Customer who is also a Supplier

Customer who is also a Supplier

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We have a Customer who is also a Supplier. He has suggested that this month I simply pay him what we owe him after subtracting what he owes us.

We have both invoiced each other (we are both VAT registered) and if I pay him £50 we will be 'straight'!

It sounds like a good idea but how would I account for this on Sage? At first I thought I could credit his account for the amount to zero it. But then it would be as if the transaction was being cancelled and the VAT still needs to be paid and reclaimed by us both?

I am confused as usual! Has anyone ever done this before? All comments gratefully received.

Poppy

Replies (7)

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By WhichTyler
06th Jun 2013 13:27

T9 Credit Notes on both sides...

... coded to the suspense account

I think there may be an automagic wizard that does it in some versions of Sage, but that is my oldfashioned way

Thanks (1)
By ShirleyM
06th Jun 2013 13:34

Contra

You can use the contra facility to settle an equal amount from customer & supplier, and then a normal payment for the balance.

EDIT: it's a while since I used Sage. You may have to pay the balance first, and then do the contra. Sorry, I can't remember which order it must be done.

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The triggle is a distant cousin of the squonk (pictured)
By Triggle
06th Jun 2013 13:57

If your version of Sage allows it set up a new bank account entitled "Sales/purchase ledger contras".

Use this account to post the contra payment to the supplier's account and to post the contra receipt for the same amount to the customer's account.

After you've done this the Sales/purchase ledger contras account balance will be zero.

Pay the supplier the £50 as normal from your usual bank account.

The new "bank" account will then have a handy audit trail of any sales/purchase ledger contras that you've made.

Thanks (1)
By Democratus
06th Jun 2013 14:05

If you want to ignore Sage's postings

Why not issue him a credit note on your sales ledger, a debit note on your purchase ledger and take it from there, tidy up the sales ledger and pay the £50 against the net balance on your purchase ledger,

Although i am sure Sage can cope with this in some way.

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By MJ Green Accountancy
06th Jun 2013 14:27

Another suggestion

The way that I deal with contra entries is to post a customer receipt  and a supplier payment for the same amount with the same date. When I perform the bank reconciliation, I match both of these items even though they obviously do not appear on the bank statement. This keeps all of the ledgers straight and has no effect on the bank balance.

 

You should not post credit notes to the accounts as you are effectively "netting off" and you will be understating turnover in your accounts.

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By andy.partridge
06th Jun 2013 15:12

Credit notes?

Only as a last resort, please.

I don't know what version of Sage you are using but take Shirley's advice.

Select Tools >Contra Entries and go from there.

Edit - as I recall if you are cash accounting for VAT purposes you should take extra care because I think the contra entries get posted as T9s

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By User deleted
06th Jun 2013 20:06

Contra not recommended if on VAT cash accounting, so ...

... why not just pay off both in full in the usual way, put the payment reference on both payment and receipt and match the two SAGE bank entries against the one on the bank statement - Simples!

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