Dealing with two sets of invoices

Dealing with two sets of invoices

Didn't find your answer?

I could really do with some advice as I'm getting myself really confused with this. I'm a real newby with accounts related tasks and I'm getting myself in a tiz.

We offer website hosting that can be ordered on our website. To facilitate this, we have a billing system set up on our website that accepts the order, process payment, then sets up the hosting account once payment has been received. The billing system then automatically generates any recurring invoices.

We then also offer design services that we invoice manually for. At present, we create these invoices on the same billing system as above, but this is become somewhat long winded and customers have to log into the billing system to make payment.

To combat this, we want to start using Quickbooks Online with IntuitPay for our design services invoices, but this has created a problem.

The automated invoices for Web Hosting are generated as pro forma invoices and then when a customer pays (usually by card online), the pro forma automatically converts to an invoice, and a sequential invoice number is assigned following on from that of the previous invoice (i.e. LH001, LH002, LH003).

If the last invoice number is LH003 and we then create an invoice in Clearbooks or QuickBooks (whichever we decide to use), and call that LH004, when the next pro forma is automatically converted on our website, it will use LH004 so we will have two invoices with the same Invoice number.

So, we have two options:

1. Use LHXXX for invoices generated on our website and LCXXX for invoices generated manually

or

2. Every time we manually create an invoice, remember to create a dummy invoice in the website system with a zero value, to 'reserve' the invoice number for the one we created manually.

Option 1 would be the most straight forward in terms of creating invoices, but I just can't get my head around how we would input this in the accounts software.

Replies (11)

Please login or register to join the discussion.

avatar
By Stuart.thomson
17th Mar 2015 21:24

I think you have confused yourself.

The pro forma invoice is just a way of issuing an invoice without incurring the VAT liability to HMRC until the cash is in your bank account. If you are not VAT registered then this is unnecessary. Accordingly the VAT on a pro forma invoice is not technically VAT but an amount equivalent to VAT. This distinction always creates problems with non accountants doing booking so you are not alone. The complexity is usually in the conversion from pro forma to actual invoice (using when invoice has been paid) as you can only recognise the revenue once so it is really moving amounts equivalent to VAT to actual VAT (possibly with a small tweak to how revenue is presented). In your case everything is happening almost simultaneously so there is probably no accounting transaction occurring on issuing the pro forma invoice only on the actual invoice.

You have two invoice systems - this automated one and a manual one. I think it would be easier and better to keep them separate. They are after all representing different activities. So I would have separate revenue codes and definitely use option 1 and have a different referencing system. I suggest the referencing is sufficient different that you can easy tell the difference.

Thanks (0)
avatar
By lumen
17th Mar 2015 22:04

Thanks for your reply Stuart. Would it be necessary to run two seperate sets of accounts for option one, or can I include them both on one set of accounts?

I am yet to test my theory but I believe Quickbooks Online allows importing invoices (and if it doesn't, we will use something that does)... So we could set Quickbooks Online to use the prefix 'LC' and our online billing system can use the prefix 'LH', and hopefully when importing the invoices from the billing system, it will keep the 'LH' invoice numbers without effecting the 'LC' numbers that Quickbooks is using.

Thanks (0)
Replying to 0098087:
avatar
By heatherhobbs
18th Mar 2015 09:35

We had this at my last place of work.  We had one set of accounts for both types of invoices.  One was internet based, for business services, that they purchased over the internet.  This had one set of invoice numbers, which were raised automatically by the system, and I imported them into the accounts system at the end of each month.  The second set were entirely unrelated, and had a completely different numbering system, which I raised manually. 

We had audits with this system and everything was fine.  As long as the way each set of invoices is numbered is different enough to be able to tell the difference between the two sets, and they are being numbered sequentially, I do not see a problem. 

 

 

Thanks (0)
RLI
By lionofludesch
18th Mar 2015 09:46

Pro Forma

In my opinion, a pro-forma invoice isn't an invoice.  It's information telling a potential customer what an invoice will look like once it's issued.

Pro-formas should never be regarded as part of the books or accounting records of the business.

Thanks (0)
avatar
By Stuart.thomson
19th Mar 2015 08:25

Lionofludesch, I beg to disagree. You want paid when a pro forma is issued so there definitely a debtor and it is on the books. However it does not trigger VAT. In the case in question the pro forma is a technical operation as payment happens by card at the same point so it could be ignored. But not all businesses operate that way.

HeatherHobbs has it right. One set of accounts but in my view revenue should be split into two types of revenue. It's not necessary but could be helpful going forward.

Thanks (0)
avatar
By Richard Willis
19th Mar 2015 10:22

A bit pedantic but ........

By the time a pro-forma is issued it will be usual for an OFFER to sell to have been made, for that offer to have been ACCEPTED, and for the CONSIDERATION to have been agreed, all the elements of a contract.  One can argue, therefore, that a sale has been made but no supply has taken place, (hence no VAT), and that the pro-forma is, as I understand it, simply a mechanism to ensure payment.  The concept that someone will, out of the blue, receive a pro-forma, look at the price, and say 'I'm not paying that' is, to me, a little strange.

The only scenarios I can think of would be if VAT has been added to the price and the buyer, not registered, was not aware that this would happen, or if carriage etc. has been added after the price agree and, of which the buyer was unaware.

Thanks (0)
Replying to RedFive:
Red Leader
By Red Leader
19th Mar 2015 11:17

pro forma is not a sale

A pro forma invoice is just a request for payment in advance.

Thanks (0)
RLI
By lionofludesch
19th Mar 2015 11:56

Quite

Red Leader wrote:

A pro forma invoice is just a request for payment in advance.

Nail on the head.

Thanks (0)
Replying to RedFive:
RLI
By lionofludesch
19th Mar 2015 12:00

No help

Richard Willis wrote:

By the time a pro-forma is issued it will be usual for an OFFER to sell to have been made, for that offer to have been ACCEPTED, and for the CONSIDERATION to have been agreed, all the elements of a contract.  One can argue, therefore, that a sale has been made but no supply has taken place, (hence no VAT), and that the pro-forma is, as I understand it, simply a mechanism to ensure payment.  The concept that someone will, out of the blue, receive a pro-forma, look at the price, and say 'I'm not paying that' is, to me, a little strange.

The only scenarios I can think of would be if VAT has been added to the price and the buyer, not registered, was not aware that this would happen, or if carriage etc. has been added after the price agree and, of which the buyer was unaware.

I'm not convinced that such pedantry makes the bookkeeping issues easier.

Thanks (1)
Replying to Sanjeev Nanda:
avatar
By Richard Willis
20th Mar 2015 13:24

Quite so

lionofludesch wrote:

I'm not convinced that such pedantry makes the bookkeeping issues easier.

Quite so but as with many topics on AWEB the OP triggers responses that widen the subject, in this case whether the raising of a pro-forma is actually a sale.  If a business is sales driven and people's income depends on sales with no responsibility for credit control then my distinction may have a significant impact.  It may be pertinent to recognise the sale, and the effort to achieve it, and show the non-payment as a bad debt.

 

By the time a pro-forma has been raised formal contracts may have been exchanged that could lead to legal action against the buyer to recover some or all of the contract price.  Not everyone is selling widgets; I was involved in the sale and accounting for capital machinery costing hundreds of thousands of pounds each but we still, occasionally, raised pro-forma invoices.

Thanks (0)
RLI
By lionofludesch
21st Mar 2015 08:52

Traditional

I hear what you are saying, Richard, and can see your point of view.

However, for me, a sale is when the goods go out of the door. Recognising sales on proforma invoices is, in my opinion, providing an opportunity for the dishonest salesman to imply that he's better than he is.  Maybe earn a little commission on the back of it.

Maybe I'm just too cynical.

Thanks (0)