years time when I realise that I forgot to consider xyz. This is why I am writing long questions. :smile:

The reason why I did not create separate expense and income accounts for the divisions was primarily because if you are using inventory you cannot allocate an inventory to an expense account! The problem with disbursements is it has the exact same problem as inventory - in that you cannot allocate to an expense account such as installations or it support etc and it has the additional problem in that I have to create both sales and purchase disbursements for the same product. For me disbursements should be used for odd expenses that you claim from the client rather than sales of goods in my opinion.

The decision to use inventory for me was based on the following:

  1. I can create a purchase price and sales price on one form.
  2. I can keep my purchases for clients completely separate from my purchases for my own company.
  3. I can review what is profitable and what is not using the inventory reports
  4. I can see how much I sell of any given product which will allow me to budget forecast for future purchases in a new budget year again using the inventory reports.

I have decided not to worry about petrol claims for the divisions as most of my petrol expenses will be for IT Support.

Point 9 I am not massively worried about, because most of my installation projects are small and consist of installing say ten network points and a new switch or something like that. It would have been nice if I could analyse each project automatically, but I can do it manually. I don’t think its worth me creating tracking codes for each project as I would end up having dozens of tracking codes over the years which complicates rather than simplifies. I would rather have only a few tracking codes and track divisions.

Thank you for your feeback. Its good to know that I am on the right track. Your are my king Tut !


#4

You seem to misunderstand how Disbursements works. (It is also still a work in progress without complete documentation.)

You don’t enter Disbursements tab to record a transaction. You enter a cash or bank account and debit Disbursements and the appropriate customer sub account. This shows up in the asset account Disbursements recoverable. When you create a sales invoice from the Disbursements tab, you transfer that amount to Accounts receivable. If you have marked it up from your cost, the extra income goes automatically to Disbursements income, which Manager created when you enabled the tab. The transaction never hits your company expense accounts. This transaction represents a purchase you made on behalf of the customer, not a purchase for company purposes.

Manager follow very straightforward accounting practices. If you are having any difficulty figuring out how to organize the chart of accounts, I strongly recommend talking with an accountant now so you don’t have to unwind things at year-end.


#5

I will have to look at disbursements in more detail to see what you mean. however if I cannot track certain things like I can with inventory, it would make sense for me to use inventory. But I will look into it.

I am going to be meeting up with my accountant next month. I just want to be as familiar with the program as I can be before meeting up with him.


#6

Hi All

May i know how to generate P&L report for the particular tracking Code that i have Created. Let say i have project 1 on hand, then i will create my first tracking code to it, so every purchase order or expanses for this project i will put this tracking code. after end of the Project 1, i want to see my P&L, is that possible to do?