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Budget variance report for inpayments against budget

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decomplexity
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Budget variance report for inpayments against budget

Post by decomplexity » 10 Oct 2015, 12:05

A sports club uses Sage Instant. Its income is mainly subscriptions. Subscribers are set up as customers in the sales ledger, and dummy invoices raised and paid when annual subscriptions are received. Budgets are set against nominal codes for the various subscription types.
A few subscribers pay their annual subscription by installments so are debtors for most of the year. A few others indicate that they will subscribe, we raise a suitable invoice, but then they either don’t pay or underpay. All very standard stuff.

Some years ago the club handled subscriptions as simple bank in-payments (so had no idea of what subscribers had committed to pay) but were – rightly - persuaded to run a sales ledger.

The finance committee uses the budget variance report as their main monitoring tool, but have now asked also for a version of the budget variance report which shows subscription payment totals against budget (as opposed to subscription invoice totals against budget). My initial reaction was to tell them to use an aged debtors report along with the normal budget variance report. But is there a better or more correct way to give them what they want ?

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brucedenney
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Re: Budget variance report for inpayments against budget

Post by brucedenney » 12 Oct 2015, 11:12

From a strictly financial point of view, they are separate issues, if the invoice is raised, the liability exists the income is there.

I can understand that in reality things are a bit different, this is really "speculative invoicing" if the member doesn't pay you are not going to try and legally enforce the debt and force the member to honour the contract, you are just going to give a credit note.

What you are trying to do is not "common" the "correct" way is the way that works for everyone.

I guess that really you can look at the income as being income received and income hoped for, and what they want to do is separate the two.

The older the debt the less likely it is to be received, the higher the lost business, the lower it's probable value is. The stuff invoiced yesterday, might not yet have been received but the probability of getting paid is a lot higher.

As such the P&L needs breaking down a bit in an unusual way.

You want to see something like this.

4000 Fees Earned £10000
4010 Pending Fees £5000

At the moment the Fees account would show £15000 and the Debtor Control would show £5000

You could achieve this fairly simply with a couple of journals.

When you are ready to print the management account, you run off an aged debtors dated for the reporting period, everything excluding future debts is what the balance of Pending fees should be.

So the journal is
Dr 4000 by that amount and Cr 4010 by the same amount, date the journal the last day of the reporting period.

When you run the P&L for the period it will now show the correct amount in Pending fees.

Next month you will need to have reversed the journal you made before making a new one for that month or do a net movement journal to get 4010 to the correct balance.

Personally, I like to use the open item nature of Sage and do the reversals dated on the first day of the next accounting period and do them at the same time as making the journal, this way when you look at the current balance of 4010 it should always be 0.00 and it is always ready for the next accounting period.

I hope this helps.
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decomplexity
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Re: Budget variance report for inpayments against budget

Post by decomplexity » 13 Oct 2015, 19:42

Many thanks for a most useful and helpful reply, Bruce.
Max

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