Suggestion on how to budget for “fees in advance"
Budget fees in advance
If you invoice an amount that you want to recognise as income over several months, our suggestion is to enter the revenue as invoiced, as that is the easiest way to get the debtors and bank accounts calculated. Then use an adjustment revenue account to modify the revenue total so that you achieve the desired recognition of income over several months. A full explanation of this implementation follows.
Example: Company send out invoices quarterly in the following months:
Visual Cash Focus will do all the calculations for the revenue, debtors and bank accounts.
Now: you want to recognise the income over three months. For example, the 900 billed in January
How do you handle this in Visual Cash Focus?
Our suggestion is to enter the revenue as invoiced, as that is the easiest way to get the debtors and bank accounts calculated.
Adjustment account
How do you handle this in Visual Cash Focus?
Our suggestion is to enter the revenue as invoiced, as that is the easiest way to get the debtors and bank accounts calculated.
Here is an example:
Create a folder under revenue: Under this folder create two revenue accounts:
- Fee income on P&L
- Fees – a) amount invoiced – in advance
- Fees – b) recognise as income adjustment
- Total Fee income on P&L
The a) account contains the amount as invoiced, eg 900 in January.
The b) account contains an adjustment to split the income over the three months, eg
The desired outcome is that the P&L shows an amount of 300 per month. The Adjustment account contains the appropriate amount to achieve this.
Note when you print the P&L report, you can suppress the folder details and print just the total.
It will be convenient to create a new account under Current Liabilities called: Fees in advance. The cash flow profile for the b) adjustment account can have the Bank account changed to this Current Liabilities Fees in advance account.
Here is an Excel spreadsheet illustrating the desired outcome. (Tip: For some browsers, you may have to right-click the link, then choose Save link as).
Here is a Visual Cash Focus model showing the implementation.
Note: You need Visual Cash Focus to view the implementation. Save this zipped model file to a folder on the hard disk. Then use File, Import Zip to import the Zip file as a model.