Visual Cash Focus - suggestion on how to handle "fees in advance"

If you invoice an amount that you want to recognise as income over several months

Answer:

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:

	Amount invoiced
January	900
April	1200
July	1500
October	1800

The cash flow collection is typically:

month after invoice	% collected
1	50 %
2	30 %
3	20 %

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 should be regarded as income as follows:

	Amount
January	300
February	300
March	300
Total	900

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

To cater for the income in advance, create an adjustment account under revenue. Then put both the revenue and the adjustment account into a new folder.

Here is an example:

Create a folder under revenue: Fee income on P&L.

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

	a) Amount invoiced	b) Adjustment	Folder total
January	900	-600	300
February	0	300	300
March	0	300	300
Total	900	900	900

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.

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.