I am new to accounting for my own business. I have noticed if I create an invoice, dated 1st Feb 2020, but with a due date of Aug 2020, it is placing the income in tax year 2019-2020, when actually I will not receive the payment until tax year 2020-2021. How do I push all future sales which have been invoiced into the next financial year?
QuickFile works on accrual accounting, so the invoice date is what’s important.
Whichever financial period the invoice issue date falls into, this is where it will be counted.
thanks for clarifying that. that creates an issue as I issue invoices way in advance with a due date upto a year, and sometimes the sale gets cancelled. so I will have paid tax on the income and it may not actually arrive. I will have to revise my methods and issue invoices nearer the due date
Legally your issue is whether you operate on a cash basis or not. Quickfile is doing it correctly as this is the standard method. If you choose to file your self assessment using the cash basis then you would need to record your income as money received in your accounting period as opposed to accrual which is how quickfile works.
As a side note, don’t forget that if a sale gets cancelled then you would issue a credit note which would credit against future turnover and therefore you would reduce any future tax liability. In other words it gets refunded.
thanks, i have changed the way I invoice now based on this. I will now only invoice a customer 2 weeks before payment is due, so generally (apart from first week of April) most invoices will be issued in the correct tax year.
Yes, you could use the “estimates” mechanism in QuickFile to document the expected cost, and then only convert that to an invoice nearer to the payment due date.
how do you convert an estimate to an invoice, or is it simply create a new invoice at the time and delete the estimate
When you view the estimate, there is a button at the top labelled “Convert to Invoice”. You have the option to tweak it before you send it, so if anything does change, you can do so at this stage.
Are you a sole trader or a limited company? If you are a company then you should be using accruals accounting as above. If you are a sole trader, then you have the option to either use accruals accounting or you can use cash accounting instead.
With accruals accounting, you need to recognise the revenue in the accounts when either the goods are sold or the service takes place. This would usually - but not always - be the same as the invoice date. You need to be careful around year-end to get your revenue and costs in the right period.
If you are using cash accounting, then you can use your bank statements to generate your accounts - revenue is everything you have received and expenses are everything that has been paid for. In this case, you would use a receipt into your bank account to generate a sales invoice rather than raising it ahead of time. As @ian_roberts says you could use an estimate instead to send to the customer.
Think you mean “cash basis” as cash accounting refers to vat.
Either term is acceptable … it doesn’t really matter.
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