Income Statement Report showing income by invoice date, not paid date
ezific
Member Posts: 4
I have an invoice dated June 1, 2018, say $1,000 total. The client has been paying several hundred dollars every few months - for this example, let's say $250 on July 1, 2018, October 1, 2018, January 1, 2019 and April 1, 2019.
What I'd expect to see on the Income Statement (Reports tab -> Income Statement) is $500 of income reported for 2018 and $500 for 2019 since that's when the payments are actually entered in the Transactions log (added via Record a Payment link on the admin invoice page), but it seems like all $1,000 is being shown in the 2018 report, even before the invoice is paid in full (and none of the income in the 2019 report).
I first noticed this with invoices dated Jan 1, 2019 (noted as due Feb 1, 2019) being included in the income statement if the income statement ran from 2018-01-01 to 2019-01-01, even if the invoices hadn't been paid until 2019-01-02 (or not paid at all to date)
Am I using this report wrong? I'd like to see a record of all Revenue/Income against all expenses - not invoice values vs expenses.
Comments
ezific,
When the invoicing feature of Wave is used it will present the income statement on an accrual basis. I understand that they are working on a choice between cash and accrual when viewing reports but from what I know it is not out yet.
For my clients that use Wave invoicing, I set up 2 profiles. One invoicing company and one cash basis accounting company. They get the benefit of invoicing and keeping track of receivables and the ease of of reporting for tax (cash basis).
You can view each account on a cash basis but I don't believe you can see it all on one report.
Mike G, CPA
www.mgfinancial.net
Mike,
Thanks for the reply - seems your dual-profile approach is the best bet for the time being.
I checked in with Wave's chat support and it seems they are rolling out a cash-based income report like you mentioned as well. Some users are in early testing already so it sounds like it'll be out this year (no official date given though).
I was shocked to find out that the reports aren't cash basis even though the set up (if I remember correctly) asks for which one your company is. The person I have doing my taxes was taking the reports on faith. And as a result, I have several years that are based on these reports, and now that I'm learning they are accrual basis, I'm fairly upset about it. It's not a tragedy as my company is not that big, but the principle is there. I wish I had known this before. Backpedalling is not my favorite thing to do for taxes. I do hope they fix this and fix it fairly soon.
@SPS_John that's too bad to hear that you were under the impression Wave was purely cash-based. I'm kind of curious: where did you get that impression from? What are you referring to when you say you thought you set it up to be cash-based?
I only ask because from my knowledge, there isn't a place in Wave where it gives you the option, and a lot of reviews/our website call out that it's a robust accrual-based system. If there's anywhere that you can point me to which is claiming we offer a purely cash-based offering, it would be really important for us to track down and clarify. In the old version of Wave, there were minimal cash-based workarounds, which prompted us to include--and continue to build--cash-based reporting views (like of the Account Transactions report), but that's as far as it goes. I hope this adds a bit of useful colour to this conversation, although I totally respect that this doesn't really fix your previous issue with your taxes. Looking forward to getting more feedback about this!
For me, the confusion is right on the Reports page, Financial Statements section.
To my non-tax-savvy mind, "income" and the money I "brought in" are equivalent to the money that has been recorded as received & verified in the Transaction log (e.g. payment on an invoice that I approve as correct).
I went through the non-customer side of waveapps.com again and can fairly confidently say nowhere that a new user would navigate does it mention that reporting is on an accrual basis nor cash basis, unless they're looking specifically for it like you mention through the help/forum. Again I'm not up on the tax world very much, but my assumption is many small businesses, perhaps especially those that don't deal with sales tax or inventory, that are willing to use a largely free (and awesome) billing/ bookkeeping software like WaveApps want it as a simple "tell me how much money came in and how much when out" - when they see "income minus expense" that's what they're thinking.
So perhaps not that WaveApps is misleading per se, just not clear on the report's intent. I'd think the bigger concern than text on the front end website is really the text noted above, right at the report itself - it could simply be clarified right there that the report is "invoice totals (paid or unpaid) minus expenses" or some similar such that mentions Accrual Basis right there with a handy link to somewhere that explains what an accrual basis even is and what the current workaround for your standard tax reporting is.
Hello Ryan,
Thanks for your response. Now I'm even more surprised lol!
I've been a Wave user for quite some time. I like it in general, though being a former Quickbooks user it took a little time to adjust. I'm generally happy with the simplicity.
However, I don't recall where it was, but I believe there was a cash vs accrual question at the very first set up. Now it's been quite some time, so where that option would be could be time consuming for me to see if it's still available. Perhaps it wasn't available, but being a competitive and feature rich online option, maybe I assumed that the cash reporting option was available? I don't know at this point. Maybe it's just my memory remembering as I was trying out several options with other competitors? Could be.
I will admit that it's not a terribly tragic situation for me, but I will have to amend prior returns, and that's going to chew up some time for me now that this revelation has come to light. It is curious (even more now) why you wouldn't have focused more on making the cash option available when clearly most of your clients (in my estimation) would be independent entrepreneurs and very small companies - of which most do and would desire the cash option - especially if they aren't in the high end professionals categories where receivables accumulate.
I do need to add this though - Thought I'd take a look again and see if it was in "Settings" under the business profile, and right now as was before I sought out the answer for Cash vs Accrual, trying to get into the Settings module is impossible when the Payroll feature is being pushed - which at this time I do not want - and there's nothing to tell it to go away. You see the menu for a second, then it disappears (clicking on any item doesn't seem to work), and then the system immediately pushes the Payroll Set up/Trial screen instead. Frustrating.
I tend to be a loyalist and a street level advocate for things I like - even if there are shortcomings. I stuck with Wave through several challenges, and probably will for some time. Unless it just becomes inconvenient and costly. I am cash based, and do a few hybrid exchanges that are a mix of cash based and accrual based (I guess typical for service/trades) for invoicing, but still treat most of my transactions as cash based. And since I am growing, and don't plan to be an accrual based company any time soon. I hope that the cash option will become available and even promoted. Especially noting that I am also a musician, and have recommended Wave Accounting to many musicians simply for it's simplicity. But they like many musicians and artists are cash based. I think Wave really needs to step up to the Cash option availability sooner than later.
@ezific that all makes sense, and I appreciate you taking the time to flesh all of that out. I particularly like the idea of having a handy in-app resource to call this out, and explain/link to a guide that explains what you can expect to see in an accrual accounting system. Thank you again for taking me through those pain points! I'll talk to some teams and see if it's something we can tack onto the Reports page.
@SPS_John I gotta pass on some thanks to you as well; thank you for the insights about how this impacts your specific business type, and for being transparent about what type of reporting options you're looking for. You're not the only one looking for more robust cash-based options, and our teams are aware that this is something people want; we'll continue to track this feedback and see if it's something we can build in for the future. As an aside, the Settings > Payroll thing isn't how the site is intended to work, and is a known issue that is being looked into. You can break out of this cycle by clicking into your Dashboard for now, although I respect it's a pain.