How can I do accruals?

customlogoshopcustomlogoshop Member Posts: 19

Hi,

In my business, I pay my designers in a lump sum for projects over the course of a few months.

I need to get wave accounting to account for these expenses when the projects actually finished, or when I received a payment for the project.

Right now, it looks as if I have had some bad months where not much profit is being made because of this issue and it seems quite important for accounting.

Can anyone help or has a solution please?

Comments

  • customlogoshopcustomlogoshop Member Posts: 19
  • eliteacchkeliteacchk Member Posts: 31

    Unfortunately, there is no Project or Tracking function, but try this for size.

    Treat payments to designers as Prepayments, then charge to the appropriate PnL items when and as they are expended by creating Journal transactions. Same goes with funds you receive for the project - Receipts in Advance, then charge to Income as they are earned.

    edited October 11, 2018
  • James_HudsonJames_Hudson Administrator Posts: 128 admin

    Thanks @eliteacchk ! to add to that, @customlogoshop, spreading out the expenses that you incur across the periods in which you are earning income from them is standard practice in accrual accounting systems like Wave.

    Our Fearless Accounting With Wave guide has instructions for how to do so. You don't have to read the whole thing (unless you want to!), just head to page 106, which gives you instructions for how to re-phase expenses at the end of the fiscal year.

    Even if you're just matching expenses across periods, the same steps will apply. Hope this helps!

  • customlogoshopcustomlogoshop Member Posts: 19

    That makes sense James, thanks very much!

    Do I need to provide an invoice from my designer on that date or would it not matter much? Reason being is that I would rather create a bill on the date my client paid me so it matches the income and expense in that period. I then pay my designer at the end of the month or even a few months down the line.

    Thanks

  • SamdSamd Administrator Posts: 560 admin

    Hey @customlogoshop, it shouldn't matter too much. I think in the case you're describing it would be best to create that bill on date your client paid, so that it is reflective of income and expenses during that period. Especially if you mark the actual payment of the designer on the actual day they were paid, then your Wave should mirror actuals!

  • customlogoshopcustomlogoshop Member Posts: 19

    Thanks Samd, perfect answer.

    I will start billing on the days I got paid from now on!

    Appreciate your help, this will make my accounting far easier as last year I had no clue how to do it :smile:

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