I have a supplier where we pre-pay and that credit is held on account. This is then gradually spent and then we re-credit and repeat. To complicate matters they invoice in USD even though they are a UK company.
When we get an invoice we allocate it to the outstanding credit thereby reducing the credit balance. However, QuickFile allocates this based on the date of the original pre-payment, not the date of the invoice which does not seem right.
For example I currently have a pre-payment dated 6th April, with 4 or 5 allocations all dated 6th April despite the invoices it is paying down being dated from April to Oct. Essentially if you look at the invoice it appears to be paid weeks or months before it was raised - I would much prefer to see it dated the date of the invoice which is when the balance was actually reduced.
This also creates issues with currency variations as these are also being dated in April, not the date of the invoice. Considering this is also in the last financial year this is not ideal.
Can QF be updated so that the date of payment allocations are either customisable on entry or so they match the invoice date rather than the date of the prepayment (which I assume will also adjust the currency variation postings).
When it comes to accounting for payments, especially for tax purposes, we follow guidelines set out by HMRC.
While I’m not entirely sure on the reasoning behind the way payments are handled (as I don’t deal with this side of things), there are a few things to consider:
When it comes to cash accounting VAT, we need to account for the payment on the date it was made, not the date it was applied to an invoice. E.g. if money leaves your account on 1st April, then it should be treated as such, even if it’s not spent until 20th September
The QuickFile accounts are based on the accrual concept, which means that the actual payment date won’t affect your profit and loss - only your invoice will. Sticking to the example from the point above, an invoice dated 1st September will be accounted for on the 1st September, regardless of if the payment was 1st April or 20th September, or any other date.
I appreciate that may not be the answer you were looking for, but I hope that helps!
Unfortunately it does not help and I’m not sure is entirely right.
Firstly, I’m not using cash accounting (nor registered for VAT at all) - although I understand other users will be. Regardless, as far as I can see a payment on account is not a supply for VAT purposes. Potentially this payment on account will never be spent, and (depending on the supplier T&Cs) could be refunded.
Likewise I need to be able to reconcile the balance on the account periodically. So if I needed to check the balance as of a given date it would be impossible to do as all the allocation dates are the same as the original payment. Meaning any future invoices would be shown as being paid prior to whatever date I was reconciling up to.
I guess I am back to looking at whether I should write my own accounting system (which I really would prefer not to) or live with yet another limitation in QuickFile.
When a foreign currency invoice is paid we utilise two rates to determine the currency loss/gain.
FX Rate on invoice issue date
FX Rate on the date the payment was physically received (For pre-payments that will be the date the pre-payment was received, not when it was allocated).
There can also be multiple rates involved if you have more than one payment allocated to a single invoice. You can view the rates by checking the invoice and the payment slip respectively.
Unless you’re dealing with larger amounts, these loss/gains will not be material from an accounting perspective so you may find it easier to simply lodge your purchase invoices in GBP and tag the payments to this invoice as when they appear on your bank.
It sounds like the root of the OP’s issue is that QuickFile doesn’t distinguish between the date a (pre-)payment was made to the supplier, creating a credit on the supplier’s account, and the (later) date when the credit was applied to a particular purchase - when you click through to view the details of a particular payment that has been assigned to multiple purchases, it gives “date”, “reference” and “narrative” columns for each line but the date is always the date of the payment, not the date when you actually do the “apply from credit” to mark the purchase as paid. The argument here seems to be that this date of application should be configurable.
Yes, for foreign exchange gains or losses you would calculate the amount from the difference between the exchange rate on the date of the purchase invoice and the rate stored with the payment (which would be the relevant bank’s rate on the day the money was sent), but if the loss/gain journal could be on the date the payment was applied (when the gain/loss was crystallised) rather than the date when it was sent then that might make more sense in terms of getting things into the relevant accounting period.
We’ll have a look at the narrative on the purchase allocations, if there’s anything we can do to make this more intuitive we will.
Regarding the loss/gain, there are quite strict rules on this. HMRC will take the payment date vs the invoice date, using the allocation date for pre-payments would technically allow you to cherry pick your preferred exchange rate to maybe maximise the loss.
Excluding bank tagging, you can manually change the preset exchange rates from XE.com on your invoice and payments to control the exact loss/gain.
Yes, I’m not suggesting you would change the way you calculate the amount of the loss or gain, just exactly when the corresponding journal pops up and thus which accounting period the loss or gain is attributed to.