Revenue on one Invoice for two fiscal years
hksuzukimusic
Member Posts: 15
Looking for a "best practice" for using Wave. We are an education center where the clients prepay for a semester and our semester happens to fall across two fiscal years. I want to create an invoicing process that can make it easier to calculate the revenue when it actually occurs. For example, Invoice #1 = $1,000 (10 classes X $100 per class). Client pays the full $1000. 5 classes occur in fiscal year 2017 ($500), 5 classes occur in fiscal year 2018 ($500). Any easy way to manage or suggestions?
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Hi, @hksuzukimusic!
We talk about this briefly in Fearless Accounting, our guide to best practices for using Wave. You can find the information you need on page 69.
If you end up enthralled by the guide and read all of it, let us know what you think. We published it a short time ago and are always hungry for feedback!
Thank you, very useful PDF, especially in showing actual Wave examples. Will be my bedtime reading for the next week. One small problem for me is, it seems I am using an older version of Wave?? As I don't see the same options listed. Any ETA on when the revised Wave will be rolled out to everyone?
You are absolutely right, @hksuzukimusic! We're working on migrating everyone over in the coming few months, but I don't have a clearer timeline to offer. We want to make sure we can move everyone over without affecting data integrity, so we're being careful and methodical about it.
I'm happy to hear you're enjoying Fearless Accounting! Everything in there should still apply, even if the interface is different at times.
Follow up question on Invoice data and revenue recognition. I've played around a bit in wave with this, but want to confirm how it works.
Example
Today is May 1st. I make a new invoice for $100 with invoice date July 1 and due date July 1st. The work will be done in July. Today, the client pays a deposit of $50 by cash. I record that payment in the invoice with Date May 1st.
I notice that income statement shows revenue for May and June of 0 (correct) and on July 1 the income statement shows income of $100 (correct).
The balance sheet for may June July shows cash of $50 (correct).
In terms of proper accrual accounting, I assume that I need to manually make a prepaid income (deferred income) transaction for that $50 for May June and then reverse that transaction for July..
Is best practice to keep my invoice date as May 1st or is it possible to use the July 1st date. Any pros, cons?
Hi, @hksuzukimusic.
It's best practice to date the invoice after the work is done. The date of the invoice is the date upon which the money is owed to you, so the assumption is that the work has already been done. It's not unforgivable to do it in any other way, but strictly speaking, an invoice should only be dated after the service was provided. In the end, it really comes down to preference.