Hoping someone can point me in the right direction here!
I’m moving from invoicing with QuickFile to sending payment links with Monzo. It’s quicker and simpler for my clients (they can open the link on their mobile and pay directly with their banking app with the details pre-filled by Monzo, or use Apple Pay/Google Pay), there are no emails to get lost in spam folders (had that a lot recently with Outlook/Hotmail especially), and I don’t have to set up a client in two places (my CRM and QuickFile). I only take payments a few times a week.
This means that payments now land in the bank account without a corresponding invoice - either immediately, in the exact amount I’ve requested (when they pay by bank transfer), or a few days later and slightly less (when they pay by card via Stripe, which Monzo uses to process card payments).
I’ve had a look around the forums to see what other people are doing with this situation, but nothing quite seems to fit my use case.
My clients don’t need an invoice, but Monzo takes their email address and emails them a receipt when they use the payment link (which is more than sufficient). In addition, if I end up registering for VAT, it will be on the flat rate scheme - and as I understand it, I don’t need to provide a VAT receipt to the customer if that is the case - so (I think) no complications there. In addition, all payments are ‘General Sales’ of the same kind (it’s a service business).
My specific questions are:
I’m aware of the Cash Register Tool - would this be an appropriate use case for it? I don’t take physical cash, but I assume that’s just semantics and that its ability to account for card purchases also applies to bank transfers
Could I just use this tool to reconcile that income on a weekly basis?
Would I categorise the bank transfers as ‘cash’ if I did this?
Would it be wise to set up specific accounts (for instance for the card payments)?
There must be other small businesses taking card/bank payments in this manner (or similar) - I’d be very grateful if someone could shed some light on this situation for me!
If a VAT-registered customer asks you for a proper VAT invoice/receipt then you must give them one (in fact technically you are always supposed to issue a VAT invoice for every sale to a VAT registered customer, whether they ask you for one or not). The flat rate scheme is just an arrangement between you and HMRC for how you declare and pay VAT to them on your sales, it doesn’t affect how you charge VAT to your customers, and your obligations around VAT invoices are the same as for any other VAT-registered business.
With that out of the way:
The cash register tool is a short cut way to take a single record of aggregate sales with the total broken down (a) into net and VAT totals and (b) by the different tender types that were used to pay for them, and create a single invoice with one associated lump payment for each tender type. Typically this would involve the cash payments going into one “bank” account (petty cash) and the card payments going into another (a merchant account representing the card provider), but in your case this might be overkill and you could get away with just one merchant account representing Monzo as a whole.
So you’d take your daily or weekly sales report from Monzo, make a single QuickFile invoice representing the bulk sales for that day/week (with the VAT itemised, once you become VAT registered), and record a single payment into your Monzo merchant account to pay off the invoice in full. All the individual payments that arrive from Monzo, whether immediate bank payments or few-days-later card payments, would be tagged as bank transfers from the Monzo merchant account to your actual bank account.
This would leave a residual balance on the Monzo merchant account representing the amount they’ve charged you in card processing fees - presumably Monzo themselves invoice you periodically for these fees, which you could then handle by creating a purchase and marking it as paid from the Monzo merchant account to cancel out that residual balance.
But coming back to the question at the very start - if/when you do register for VAT, any sale to a VAT-registered customer would need to be excluded from the weekly totals so you could generate a separate VAT invoice just for that customer, but you would still mark this invoice as paid into the merchant account and then deal with the payment as a bank transfer exactly as you do with the bulk ones. And ideally when you have a week that straddles two VAT quarters you would split the bulk sales for that week into two invoices either side of the quarter date so that you’re reporting the correct totals in each quarter.
Thanks for the comprehensive reply - really appreciated.
Thanks for clarifying - I obviously had that wrong. I’m strictly consumer-focused though (I’ll likely never invoice a business), so I doubt this will be an issue.
That sounds simpler. I like simpler.
That makes sense, except Monzo doesn’t provide any form of sales report. And I’m a bit confused here - are you saying that this part (creating the single invoice and payment) is done with the Cash Register Tool?
Monzo doesn’t invoice anything. Bank transfers are handled directly by Monzo; card payments they handle with Stripe, who take their cut and deposit the rest a few days later. I have access to a Stripe dashboard, so I can presumably export a statement of fees for this.
Understood, thanks. As I say, highly unlikely - but saved for future reference!
The way you describe things now I’m starting to think that it might actually be simpler to create a QuickFile invoice for each individual sale anyway, particularly if you have a bank feed set up. I’m thinking a process something like this:
when a customer pays you directly by bank transfer, tag the “money in” on your bank account as “payment from a customer”, and create an invoice as part of the tagging process. Initially you don’t necessarily have to create a separate “client” record for each customer, you could have one dummy “Bulk sales” client that you use for them all.
you set up a Stripe merchant account and enable the Stripe feed in QuickFile, telling it to ignore both payout transactions and fees. Now when a customer pays you by card it will appear as “money in” in your Stripe merchant account and you can tag-and-create-invoice there, exactly as you do in your main bank account for bank transfer payments
when Stripe pays out card payments to you, those will appear as “money in” in your bank account, tag them as transfers from the Stripe merchant account. The merchant account balance will gradually drift upwards through the month due to the fees that Stripe charged you before paying out.
at the end of each month, Stripe will make available an invoice summarising that month’s fees (it should be somewhere in the “documents” section of your Stripe dashboard). Download that and create a purchase in QuickFile for the total, and “log payment” from the Stripe merchant account to cancel out the “drift”.
This isn’t that many more clicks compared to trying to deal with things in bulk - with the bulk method you’d still have to tag every bank transfer payment individually, just in that case they’d be transfers from a merchant account rather than payments from customers. And you don’t need to faff about trying to calculate weekly totals from Monzo when they don’t give you a sensible report.
And doing things this way has a number of other advantages, particularly once you are VAT registered:
every payment is recorded on the date it actually happened, which means there’s no little adjustments to make at the quarter end
if you ever do need to produce a proper VAT invoice for a particular customer the only thing you need to do is create a dedicated client record for that customer when tagging their payment, instead of using the generic “bulk sales” client
the Stripe fee invoice is subject to the VAT reverse charge, which you can apply in one click
Note that last point - if you’re running close to the VAT threshold then remember that you need to add the total of your Stripe fees to your actual turnover when deciding whether you’ve reached the threshold, since reverse-chargeable purchases are considered part of your VAT taxable turnover.
That all makes sense, thank you. This is what I’ve done:
Created a new Stripe holding account for processing payments collected from Monzo via Stripe
Created a ‘bulk’ sales client
Created and tested an automation with Zapier which adds a bank transaction to the new Stripe holding account whenever Stripe completes a successful card debit (QF only seems to allow one active Stripe feed)
Created a bank tagging rule to catch Stripe transactions and create paid invoices for them against the ‘bulk’ sales client
Created a bank tagging rule to catch direct bank transfers to the current account and create paid invoices for them against the ‘bulk’ sales client
This seems to tick most boxes for me - most of it happens automatically, and all I now have to do is a) check and confirm the pending rule matches in those accounts, and b) create a monthly transaction to reconcile the ‘drift’ against Stripe’s aggregate fees. The automation also captures the client name from the card data in Stripe, and adds it to the transaction description - so I can always go back and find a given customer’s individual invoice later if I need to refund, or anything like that.
All noted ref. the VAT reverse charge, thank you - I’ll read up on that.
Thanks so much for taking the time to share your advice on this - I really appreciate it.