Client Accounts
If your business involves handling money on behalf of your clients and you invoice and order on behalf of your client using a bank account setup by you specifically to do this, then follow this guide:
- Set up a bank account on behalf of your client (it is your account, but set up solely to handle your clients money - ask your bank about the options)
- Set up a Client Bank Group in Current Assets
- Set up individual Client Bank Accounts in the above group (replace the word ‘Client’ here with you actual client’s name - eg. ACME Bank Account)
- Set up a Client Accounts Group in Current Liabilities
- Set up individual Client Accounts in the above group (Client Accounts Group) (name them like this example: ACME Client Account)
NOTE: As you can see above, for each client, you will be opening 2 accounts, the first in Current Assets > Client Bank Accounts, the second in Current Liabilities > Client Account Group
Sales Transactions
To make this easier to follow, we will use the example name above (ACME).
- Whenever you invoice on behalf of your client, make a Sales Transaction From ACME Client Account To Unpaid Invoices. Use normal VAT rules if you are VAT registered.
- When the client’s customer pays you, make a Transfer Transaction From Unpaid Invoices To ACME Bank Account.
Note 1: If they pay you immediately you can skip the second transaction and use ACME Bank Account in place of Unpaid Invoices.
Note 2: If they pay some kind of deposit, split the invoice into 2 transactions, one for the deposit and the other for the remainder (the accounts involved are just the same as described above).
Purchase Transactions
- If you are placing a purchase order on behalf of the client, make a Purchase Order From ACME Bank Account To ACME Client Account (this presumes you will be paying for the order when you place it). If it is on credit then use Bills Unpaid for the From account.
- When you receive the order, find the Purchase Order transaction (in Suppliers Records), highlight it, then click on the Insert Purchase Transaction Based on this Order button. This will automatically create the Purchase Transaction(s) for the order.
Note 3: if you are paying and placing the order immediately, then enter the Purchase Transaction directly without doing a Purchase Order first.
- If you are paying a deposit on a purchase order, make two transactions, the first for the deposit, the second for the remainder. (the accounts involved are just the same as described above).
Note 4: If this is just some expense, then go straight to Purchase Transactions.
Note 5: Treat VAT just the same as you would for any expense.
Invoicing Your Clients
The final part of the equation is invoicing clients for money they owe you for the work you are doing on their behalf. This is the actual money that is recorded in your Profit and Loss (all other transactions by-pass your P&L as you are doing that work on behalf of your clients).
There are 2 scenarios here.
Scenario 1
The first is where they pay you directly from their own business:
- Invoice them as normal: From Sales Account To Invoices Unpaid
- When they pay you, make a Transfer From Invoices Unpaid To your Bank
Scenario 2
The second is where they pay you from their client account in your system:
- Invoice them From Sales Account To ACME Bank Account
- Make a Transfer Transaction From ACME Bank Account To your Bank
Note: this records the fact that the money has passed through their client bank account so it is completely transparent. This case is where your commission/fees is included in your original invoice to your client’s client.