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How do I deal with single payments of expenses and billed time?
While contracting for a while I billed the company separately for time and expenses. However the company paid me this in one lump sum. When I add explanations in FAC to my bank account I have chosen 'Other Sales Income' as the explanation. However without doing anything else I would be getting taxed on my reimbursed expenses - not ideal! ;-)
Should I then create 'New Out-of-Pocket Expense' for each expense, this would appear to correct it. Thanks.
Should I then create 'New Out-of-Pocket Expense' for each expense, this would appear to correct it. Thanks.
I’m confused
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Inappropriate?It sounds like you created an invoice and just manually created line items for the expenses you incurred (direct from your receipts, etc).
Expenses should be entered as an Out of Pocket Expense - item by item is best, as you can then upload scanned images of the receipts to each one.
If you don't enter up your expenses, then you have the extra problem of accounting properly for reimbursement of those expenses, as FAC won't understand that it owes you anything!1 Comment
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This answers the question
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Thanks.
This work is from this accounting year but pre-dates my use of FAC.
I created 1 invoice for the work and 1 for the expenses incurred but they paid me 1 payment totalling both.
To claim these expenses back from the client, I provided the receipts to them. Can I simply upload the invoice for expenses as my proof as far as tax is concerned? -
Inappropriate?Are you referring to Corporation Tax or VAT?
For VAT, having a copy of the receipts is best, but it's not a deal-breaker for HMRC in the unlikely event of an inspection - they generally accept any reasonable records that show you incurred the expense. (You don't have to supply your records when doing a normal VAT return, so chances are you'll never need to worry about this).
For Corporation Tax (i.e. you want to make sure that your profits are not overstated), then again just post the Out of Pocket expenses into FAC, and do the best you can with your paper records. Chances are that it'll never be looked at.
Your accountant might tut-tut at you a bit, but that's about it!
Worst comes to the worst - can you ask the client to do copies of the original receipts you sent them? -
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Inappropriate?@Charles I am stumped on how to list my expenses properly.
Say I billed a client for £500 for my time and £500 in expenses. The customer pays me 1 payment of £1000.
In my bank account there is a deposit of £1000. I mark £500 as 'Other Sales Income', what do I mark the other half as?
Thanks
I’m confused, again.
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Inappropriate?I'd code it all as 'Invoice Receipt' (The money comes to you because of an invoice, therefore its an invoice receipt!)
If you've manually created the two invoices to the client and issued them, then it's too late to reverse things (as the client already has the paperwork, and won't be impressed if you ask for it back!). Don't worry about it, it'll all come out in the wash.
So in this case, we just need to square things up in the software.
If you haven't entered up the £500 worth of expenses in the Expense system, then do so, but do NOT choose to 'Rebill' the expense - just leave it as '-- Don't Rebill --'. (or the system will try to create ANOTHER £500 invoice to your client - which would be bad!)
This will give you a £500 balance on the Expenses account (i.e. your company owes you £500).
So - the £1000 payment from the client should be posted against the two invoices - coding as 'Invoice Receipt'
Then, whenever you want, re-imburse yourself the £500 expenses coding it as 'Type = Money Paid to User' and 'Reason = Expense Payment'
This isn't perfect, as it doesn't tie the expense records to the invoice in the system, but that's purely for your own convenience, and has no impact on the actual books, and FreeAgent won't care, as it doesn't do profitability calculations on jobs anyway. (Are you listening, Ed?)
Just as a final point - If the expenses actually cost you £450, and you've added a bit on top (quite common in some industries) then you should post the ACTUAL costs in the expenses system, not the uplifted values. There's no need to match the expenses to the invoice - if your client is happy, and the figures match the paperwork, then that's all you need to worry about.
I’m worried I hang around with accountants too much
