Discount

[Lawnman]

I need to know if there is any way to apply an early pay discount to a class. I don't want the discount that we take to show up on my monthly P&L as unclassified. Any ideas would be great!!!

[hartford]

Hi Lawnman
I may have missed something on the latest version of Quickbooks but isn't cash discounts one of those horrible areas where the program can't cope - at least cope like other programs dare I mention Sage.
I seem to remember that Intuit blind us with VAT science in the Help system and then tell us to create credit memos for cash discount!!
Christ Almighty I'm now getting worked up about those Intuit people. Am I right?
Sorry Lawnman your question was on classes - don't you allocate the class when you enter the credit memo. Or how do you enter discounts?

[gibbo]

While I agrre with the frustration on Discounts, in Australia they took it off the Payment Form entirely. The problem we have, and I suspect it is the same in the UK, is that the Tax is levied on the supply of goods or services and do not get applied on Payments. This creates an issue for the programming, as the Invoice is the place that these Tax liabilities must be levied and altered. They cannot be applied to the payment. If there was no impact on the Tax owing when payments were made, they could easily add Discount to the payment area. QuickBooks makes you either alter the Invoice or create a Credit. Annoying, but because of the way Tax is levied and applied, necessary.
If you go back to the original Invoice and enter a Discount, you can add a class there.

[hartford]

Hi Gibbo
I can see the programming problem but I believe that if you offer early settlement discount HM Customs & Excise allow VAT to be worked out on the invoice as though the discount is always taken. For example if you offer 2.5% then you can calculate VAT on 97.5% of the sales price.
Have not come across this in practice for many years - has anyone?

[gibbo]

I believe this is also the case in Australia. Even if the discount is not taken, the Tax is able to be calculted by the seller at the discounted sell price. This would save a lot of stuffing around for large companies on accrual. But if you deduct the discount at the beginning in QuickBooks, you have to sort out an overpayment if they do not actually get the discount because they paid too late.

[hartford]

Hi gibbo
I'm still not clear why the discount facility is not available - is it really that difficult to program??

[gibbo]

I'm not sure that is exactly the problem. Most of the Quickbooks programming is done in the US. Then it goes to Canada, then the UK and finally to Australia. Each Country after the US has to do what it needs to get the tax implcations correct. Little things like getting the discount to work just do not seem to get a high priority. What we find is that when there is a satisfactory work-around, they do not devote the time and money to fixing the problem. The US version does not have any tax implications on the payments, so they do not need to have that feature. Its just all us with goods and services tax that run into it. But no-one sees it as important.

[hartford]

Hi gibbo
I can see that there are VAT issues on payments (& receipts) in the UK if VAT cash accounting is used - this can be used if sales are £600,000 or less. However on VAT accrual accounting the payments(& receipts) are not VAT transactions so are similar to the US.
This still does not explain why cash discounts are not part of the US program. It seems a surprising ommission. Sage has it and I would guess other programs like MYOB do as well.

[gibbo]

The US version does have the ability to offer discounts on receipts - it can do this because there are ne tax implications on the transaction. The discount ability got removed when it moved across to the Goods and Services Tax nations. They simply disbled it rather than fixing it. Initially in Austarlia they had it available, but you could only post discount to an Income or Expense - not to a COGS account. They assumed that as an expense, there would not be a tax liablility. But of course, most discounts on purchases will be to COGS. So it all went lopsided and they removed the function.

[hartford]

Hi gibbo
Thanks for that info, sounds as though we won't see it in our life time then!

[RobJoy]

The HMCE rule is actually that you may calculate the VAT on the discounted amount if you 'expect' the payment to be made within the discount period. The VAT amount MUST be fixed at the time of invoice, you cannot change it depending on the payment. You will get into VAT Inspector trouble if you reduce the VAT all the time and nobody pays within the discount period. It has nothing whatever to do with whether you're on Cash Accounting.

As a programmer, I can confirm that it is a hellish thing to get right. To satisfy the VAT man, the only reasonable thing to do is to create a credit note at the time of payment - it's just about possible to get the program to do that, but it brings up all sorts of difficulties: how do you number them, how do you make sure they're printed and sent to the customer (who must have a hard copy to show HIS VAT man), I don't blame Intuit in the slightest (on this occasion) for ducking out of this one.

[hartford]

Hi Robjoy
I'm not a programmer I tried with Sinclair ZX80's but couldn't hack it.
I agree with what you say and that VAT is fixed at the time of invoice - if you generally offer say 2.5% discount for settlement within 30 days then the standard rate is 17.5% less 2.50% = 17.0625%. If you offer this on the invoice and no one takes it I don't believe HMC&E will be the least concerned.
However in cash accounting isn't VAT calculated on actual receipts & thinking about how cash discounts could work in QB gives me a headache. It's because I don't like cash accounting!
These days I notice not many people offer cash discounts - perhaps because of low interest rates.
But lets debate how you would build it in to QB in accrual accounting.
I don't think it would be that hard.
Lets consider the sales ledger - isn't the discount a bit like cash you never receive so in the receive payments area you would have another column next to the invoice where you input the discount. Then the Invoice less Discount line is calced & is what you should actually receive. The total discount allowed for each receipt then gets posted to a "Discounts received" account in the Profit & Loss Account.
Yeh I think you're right its quite hard!
But issueing credit notes for cash discounts really grates & sucks & & .......is the pits.

[RobJoy]

You say "However in cash accounting isn't VAT calculated on actual receipts" - no, it's still invoice-driven, it's only that it isn't counted until the invoice is paid.

Posting to a 'discounts' account alongside the payment to make up the invoice value sounds fine, but it still leaves the problem that there has to be a transaction on the Sales Ledger to account for the discount on each invoice.

[gibbo]

This is all Lawnman's fault! He should never have asked that question!

[RobJoy]

Alternatively, the VAT regulations could be blamed. What? Surely not! How dare I suggest that UK businesses are acting as unpaid tax collectors, administering a lot of silly rules at considerable cost in time and paper. What do you mean "Why can't we zero rate all invoices on quoting the customer's VAT reg, since they're going to claim it back anyway?" How could I possibly suggest that the VAT Fuel Scale Charge is the invention of a sick mind? Why shouldn't I have to account for five different types of taxation paid by my clients by totally different rules, ending up with a succession of governments which waste huge amounts of it on administration then spend the rest in ways I don't agree with?

There, I feel better now.

[hartford]

Hi Joyce
Surely if Sage can handle it.......

[gibbo]

Handle it? Because of the complexities and difficulties, it is doubtful that it always completely and correctly handles it. It may allow you to input discount information, but is it always going to be correct? The problem is not just what you put in - but under the particular circumstance, what is are the implications? Having the information in Sage does not mean that it will report correctly.

[hartford]

Hi gibbo
Are you speaking from actual experience of using Sage and it handling cash discounts (and the VAT aspects of this) incorrectly?

[gibbo]

No. My issue is that even if it allows you to make the entry, because of the complexity of the issues surrounding discounts, there is no guarrentee that someone has got the implications correct simply because they were able to make the entry. The reason QuickBooks deleted the function is because they could not be sure that the entry was correctly reporting the obligations in that particuler case.

[hartford]

Hi gibbo
1) I would bet a fair amount with you that Sage have got the programming right on cash discounts and VAT. Its a clunky program that I don't like, but as its specified and written in the UK I am confident they have it right. My point is if they can do it, it can be done by Intuit.
2) I was interested that you say it was "deleted" from Quickbooks. When was this?
3) Lets face it Intuit have been making a hash of VAT for some years and unless they put more resources into this area we ain't going to get this basic feature. Its a great shame.