Re: [GNC] Commission sales and business features

[Gyle McCollam]

I don't use Gnucash for business, so I don't know if you can or cannot expense 
commission on the invoice.  If you can't, you could create a liability account 
for commissions and create a monthly transaction to debit the liability and 
debit the commission expense account or on a more frequent basis, even sale by 
sale if required.  You could even have a placeholder account for commission 
with sub account for each salesperson if you wanted to track commissions by 
Salesman.


Thank You,
Gyle McCollam

Gyle McCollam

609.680.2326 Mobile

gmccol...@live.com   email


From: gnucash-user  on 
behalf of R. Victor Klassen 
Sent: Wednesday, January 5, 2022 12:14 PM
To: GNU Cash User 
Subject: [GNC] Commission sales and business features

We occasionally sell something through a third party acting in a broker role.  
Which is to say the item is never the possession of the party who does the sale 
- or at least not owned by them.

When I do the invoice I do not know the actual customer so I create a pseudo 
customer as a stand-in.  I put in line items for everything sold and then I 
would like to have a item for commission which reduces the total amount owed.

Adding to the complexity is that commission is taxable,  while none of the 
other line items is.

Here’s the question:   The commission should be booked against cost of sales 
which is an expense.  Invoices don’t permit expenses, just assets, income and 
liabilities.

How do folks normally treat this?

Sent from my iPhone
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Re: [GNC] Commission sales

[Adrien Monteleone]

No worries. And I understand the explanation. Thanks.

Regards,
Adrien

On 1/15/21 2:11 PM, John Ralls wrote:


Sorry Adrien, my ISP bounced the list cc so you get to see this twice.


On Jan 15, 2021, at 10:13 AM, Adrien Monteleone 
 wrote:

the devs seem to take the approach that it is extremely rare for customers to also 
be vendors and/or employees, or all three. From personal mom & pop small biz 
experience, I beg to differ, but I understand trying to accommodate such cases 
might be a bit messy for the code.)


Adrien,

I think that's mostly a justification of the internals, wherein a particular entity can 
be one of Customer, Employee, or Vendor and each of those types is closely coupled to the 
corresponding Invoice, Voucher, or Bill respectively.  The workaround is straightforward: 
If the same entity is both a customer and a vendor then create an entry for each role. If 
you want to "wash out" payables and receivables you can make an asset account 
for the other part of the transactions.

Regards,
John Ralls


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Re: [GNC] Commission sales

[John Ralls]

Sorry Adrien, my ISP bounced the list cc so you get to see this twice.

> On Jan 15, 2021, at 10:13 AM, Adrien Monteleone 
>  wrote:
> 
> the devs seem to take the approach that it is extremely rare for customers to 
> also be vendors and/or employees, or all three. From personal mom & pop small 
> biz experience, I beg to differ, but I understand trying to accommodate such 
> cases might be a bit messy for the code.)

Adrien,

I think that's mostly a justification of the internals, wherein a particular 
entity can be one of Customer, Employee, or Vendor and each of those types is 
closely coupled to the corresponding Invoice, Voucher, or Bill respectively.  
The workaround is straightforward: If the same entity is both a customer and a 
vendor then create an entry for each role. If you want to "wash out" payables 
and receivables you can make an asset account for the other part of the 
transactions.

Regards,
John Ralls


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Re: [GNC] Commission sales

[R. Victor Klassen]

The reason it matters that it is not revenue is that in this jurisdiction there 
is a subsidy based on reduction in revenue during COVID-19.  The neighbour’s  
ability to sell was severely hampered so we helped out.   Before the pandemic 
we were not selling anything for him, nor did we have an online store.  So it 
doesn’t make sense to inflate revenue. For income tax purposes the difference 
is only what goes on what line of the tax forms and the end result is the same. 

Regarding your side comment with the discount for early payment - yes we have 
at least two such vendors.  It would be nice if bills permitted discounts like 
invoices do, since there may be five line items with three accounts and I 
generally don’t but should allocate the discount proportionately.  


Sent from my iPhone

> On Jan 15, 2021, at 1:15 PM, Adrien Monteleone 
>  wrote:
> 
> On 1/15/21 7:25 AM, R. Victor Klassen wrote:
>> The mechanism looks like this: customer orders from our online store 
>> (typically) some items of ours and some of the neighbour’s.  Branding is 
>> clear on the store.  Twice a week we deliver orders.  On that day or the one 
>> before, we inform the neighbour what they need to supply (we have no 
>> inventory of theirs - they are responsible for informing us how much we can 
>> sell) and they bring it over.  We pay in cash the amount the customer will 
>> pay us, less a percentage.  The customer has already paid us through the 
>> online store.
>> Where it starts to look like bills and invoices is that the online ordering 
>> system provides us with what can be (fairly) easily converted (perl script) 
>> into an importable invoice.  But the online system, being 3rd party, has no 
>> idea that we have a mix of sales out of our inventory and commission sales, 
>> so the invoice contains both.
> 
> Okay, so this is more formal than I was thinking. Certainly, if you can make 
> this work by importing from a 3rd-party app, that is the best route.
> 
>> This looks somewhat cleaner than having an expense amount that later gets 
>> re-characterized.
>> Cleaner yet would be putting an income entry in a bill, but that’s not 
>> permitted.
> 
> 
> Probably because that would then be a charge to the neighbor, which is 
> usually done for a 'customer' rather than a vendor. (the devs seem to take 
> the approach that it is extremely rare for customers to also be vendors 
> and/or employees, or all three. From personal mom & pop small biz experience, 
> I beg to differ, but I understand trying to accommodate such cases might be a 
> bit messy for the code.)
> 
> You could possibly initially treat the commission as a discount from the 
> neighbor. I don't know if you can use the discount feature and have it hit a 
> proper income account, or if it needs a special contra-expense account that 
> you later balance out with income. Otherwise, you could maybe enter it as a 
> separate line-item.
> 
> Maybe ask a CPA, as it might work as a discount the whole way around and you 
> don't need to involve income accounts at all for it. (if you are tracking 
> COGS, it would reduce your cost, thus increasing income, as distinct from 
> revenue) This would be similar to 2/10Net30 terms (does anyone offer that 
> anymore?) where if you pay within 10 days, you can deduct 2% off the invoice, 
> otherwise you have to pay within 30 days to avoid late fees or interest. Such 
> terms are vendor discounts applied against inventory, and thus against COGS. 
> (and very likely tracked in their own account a la "Vendor Discounts" so you 
> can tell if you are taking advantage of them. Some business even track 
> available vs. utilized discounts for that reason.)
> 
> Since you are paying the neighbor for the merchandise and taking possession 
> of it, perhaps you should be booking it to inventory anyway. (again, a local 
> CPA can better answer that for your exact situation)
> 
> This kind of sounds like a 3rd party shipping and payment factor situation 
> (common in the furniture industry for example) where sometimes, the trucking 
> company takes possession of the merchandise legally, buying it (the invoice 
> less a percentage for the convenience) from the shipper, and then collects 
> the full amount from the retailer. This used to be common with owner/operator 
> single-rig truckers, but can still be found with small fleet operations.
> 
> Other than the manufacturer/wholesaler shipping on their own trucks, the 
> other scenario is the retailer takes legal possession at the shipping point 
> (known as "FOB shipping") and pays the shipper and trucking company 
> separately. The trucking company is merely custodian for the retailer's 
> product.
> 
> I know all of that gets off the main topic, but it may shed some light on how 
> you approach this.
> 
> Regards,
> Adrien
> 
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Re: [GNC] Commission sales

[Adrien Monteleone]

On 1/15/21 7:25 AM, R. Victor Klassen wrote:

The mechanism looks like this: customer orders from our online store 
(typically) some items of ours and some of the neighbour’s.  Branding is clear 
on the store.  Twice a week we deliver orders.  On that day or the one before, 
we inform the neighbour what they need to supply (we have no inventory of 
theirs - they are responsible for informing us how much we can sell) and they 
bring it over.  We pay in cash the amount the customer will pay us, less a 
percentage.  The customer has already paid us through the online store.

Where it starts to look like bills and invoices is that the online ordering 
system provides us with what can be (fairly) easily converted (perl script) 
into an importable invoice.  But the online system, being 3rd party, has no 
idea that we have a mix of sales out of our inventory and commission sales, so 
the invoice contains both.


Okay, so this is more formal than I was thinking. Certainly, if you can 
make this work by importing from a 3rd-party app, that is the best route.




This looks somewhat cleaner than having an expense amount that later gets 
re-characterized.
Cleaner yet would be putting an income entry in a bill, but that’s not 
permitted.



Probably because that would then be a charge to the neighbor, which is 
usually done for a 'customer' rather than a vendor. (the devs seem to 
take the approach that it is extremely rare for customers to also be 
vendors and/or employees, or all three. From personal mom & pop small 
biz experience, I beg to differ, but I understand trying to accommodate 
such cases might be a bit messy for the code.)


You could possibly initially treat the commission as a discount from the 
neighbor. I don't know if you can use the discount feature and have it 
hit a proper income account, or if it needs a special contra-expense 
account that you later balance out with income. Otherwise, you could 
maybe enter it as a separate line-item.


Maybe ask a CPA, as it might work as a discount the whole way around and 
you don't need to involve income accounts at all for it. (if you are 
tracking COGS, it would reduce your cost, thus increasing income, as 
distinct from revenue) This would be similar to 2/10Net30 terms (does 
anyone offer that anymore?) where if you pay within 10 days, you can 
deduct 2% off the invoice, otherwise you have to pay within 30 days to 
avoid late fees or interest. Such terms are vendor discounts applied 
against inventory, and thus against COGS. (and very likely tracked in 
their own account a la "Vendor Discounts" so you can tell if you are 
taking advantage of them. Some business even track available vs. 
utilized discounts for that reason.)


Since you are paying the neighbor for the merchandise and taking 
possession of it, perhaps you should be booking it to inventory anyway. 
(again, a local CPA can better answer that for your exact situation)


This kind of sounds like a 3rd party shipping and payment factor 
situation (common in the furniture industry for example) where 
sometimes, the trucking company takes possession of the merchandise 
legally, buying it (the invoice less a percentage for the convenience) 
from the shipper, and then collects the full amount from the retailer. 
This used to be common with owner/operator single-rig truckers, but can 
still be found with small fleet operations.


Other than the manufacturer/wholesaler shipping on their own trucks, the 
other scenario is the retailer takes legal possession at the shipping 
point (known as "FOB shipping") and pays the shipper and trucking 
company separately. The trucking company is merely custodian for the 
retailer's product.


I know all of that gets off the main topic, but it may shed some light 
on how you approach this.


Regards,
Adrien

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Re: [GNC] Commission sales

[R. Victor Klassen]

> On Jan 14, 2021, at 10:48 AM, Adrien Monteleone 
>  wrote:
> 
> The usual "I am not an accountant and this is not accounting advice" applies 
> here. The following is simply how *I* would approach this:
> 
And I’m not really asking about accounting, more the GnuCash mechanisms.

> Some questions would need to be answered first.
> 
> Are you taking possession of the goods from your neighbor, or is this just a 
> consignment type operation? (meaning, do you have any financial or legal 
> interest in the goods, can you walk away with them, or can they take them 
> back with no issue?) I understand this might be quite an informal 
> arrangement, but unless you are buying the goods from the neighbor, I 
> wouldn't think there is an occasion for entering a bill for them.

The mechanism looks like this: customer orders from our online store 
(typically) some items of ours and some of the neighbour’s.  Branding is clear 
on the store.  Twice a week we deliver orders.  On that day or the one before, 
we inform the neighbour what they need to supply (we have no inventory of 
theirs - they are responsible for informing us how much we can sell) and they 
bring it over.  We pay in cash the amount the customer will pay us, less a 
percentage.  The customer has already paid us through the online store. 

Where it starts to look like bills and invoices is that the online ordering 
system provides us with what can be (fairly) easily converted (perl script) 
into an importable invoice.  But the online system, being 3rd party, has no 
idea that we have a mix of sales out of our inventory and commission sales, so 
the invoice contains both.

> 
> I would think a holding/suspense liability account for the funds collected on 
> behalf of the neighbor would work, named something like 'Sales-Payable'. 
> (similar concept to sales tax collection) The full amount collected from the 
> end customer drops here first from their invoice. (posted against AR, which 
> itself is reduced as the end customer pays you.)
> 
> Result: Dr. AR, Cr. Liabilities:Sales-Payable

I was aware that I could not enter an expense account in an invoice, but hadn’t 
realized that liabilities accounts were permitted.

> 
> Do a manual transaction periodically or each time, reducing the holding 
> account balanced against an income account. (Dr. Sales-Payable, Cr. 
> Income:Commission)
> 

This looks somewhat cleaner than having an expense amount that later gets 
re-characterized.
Cleaner yet would be putting an income entry in a bill, but that’s not 
permitted.

> 
> 
> 
> Regards,
> Adrien
> 
> On 1/13/21 12:09 PM, R. Victor Klassen wrote:
>> Since early in the pandemic we’ve been selling some of our neighbour’s 
>> stuff, charging a few percent commission, mostly to cover credit card fees.
>> Our income here is really just the commission since the end customer knows 
>> it isn’t ours and we aren’t providing any value add othe than facilitating 
>> the order and delivery process.
>> The only way I have figured out to account using the business features is to 
>> enter an invoice to the end customer and a bill for the full amount from the 
>> neighbour.  Then I have to hack around in the income and expense accounts to 
>> make the difference between the two show up as commission.
>> This is because I can’t put an income account in a bill.
>> Is there a more elegant way of handling this?
> 
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Re: [GNC] Commission sales

[Adrien Monteleone]

I forgot to mention, you can skip that last bill from the neighbor if 
you prefer and just enter a manual transaction paying them like so:


Cr. Bank/Cash/etc.
Dr. Sales-Payable

Regards,
Adrien

On 1/14/21 9:48 AM, Adrien Monteleone wrote:
The usual "I am not an accountant and this is not accounting advice" 
applies here. The following is simply how *I* would approach this:



Some questions would need to be answered first.

Are you taking possession of the goods from your neighbor, or is this 
just a consignment type operation? (meaning, do you have any financial 
or legal interest in the goods, can you walk away with them, or can they 
take them back with no issue?) I understand this might be quite an 
informal arrangement, but unless you are buying the goods from the 
neighbor, I wouldn't think there is an occasion for entering a bill for 
them.


I would think a holding/suspense liability account for the funds 
collected on behalf of the neighbor would work, named something like 
'Sales-Payable'. (similar concept to sales tax collection) The full 
amount collected from the end customer drops here first from their 
invoice. (posted against AR, which itself is reduced as the end customer 
pays you.)


Result: Dr. AR, Cr. Liabilities:Sales-Payable

Note, if transactions take place on the spot, and they don't need some 
other 'invoice' than their credit card receipt, you can do this with 
manual transactions and avoid the Business Features and AR. The Autofill 
& Duplicate Transaction function can help cut down on data entry.


Do a manual transaction periodically or each time, reducing the holding 
account balanced against an income account. (Dr. Sales-Payable, Cr. 
Income:Commission)


If you didn't issue invoices in the first place, but used manual 
transactions, you can use a single transaction for this at each sale, 
but you'll have to employ some math. (GnuCash can do math in the amount 
fields)


Dr. Bank/Cash/etc. (however you immediately received funds)
Cr. Income:Commission (entered as the sale amount * commission %)
Cr. Sales-Payable (amount collected, minus the commission split, if you 
enter splits in this order, this amount will already be filled in.)


Then periodically or as needed, issue a bill 'from' the neighbor (as a 
vendor) for the amount you collected for them minus the commission, 
which should be the balance of the Sales-Payable account. (Dr. 
Sales-Payable, Cr. AP)


Then pay them the balance of funds. (Dr. AP, Cr. Bank/Cash, etc.)


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Re: [GNC] Commission sales

[Adrien Monteleone]

The usual "I am not an accountant and this is not accounting advice" 
applies here. The following is simply how *I* would approach this:



Some questions would need to be answered first.

Are you taking possession of the goods from your neighbor, or is this 
just a consignment type operation? (meaning, do you have any financial 
or legal interest in the goods, can you walk away with them, or can they 
take them back with no issue?) I understand this might be quite an 
informal arrangement, but unless you are buying the goods from the 
neighbor, I wouldn't think there is an occasion for entering a bill for 
them.


I would think a holding/suspense liability account for the funds 
collected on behalf of the neighbor would work, named something like 
'Sales-Payable'. (similar concept to sales tax collection) The full 
amount collected from the end customer drops here first from their 
invoice. (posted against AR, which itself is reduced as the end customer 
pays you.)


Result: Dr. AR, Cr. Liabilities:Sales-Payable

Note, if transactions take place on the spot, and they don't need some 
other 'invoice' than their credit card receipt, you can do this with 
manual transactions and avoid the Business Features and AR. The Autofill 
& Duplicate Transaction function can help cut down on data entry.


Do a manual transaction periodically or each time, reducing the holding 
account balanced against an income account. (Dr. Sales-Payable, Cr. 
Income:Commission)


If you didn't issue invoices in the first place, but used manual 
transactions, you can use a single transaction for this at each sale, 
but you'll have to employ some math. (GnuCash can do math in the amount 
fields)


Dr. Bank/Cash/etc. (however you immediately received funds)
Cr. Income:Commission (entered as the sale amount * commission %)
Cr. Sales-Payable (amount collected, minus the commission split, if you 
enter splits in this order, this amount will already be filled in.)


Then periodically or as needed, issue a bill 'from' the neighbor (as a 
vendor) for the amount you collected for them minus the commission, 
which should be the balance of the Sales-Payable account. (Dr. 
Sales-Payable, Cr. AP)


Then pay them the balance of funds. (Dr. AP, Cr. Bank/Cash, etc.)


Regards,
Adrien

On 1/13/21 12:09 PM, R. Victor Klassen wrote:

Since early in the pandemic we’ve been selling some of our neighbour’s stuff, 
charging a few percent commission, mostly to cover credit card fees.

Our income here is really just the commission since the end customer knows it 
isn’t ours and we aren’t providing any value add othe than facilitating the 
order and delivery process.

The only way I have figured out to account using the business features is to 
enter an invoice to the end customer and a bill for the full amount from the 
neighbour.  Then I have to hack around in the income and expense accounts to 
make the difference between the two show up as commission.

This is because I can’t put an income account in a bill.

Is there a more elegant way of handling this?


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