Recording income and fees for Upwork

eve1985

Hi,

I'm newly set up as a freelancer, and getting quite a lot of work through sites like Upwork and People Per Hour. I was wondering if you could tell me a bit about how I'm supposed to record earnings for income from these sites? I work for a number of clients through them, and withdraw funds from them into my business account which is linked to Wave once a month. So the income that I see popping up in my account in the transactions list is the total billed to all clients through that site, minus the charge Upwork etc. take off. Can I leave it as a single amount, as it is, with the fees taken off already by Upwork, or do I need to enter the full amount charged to each client individually, along with the fees taken off as expenses (balancing it back to the amount coming into my account)? And do I need to raise an invoice/invoices to match the income to?

Thanks,

Eve

Alexia

Hi, @eve1985.

I'll start by saying that more information is always better. I don't think it's necessary to create invoices for each client since you won't be sending them those invoices. Here's how I would recommend handling it.

1. Create a "Money in Transit" asset account for each of those services. The money in each of those accounts represents payments you've earned but haven't been sent to your bank account yet. Also, create a "Merchant Fees" expense account
2. When you do a job, record it as an income to one of those accounts. Record the full amount paid by the client and choose the appropriate income category.
3. When you get a deposit to your bank account, categorize it as "Transfer from..." and choose the right Money in Transit account. Wave will make a transfer transaction for that other account automatically.
4. Create expense transactions to your Money in Transit account for the amount of the merchant fees. Categorize those to Merchant Fees

At the end of this process, you'll have accounted for everything and your Money in Transit account will be empty. It's a bit of work, but it will ensure all of your reports are accurate and everything is represented in your books.

eve1985

Thanks Alexia, that's really helpful! The only other complication I have with Upwork is that it's in USD whereas my accounts are in GBP. What's the best way of recording income in Dollars when the money in my account will come up as Pounds?

Alexia

Hi, @eve1985!

This gets a little more complicated since Wave doesn't fully support businesses operating in multiple currencies. But there's always a way! Let's see...

The biggest obstacle here is that Wave uses the mid-market exchange rate from xe.com for transaction exchanged, which might not match with your banks (or Upwork, depending on at which point of the process the exchange is made).

First, you would have to create a separate Money in Transit account which uses USD rather than GBP. Record the full payment for the job there, then create the expense for Upwork's fees to that account.

Once the money is deposited to your account, make it into a transfer from that money in transit account for the amount of the deposit in GBP, as you usually would. Because the exchange rate might be different than the one you're using, you might have to create another transaction to clear any discrepancies from differences in exchange rates, but it should otherwise work without issues.

You can use the Gain/Loss on foreign exchange as the category for those adjustment transactions.

mrojze

Hi Alexia,
I have the same situation but I tried to follow the step and I got stuck.
I created a "Money in Transit" Asset account. I made all the individual payments there.
Now I got the payment from UpWork into to chequing account. Let's say I have $99.5 in Money In Transit and $100 in Chequing.
I don't understand step #3. I don't see an option to make a transfer from one account to the other. I could do a Journal entry...
I guess the idea is to clear the $99.5 since Money In Transit should be now at $0?
Can you please help me with this step?

Thanks,
Martin

mrojze

Hi @Alexia,
Can you help me with this?

Thanks,
Martin

Erik

Hi @mrojze, sounds like you might be using an older version of Wave. If that's the case, we should still be able to account for your payments. I've bolded the portions that I've modified for you. In my example, my customer has paid me $100 but I lose $5 for the transaction fee.

1. Create a "Money in Transit" asset account for each of those services. The money in each of those accounts represents payments you've earned but haven't been sent to your bank account yet. Also, create a "Merchant Fees" expense account
2. When you do a job, record it as an income to one of those Money in Transit accounts. Record the full amount paid by the client and choose the appropriate income category.
3. When you get a deposit to your bank account, create a matching expense transaction for the same amount under the Money in Transit account.
4. Click the checkbox to the left of the bank deposit and your newly created expense transaction.
5. Click "Transfer" at the top of the transaction list.

You can refer to my screenshot here (Note: my Money in Transit account is called "Undeposited Funds" and my Merchant Fees account is named "Professional Fees").

mrojze

Thanks @Erik
I end up doing a Journal Entry to move the money between Money in Transit and the Merchant Fees accounts. Is that also right? As long as the Money In Transit ends up in 0 (zero)?
Also, what do you mean I am in an old version?? Shouldn't I get automatic updates?

Thanks for your help!

Martin

JordanD

@mrojze Wave recently launched an upgraded version of Wave for all new accounts and are working on updating all pre-existing users. Because we want to ensure that none of your information is lost, we are taking extra care when moving accounts from the previous version. We are hoping to have everyone moved over onto the most updated version as soon as possible, but only if we can ensure that nothing is lost in the process.