Is this the wrong board to talk about traditional, non-altcoin businesses?
How the fuck do I manage my invoices so that I don't have an account receivable at the end of the fiscal year?
My accountant insists on getting a letter from my client verifying that they paid the invoice that was outstanding at year-end even though I've got a bank statement saying it was paid two weeks later.
Other urls found in this thread:
hkicpa.org.hk
twitter.com
first of all, why are you opposed to having a balance in AR? accounts receivable is a balance sheet asset just like cash. you either have cash from goods/services, or you have AR, which you are expecting to receive.
you should however, be aging your accounts receivable. anything over 90 days old should be suspect, and you probably wont receive payment in full.
Second, it's not your customer's job to make sure that your invoices are paid. That's your (your AR department or accountants) job. If a vendor came to me and said "you didn't pay invoice 12345," and i know that i did, i'd say that it was paid with check 321 dated xx/xx/xxxx, see the remit advice attached, you retard.
How do you manage your invoices? Are you actually using accounting software? I think even quickbooks does this for you (there's probably some open source software for you cheapskates anyway). Your accountant sounds like a fucking retard.
Other than that, if you just want to collect cash faster, offer your customers a discount for paying sooner. 5%10NET30 should do the trick (5% discount for paying within 10 days, otherwise the NET amount is due within 30 days).
Also, any balances at the end of a period that rollover into another period, are accrued. if for some technical reason you HAVE to clear your AR account at the end of the year, just clear the total amount to an Accrued Revenue account. Or just do an entry to clear the account that will reverse on day 1 of the new period. This would be dumb though, i recommend just getting a new accountant.
>first of all, why are you opposed to having a balance in AR?
I'm not really but the problem is that my accountant won't issue an unqualified audit report without getting written confirmation from my client that they paid the invoice.
What I'm really opposed to is them hassling my client, I'm also opposed to getting an unqualified audit report because it can (allegedly) cause banking problems.
I'm in Hong Kong if it matters.
Oh yeah, the problem isn't that the invoice is unpaid (it got paid two weeks after the date, it's a 10 day due date but I'm not sweating over it obviously). The problem is that it's issued 2017/3/31 which is end-of-fiscal-year in HK and got paid 2017/4/14 so was outstanding at year-end.
you just include it as income in the year it was issued, not the year it was paid
>you just include it as income in the year it was issued, not the year it was paid
That's what I'm doing but the account insists that Hong Kong Auditing Standards require confirmation from the client that it was paid because it was paid after year-end.
ah ok, i'm not familiar with HK law. And yes, i think it's strange that you'd have to hassle a customer to verify that they paid it. Are you sure that the written confirmation is that they "paid it" or that they "will pay it?" because a purchase order is pretty much confirmation that they will pay it.
Truth be told i'm not familiar with the laws there, so you might want to reach out to someone familiar with HK business law. they could also be a point of contact for avoiding "banking problems."
also, if the item was paid, we're assuming you haven't received the check and remittance yet? if you have the remittance already, that's confirmation that it has been paid.
Otherwise maybe look into electronic payments?
>I'm in Hong Kong
Just save yourself the trouble and kill yourself now. Either that or they turn you into soup
Side note: If you have a check, then show your auditor the check. If it was a wire transfer then just show your statement. If your accountant is giving you a serious hard time over something as stupid as this then just get a new accountant. I mean fuck. Enjoy your ching chong IFRS
>Public Accountant here
CPA here.
In china its very common for auditors to require accounts receivable confirmations.
In the US, we only do accounts payable confirmations. This is to verify that liabilities are not understated.
It's just a letter. Dear XYX Client, what is your balance payable for invoice number 234092348230948?
>they reply
>accountants verify
Do whatever your accountant says, you fucking idiot.
In the matter of getting rid of AR, you're going to have to make sure that AR is either immaterial or literally 0. So customers will have to pay you immediately, or you're going to have to stop selling a month before your reporting period to give your customers time to pay.
Go take an accounting class
That's called cut-off testing.
Your auditor is making sure you're recording your receivables and recognizing your revenue when you should. Normal part of an audit.
This is the standards they're using: hkicpa.org.hk
Seems to me that there's some wiggle room but as a freelancer, I'm getting the junior accountant in their firm I guess and they're just going literally by the book or company policy or whatever.
It's paid by remittance, I've got the (pdf) statement. Insufficient apparently.
I've got the bank statement of the wire transfer. The accountancy firm are the ones who registered my business so I'm somewhat tied to them, at least it's a hassle to move and they're cheap...probably for a reason. This is about the only hassle they give me so it's not a reason to move yet.
I did CS which is what my freelancer business actually does but I should really find some sort of Hong Kong Business Owner's class or manual or something.
Any tips on how can I structure my invoicing so as to avoid hassling my clients with my audit procedures?
My client is forgiving to a point but my being an amateur at business shouldn't cause them extra work.
I used to invoice in the following month but last year the accountant (a different person) did the same thing when asking about work performed in year 1 that was invoiced in year 2.
Auditors need to audit every financial statement area. That means Cash, AR, AP, Fixed Assets, Inventory, revenue, deferred revenue, expenses ect... every single one.
Cut-off testing is a very common test to do on AR, AP and revenue. No matter how you structure your invoices, that auditor will do cut-off testing on AR. They'll focus on invoices dated around your reporting period's end. So, roughly a month before and after. They need to verify the amount with a third party to make sure you're not overstating your receivables - this requires contact with your clients. A part of their test is also to make sure you're recording them correctly.
If you don't do any business around your reporting period, they'll just widen the range of their sample to include enough invoices to pick from.
What I'm saying is, there's really not much you can do to avoid this. Cut-Off testing = AR Confirmations. I've worked with come IFRS auditors from china, and they go a little crazy with the volume on these confirmations.
So, I don't have any magical ideas that are actually feasible.
I love the rare Economics/Accounting/Finance threads here.
In case people want a summary of what's going on in thread:
OP issued an invoice on the 3/31/17, which is the end of the Fiscal Year in Hong Kong.
Accounting requires that you recognize events as are they are incurred:
(3/31/17) A/c Rec (debit/increased)
Income (credit/increased)
OP received payment 14 days later, as according to a bank statement.
(4/14/17) Cash (debit/increased)
A/c Rec (credit/decreased)
In order for OP's accountant to issue an Unqualified Audit Report, the client who made the payment must contacted to confirm they made the payment; confirmation in the form of a letter stating so. This is because this is the procedure required for invoices that are issued before the End of Fiscal Year, but have their account settled in cash in a future Fiscal Year. It's part of an auditing check known as Cutoff Testing.
What the fuck does this have to do with the blockchain?
Quite a lot actually. You'll see, one day.
Hey there. I work in Accounts Receivable for a very large company in the US.
ah fuck it nevermind there are CPAs answering, i don't know shit lol
Woops, change those years to 2014
shit, never mind, it was 2017
OP here, that is exactly what is going on. Thanks for the recap.
The actual issue (from my perspective) is that the accountant has to hassle my client and I'd prefer not to inflict my business audit on them for fear of harming the relationship.
>What the fuck does this have to do with the blockchain?
kek
>So, I don't have any magical ideas that are actually feasible.
Yeah, I'm getting that there isn't much way around it.
I suppose a clean audit also requires checking that the client I'm invoicing really exists and I'm not banking drug money or something. That might be part of it?
>I suppose a clean audit also requires checking that the client I'm invoicing really exists and I'm not banking drug money or something. That might be part of it?
most definitely, that's one of the things their tests verify. Auditors will assume that they're actually real until their tests show they're not.
Side Note, when an audit is being planned, they establish materiality. Materiality is a threshold under which things are irrelevant. For instance, if materiality for this audit is 100k, and I find a 99k error in one of my tests, I literally don't care as the auditor.
Auditors also use materiality to assign targets. The accounts with balances over materiality will be tested at 100%. That's simply industry talk for "fully tested" for existence and completeness. So for an account that's very material, an auditor might do several tests on it.
If an account is immaterial, meaning under materiality, it will not be subject to the more sophisticated testing that a material balance would. An account under materiality might only be tested for existence. In the case of AR, if your balance in AR at period-end is immaterial, they will not do as much testing on it. That means less confirmations, less bothering your clients.
AR is usually one of the more prominent accounts so that might be hard. One thing you could do is offer discounts on early payment do get them to pay before period-end.