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Thread: Handling Annual Payments
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10-20-2013, 12:52 PM #1Disabled
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- Jan 2005
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Handling Annual Payments
Hello,
We use QuickBooks for our bookkeeping.
We don't get all that many customers paying annually as opposed to monthly, but when we do, it's difficult to know how to handle them.
What I mean is, we pay all of our venders monthly, so we know what the budget is from month to month. But when we get a yearly customer, it throws all of that off.
I would like to see how others handle this. I'd love to show that income split over the entire 12 months, or somehow otherwise account for it gradually. Suggestions would be appreciated.
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10-20-2013, 01:38 PM #2Newbie
- Join Date
- Mar 2013
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- 19
What you are referring to is the difference between cash accounting and GAAP accounting where revenue recognition needs to occur as the income is earned, not when you are paid.
I've seen a couple of ways to handle this if you truly want to see it in reports. You'll want to have a separate account called "Unearned Revenue". This is where you'll book the entry where you earn the sales. i.e. debit Unearned Revenue, Credit Sales. You will then on a monthly basis earn that revenue. So you would Debit Revenue, Credit Unearned Revenue until the bal of Unearned Revenue is $0.
This really is more work than you want it to be since Taxes are paid on a cash basis (assuming you are in the US), so may be more work than it is worth.
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10-20-2013, 01:52 PM #3Disabled
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10-20-2013, 01:53 PM #4Web Hosting Master
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What I do with my company is take all estimated Annual revenue and divide that by 12, then build a budget with some head room.
I ran into the same thing when most of my customers started paying annually.
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10-24-2013, 08:08 AM #5Temporarily Suspended
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- Oct 2007
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- Milwaukee, WI
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- 143
Perfect explanation. Many hosting companies do not understand this concept and the earned/unearned revenue concept is accounting while paying your bills is simply budgeting and cash flow concerned.
Many billing systems in the hosting industry like WHMCS and others do not understand earned/unearned revenue.
I would consult with an accountant.
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12-19-2013, 07:14 AM #6WHT Addict
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- Apr 2012
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- India
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If you still need help then let me know.
I have worked with quickbooks for good 4 years. I know this piece in and out and can help you with other things as well.
Let me know if you need any helpCFG Web Hosting Company, Haryana, IndiaPremium CDN Based cPanel Hosting & Dedicated ServersFollow Twitter:@cfghosting - www.cfg.co.in - +91.8988113379
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