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Cash back

TrishTrish Settling In NicelyRegistered Posts: 20
A client has a lot of sales paid for by card and quite frequently the customer has cash back as well. When the card sale and cash back are paid into the client`s business bank account, I give the cash back the nominal code of 4009, I use Sage Line 50 and this is the relevant code for cash back. The problem is that the Sage program includes the cash back in the Sales figure. I have checked with HMRC and they say that cash back should not be included in the Sales figure. Has anyone else encountered this problem and if so how have they resolved it. I would appreciate some help and advice.

Regards Trish

Comments

  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Could you put cash back; payments and receipts to that nominal, so they would be netted off to zero?
  • BowdentBowdent Settling In Nicely Registered Posts: 22
    I dont know how Sage works really, but you need to account for the transaction as follows;

    For example, in one sales transaction:

    Sales = £100 - Credit in Sales, Debit Bank Account
    Cash Back = £50. - Credit in the Cash Account, Debit Bank Account.

    So, you'll see £150 in the bank as a Debit (which is what you've taken from the customers card), £100 as a credit in Sales, and £50 as a credit in the Cash Account (as you've taken £50 from your own cash balance, and given it to the customer - in effect all thats happened is that you've banked £50 of your own cash, just through the customers card).

    Hope this makes sense. Please let us know your thoughts and if the explanation helps.
  • TrishTrish Settling In Nicely Registered Posts: 20
    Cash back

    Thank you for your response. When I get back to my office, (I am away for a week at the moment and using a friend`s computer), I will try what you suggest and see if it works! I will let you know.

    Many thanks

    Trish
  • sheelaghsheelagh Well-Known Registered Posts: 133
    Cash Back
    Trish wrote: »
    A client has a lot of sales paid for by card and quite frequently the customer has cash back as well. ... the card sale and cash back are paid into the client`s business bank account,

    Not sure if I have understood this, but I think you are saying that the net of sale price and cash back goes into the bank account. So, if you have a sale of £200, and allow cash back of £20, you get £180 in the bank (disregarding VAT). That would be
    CR Sales £200 to n/code 4000
    DR cash back £20 to n/code 4009
    DR bank £180
    You would therefore have total sales in n/code 4000, netted against cash back in n/code 4009.
    The problem is that the Sage program includes the cash back in the Sales figure.
    By default, Sage will display a total of all nominal codes in the range 4000 - 4099 in the "Sales" figure on the P&L report.
    If you would like these shown separately in the P&L, you can change the layout of the report by amending the chart of accounts.
    Go to NOMINAL, then COA, and select EDIT to amend the Chart of Accounts. You can add lines to the right hand side of the window using F7 and adjust the number ranges to suit your requirements. Add a line below "Product Sales", give it a name eg "Discounts Allowed" or "cash back", enter 4009 in the "low" and "high" fields. Change the range of the "product sales" line to 4000 to 4008. By default accounts 4010 to 4099 are not in the nominal ledger, so you can ignore them unless these numbers are used for anything else.
    Use the CHECK button to make sure you have no overlap, or have excluded any accounts.
    If there are any errors a report will be automatically generated.
  • BowdentBowdent Settling In Nicely Registered Posts: 22
    sheelagh wrote: »
    Not sure if I have understood this, but I think you are saying that the net of sale price and cash back goes into the bank account. So, if you have a sale of £200, and allow cash back of £20, you get £180 in the bank (disregarding VAT). That would be
    CR Sales £200 to n/code 4000
    DR cash back £20 to n/code 4009
    DR bank £180

    Yes, I think you've misunderstood slightly. Think of it as getting cash back from the supermarket. You buy food for £30, and ask for cash back of £20. A total of £50 is charged to you as the customer via the card. The £50 then ends up in the supermarkets bank account (via an automated merchant card transaction), with £30cr going to sales, and £20cr going to the cash account.
    £30 is what you should have in sales. To get your cash account to balance, the cash back needs to go to your cash account. Think of the physical movement of cash. £20 has gone from your till to the customer, which has effectively been banked via the card transaction.
    If you dont put the cash back to your cash account, you'll overstate your cash balances.
  • sheelaghsheelagh Well-Known Registered Posts: 133
    Cash Back

    Ah, okay - I thought the client was giving cash back to his customers. Now I see he is receiving the cash back and wants to show it a separate income stream.
    So Bowdent's entries are correct and the editing of the COA should help you to show the income stream separately.
  • PoodlePoodle Experienced Mentor Registered Posts: 711
    Hi,

    I have several clients who do this and at the start I always suggest that they open up a separate bank account to accept PDQ receipts into, not have them paid into their main current account. This makes it far easier for reconciliations especially if there is a large volume of PDQ transactions and you can easily transfer to the current account as and when needed.

    On Sage everything is posted through the bank module, they have a till bank account to process the daily sales through and the balance on this should always agree to the cash in hand (including the float) at the end of each day.

    The days takings should be posted onto the till bank account and should always reflect the sales figure from the 'Z' reading on the till receipt. Cash backs are not sales it is you acting as a lending agent on behalf of the card company. The first postings would be a credit to 4000 for the total sales made in the day, adjusting for VAT with this posting as normal.
    Next make a transfer for any sales paid for by PDQ from the till bank account to the PDQ bank account.
    Next a transfer is made from the till bank account to the PDQ bank account for any cash back made, details on the PDQ daily banking summary.

    Finally any bankings in the day are transfered from the till bank to the bank current account.

    You will now be able to reconcile the till bank account for the day to your actual cash in hand.

    The PDQ bank account can be reconciled in the usual way to the bank statement and by keeping it separate it ensures that you have a good control on the PDQ supplier and get all of your money back.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    I assume the cashback IS going to the customers but I am not sure I agree with either solution. Using Sheelagh's example I would go with:

    Dr Bank £220
    Cr Sales £200
    Cr Cash (Balance sheet) £20

    £220 has been taken on the customers card and will be received in the client's bank. £20 has come out of the til and £200 of goods have been sold.


    Edit: Poodle beat me to the post and sums it up nicely!
  • BowdentBowdent Settling In Nicely Registered Posts: 22
    I think we're all saying and agreed on the same thing now arent we?
    Problem solved me thinks!

    Bring on the next challange!
  • sheelaghsheelagh Well-Known Registered Posts: 133
    Cash Back

    I really should read things properly!
    I thought we were discussing cash back as in DFS "£100 cash back with your new sofa", which is a discount to the customer. I was thrown by the use for nominal code 4009, which is usually used for discounts allowed.
    I agree that there should be some sort of control account in the balance sheet section of the COA.
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