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Old 11-28-2017, 08:58 AM
Hammerhead Hammerhead is offline
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In-Kind Payments?

This is more of an accounting question than a technology issue, but perhaps you folks can help.

I'm the US rep for an overseas company. Every month I bill for a retainer to cover services and operating costs paid by their office in Switzerland. For sales to customers here, we invoice in the US and accept payment here; I send a wire transfer to the office in Germany since most orders ship from there. However, all payments to me come from their office in Switzerland for tax reasons on their end.

A recent transaction departed from this method for operational reasons (it was handled through Switzerland), and it was suggested that instead of adding this transaction to our normal wire transfer process, that I just apply it to this month's invoice (deducting the customer's payment from this month's bill) to avoid the additional steps of wire transfers and fees.

I'm not quite sure how to handle that. I have received payment from the end customer, and I can apply it to their invoice to mark it paid and close it out. Normally I apply the entire payment as an expense item created as 'cost of goods' because I'm simply passing all the money directly to them. But how do I deduct that amount from my invoice to the parent company - should I just issue a credit memo referencing the end customer's name? Would it be better if I were to receive an invoice from the parent company to record the 'pass-through' and just send the transfer anyway to "keep it clean"?

Sorry if this sounds complicated. Just not sure what to do, here.

Last edited by Hammerhead; 11-28-2017 at 09:04 AM.
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Old 11-29-2017, 06:11 AM
Rustler Rustler is offline
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I'm not following this, maybe I just need more coffee, but from what I understand you should be doing it this way

You invoice the parent company monthly - that posts to your income account

You sell to a US customer - that posts to a liability account since you pass those funds to the parent company

Then later you pay the liability to the parent company.

There is no COGS in this process.

Unless you are posting sales to your income. Not sure why you would do that since that increases your gross income and in many states could result in additional taxes/fees.

So they want you to receive a customer payment, and apply it to the invoice you send the parent company.

1. receive payment for this customer invoice, and deposit to a cash type account
2. On the cash account, use write checks, do not print this is data entry, select accounts payable as the expense, select the parent company name in the name column, save
3. in receive payments, select the parent and the invoice and apply the credit the cash "check" created, save. The parent company invoice will stay open for the balance.
4. send a statement to the parent which will show the original invoice and amount, the credit memo and balance due
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Old 11-29-2017, 08:11 AM
Hammerhead Hammerhead is offline
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Quote:
Originally Posted by Rustler View Post
I'm not following this, maybe I just need more coffee, but from what I understand you should be doing it this way
Pretty sure I need something stronger than coffee.

I see how your method could work, but the problem is that I still need to track sales over time to verify commission and have been using a different method up to now. Here's what I've been doing:

Order received
Invoice created (sales)
Customer pays
Money received, applied to invoice as Income: Sales
Money sent overseas, applied 100% as 'Cost Of Good Sold' (Expense account created for this purpose)

Now, the question is how to shift this up a bit and apply a payment received by a customer against the invoice amount to my partner overseas. In this scenario, would a credit memo of an equal amount applied to this month's invoice to the parent company (referencing the customer name) solve the dilemma?

Last edited by Hammerhead; 11-29-2017 at 03:48 PM.
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Old 11-30-2017, 05:02 AM
Rustler Rustler is offline
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I see how your method could work, but the problem is that I still need to track sales over time to verify commission

A report on the liability account for the period the commission is due for would do that

If you created the expense account COGS, I would suggest renaming it to COS, Cost Of Sales, Inventory uses COGS and so does the tax form you file. COGS is all about inventory

would a credit memo of an equal amount applied to this month's invoice to the parent company (referencing the customer name) solve the dilemma?


No, QB will not allow the other customer to get the credit memo created from a different one directly. You could do this

Make a deposit to the cash account, use the COGS expense account as the source (from) account for the deposit

then do steps 2-4 above
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