Record unpaid invoices?

[d.roc]

Hi all, first time poster.

I'm not sure if I'm in the right place to ask this question, it is kind of accounting related, but perhaps someone could point me in the right direction if I'm not...

I run a small business and use MYOB for that, and after years 'winging it' as far as my personal finances go, I have finally begun using software to record my daily incomings and outgoings to try and keep better track of where my money goes.

At any time the business will have a number of outstanding invoices for completed jobs waiting to be sent or paid.

My question is, should I have an account in my personal finance software that reflects this owed amount, or would it confuse me (by making my net worth look higher than it actually is)? What would standard budgeting/accounting practice be?

It's handy to know that I've got X amount of dollars due, just not sure if I should be seeing it in my software or not.

Any thoughts are appreciated, thanks!

[SnoopyCool]

Do you run your business on a cash or accrual basis? I have a small business, and we don't count the income until it is in our hands (cash).

[d.roc]

I run on a cash basis, so I suppose that kind of answers my question? Is there a particular way outstanding incomings are usually recorded so that they don't affect the actual balance?

[MonkeyMama]

Many options:

Complicated Receivables: As an accountant, this is mostly what I deal with (medical billing). Most people track their books primarily for taxes. So, they would only record cash reciepts on their books and use a separate system for tracking complicated receivables.

EASY: If your business is really simple and not a lot of receivables, keep invoices in a folder, ordered by date, until payment is received. Something simple along those lines. This would also be separate from your accounting software.

Middle ground: Programs like Quickbooks are really good for keeping track of receivables. You can run reports on accrual or cash basis. Maybe you'd use cash reports for taxes and accrual reports for a better idea of your bottom line. If you don't like the idea of keeping it separate, different software may be in order (I am sure other software can do this).

[d.roc]

Thanks for the replies.

After reading the replies and reading a bit about accounts receivable (I'm new to even these basic accounting ideas, hence the need to start doing something about it!) it's making a lot more sense.

The personal finance software I'm using (Fortora Fresh Finance) doesn't seem to have the option for a receivables account, though I don't suppose you would expect it in that kind of software.

I'm extremely reluctant to use any Quickbooks software as I'm in Australia and there are lots of reports of very bad customer support in Australia. It is also fairly expensive.

I think I will keep things the way they are with my receivables in MYOB, my real money in Fortora.

If anyone does have any other thoughts for a bookkeeping newbie they are appreciated!

[frugalgirl]

I don't know if it would be feasible to change software and if it would do all that you need it to do but I use Quicken for keeping all of my father's accounts and my late mother's estate accounts in order. I am not an accountant. My father's accounts include: personal checking, farm account, business account, mother's estate account. The software has a transfer transaction that automatically will debit the appropriate account when I enter the transaction in the account to be credited. For example, if I transfer money into the personal checking account from the farm account, I enter a transfer of funds from the farm account and the software automatically credits the personal checking account for me. If I were in your situation, I'd set up one account for all of the receivables that were due. Call it the "receivables due" account. The ledger balance of that account would always show you how much you were owed. As each check came in, I'd enter a transfer transaction to show the deposit in your checking account (or whatever account you would deposit it into.) This would be super easy. Your receivables due account would show the debit (and the amount would decrease to show the decrease in the amount you were owed) and the checking account would show the deposit (and the increase in the amount of cash you actually have). This would also let you have an electronic record of your cash flow to back-up your paper invoices. Perhaps your current software could do something similar?

[SnoopyCool]

You could try Peach Tree software. It *WAS* free when you liked Legal Zoom on FaceBook (not sure if it still is). I haven't completely switched over to it, yet, but it looks very promising.

[d.roc]

I think I'm going to give the software I'm using a bit more of a go. It seems pretty good; it was very easy for me to pick up and this is important because as I previously mentioned my bookkeeping knowledge is very limited.

As for the Quicken recommendation frugalgirl, I'm pretty sure it would be possible for me to transfer into it from Fortora using QIF file format. However, apparently the Australian version of Quicken doesn't export to QIF, only to some proprietary format (QDF?), making it virtually impossible to move from Quicken to different software! I have also heard reports that their support is bad and updating of known bugs is slow. I am not sure whether the software I am using can do what you describe. I could certainly set up an account for receivables and transfer amounts from there to an income account as they are paid, the problem is there doesn't seem to be an option to properly designate it as a receivables account (other than naming it as such), so the balance of that account would show as part of total net worth, and I'm not sure I want that.

I think for now it's probably best to keep my receivables separate in MYOB and let Fortora show me my real money! Then I just enter payments as they are actually received as salary in Fortora. I can always open MYOB and get a total for outstanding invoices and add it manually to my real balance to give me an idea of where I'm at.

Thanks everyone for your thoughts.