On 1/15/21 7:25 AM, R. Victor Klassen wrote:
The mechanism looks like this: customer orders from our online store
(typically) some items of ours and some of the neighbour’s. Branding is clear
on the store. Twice a week we deliver orders. On that day or the one before,
we inform the neighbour what they need to supply (we have no inventory of
theirs - they are responsible for informing us how much we can sell) and they
bring it over. We pay in cash the amount the customer will pay us, less a
percentage. The customer has already paid us through the online store.
Where it starts to look like bills and invoices is that the online ordering
system provides us with what can be (fairly) easily converted (perl script)
into an importable invoice. But the online system, being 3rd party, has no
idea that we have a mix of sales out of our inventory and commission sales, so
the invoice contains both.
Okay, so this is more formal than I was thinking. Certainly, if you can
make this work by importing from a 3rd-party app, that is the best route.
This looks somewhat cleaner than having an expense amount that later gets
re-characterized.
Cleaner yet would be putting an income entry in a bill, but that’s not
permitted.
Probably because that would then be a charge to the neighbor, which is
usually done for a 'customer' rather than a vendor. (the devs seem to
take the approach that it is extremely rare for customers to also be
vendors and/or employees, or all three. From personal mom & pop small
biz experience, I beg to differ, but I understand trying to accommodate
such cases might be a bit messy for the code.)
You could possibly initially treat the commission as a discount from the
neighbor. I don't know if you can use the discount feature and have it
hit a proper income account, or if it needs a special contra-expense
account that you later balance out with income. Otherwise, you could
maybe enter it as a separate line-item.
Maybe ask a CPA, as it might work as a discount the whole way around and
you don't need to involve income accounts at all for it. (if you are
tracking COGS, it would reduce your cost, thus increasing income, as
distinct from revenue) This would be similar to 2/10Net30 terms (does
anyone offer that anymore?) where if you pay within 10 days, you can
deduct 2% off the invoice, otherwise you have to pay within 30 days to
avoid late fees or interest. Such terms are vendor discounts applied
against inventory, and thus against COGS. (and very likely tracked in
their own account a la "Vendor Discounts" so you can tell if you are
taking advantage of them. Some business even track available vs.
utilized discounts for that reason.)
Since you are paying the neighbor for the merchandise and taking
possession of it, perhaps you should be booking it to inventory anyway.
(again, a local CPA can better answer that for your exact situation)
This kind of sounds like a 3rd party shipping and payment factor
situation (common in the furniture industry for example) where
sometimes, the trucking company takes possession of the merchandise
legally, buying it (the invoice less a percentage for the convenience)
from the shipper, and then collects the full amount from the retailer.
This used to be common with owner/operator single-rig truckers, but can
still be found with small fleet operations.
Other than the manufacturer/wholesaler shipping on their own trucks, the
other scenario is the retailer takes legal possession at the shipping
point (known as "FOB shipping") and pays the shipper and trucking
company separately. The trucking company is merely custodian for the
retailer's product.
I know all of that gets off the main topic, but it may shed some light
on how you approach this.
Regards,
Adrien
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