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Set up Quickbooks #154

Closed patcon closed 4 years ago

patcon commented 4 years ago

This initial comment is collaborative and open to modification by all.

Task Summary

🎟️ Re-ticketed from: #
🗣 Loomio: N/A
📅 Due date: N/A
🎯 Success criteria: We are ready to do our accounting with quickbooks, and feel confident we're doing it correctly.

...

cc: @hyphacoop/finance-wg

To Do

patcon commented 4 years ago

Shared by @YurkoWasHere in chat: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it454/archived-business-transactions-prior-incorporation.html

EDIT: I later found: https://turbotax.intuit.ca/tips/deductible-business-start-up-costs-6184

YurkoWasHere commented 4 years ago

Review new accounts created

Decide what to do with Interest prior to aug1/2019

YurkoWasHere commented 4 years ago

HST for NonProfits:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4081/gst-hst-information-non-profit-organizations.html

benhylau commented 4 years ago

Moved to https://github.com/hyphacoop/organizing/issues/120

patcon commented 4 years ago

Link shared by yurko in chat: https://www.avalonaccounting.ca/blog/shareholder-loan

Also migrated @YurkoWasHere's suggested review tasks from chat

Saved for later review: https://quickbooks.intuit.com/learn-support/en-ca/sales-tax/when-to-use-sales-tax-e-exempt-vs-z-zero-rated-tax/00/260620

patcon commented 4 years ago

Added a todo for setting up taxes. Is accrual vs cash and filing frequency a big decision, or something we can decide on our own as finance WG?

patcon commented 4 years ago

Tentative to dos from finance WG

benhylau commented 4 years ago

Multi-currency invoicing

Turns our QB support for multi-currency (which include invoicing) is only available in Essentials and above, so we don't have it unless we upgrade. Even then, the feature seems quite restrictive. For example, if we need to bill one customer in different currencies for different projects, we basically need to create different customers (e.g. ABC Tech, ABC Tech (USD)) because the currency is associated with customer. This probably is okay for our current purpose, but I feel committing ourselves to pay more money per month for something quite restrictive may be a bad idea, although with Essentials we do get multi-user, which may be useful.

An alternative is we make only CAD receipts, but put the native currency info into the description:

Description QTY RATE AMOUNT
Software development for Aug 2019 (10.00 @ USD 50.00 = 500.00) 10 66.5 665

Include a line in the end that says:

Please pay CAD 665.00 or USD 500.00

Then include TransferWise USD payment info and Desjardins/TransferWise CAD payment info in the footer.

@hyphacoop/finance-wg thoughts?

YurkoWasHere commented 4 years ago

Yep sounds about right :(

Trying to do this in multi currency without proper support from the accounting software will create chaos. especially when it comes to HST. Remember HST is "paid" on when we invoice NOT on when we get paid.

I think your way @benhylau is the best way forward currently, where the books themselves just deal in CAD.

I think if we send the invoice as a estimate of how much it would be after conversion. (ie 665.00) Then once the payment goes through we update the invoice (with an additional line) to indicate the correct amount after conversions and that way we balance the books.

Question: we are not keeping the money in transfer wise right?

YurkoWasHere commented 4 years ago 
* [ ]  regroup interest charges to incorp date as initial loan

If interested charges are "initial loan" then who gets that money back?

💭 don't think this is the right category

YurkoWasHere commented 4 years ago

I later found: https://turbotax.intuit.ca/tips/deductible-business-start-up-costs-6184

Usually Small Business != Corporation Although I'm not 100%, i don't think this applies to corporations

patcon commented 4 years ago

Although I'm not 100%, i don't think this applies to corporations

The example they use is a brick and mortar storefront, which I believe would be just as likely to be a corporation, no? Also, the CRA links at bottom defines a "business" very generally, and direct readers to consider a corporation. Though open to idea that what you're saying is correct, I feel they'd make the distinction more clear if the article didn't apply to corporations...?

patcon commented 4 years ago

@hyphacoop/finance-wg thoughts?

Thanks Ben! I'm easy on this, since y'all working on Aether know best how this client prefers.

Having said that, here are my thoughts for your consideration:

patcon commented 4 years ago

Question: we are not keeping the money in transfer wise right?

@YurkoWasHere Not sure if it answers fully, but there's something in Finance section of our handbook about it:

Our TransferWise account does not require multiple signatures, and the Finance WG is responsible for transfering money into our main Desjardins account when accumulated funds exceed a CAD 10,000 threshold.

I'm assuming we'll likely do it much sooner, and that this is just saying we'll not let it go higher than that. We should reword it if you have suggestions on how to clarify.

YurkoWasHere commented 4 years ago

@YurkoWasHere Not sure if it answers fully, but there's something in Finance section of our handbook about it

Yes that does answer the question. Thanks.

However without being able to record money in a USD account (transfer wise being a new account) in QB the process may need to be revised.

patcon commented 4 years ago

If interested charges are "initial loan" then who gets that money back?

Could we just divide the interest amount between everyone, and add it to the amount we each supposedly initially loaned?

patcon commented 4 years ago

@YurkoWasHere: However without being able to record money in a USD account (transfer wise being a new account) in QB the process may need to be revised.

I believe if we used the amount lock feature as per my suggestion, that brings the money directly into our CAD account on TransferWise. So we'd have nothing coming in as USD. Correct me if I'm wrong Ben. (But also, yes, mentioning USD seems a good idea!)

YurkoWasHere commented 4 years ago

@YurkoWasHere: However without being able to record money in a USD account (transfer wise being a new account) in QB the process may need to be revised.

I believe if we used the amount lock feature as per my suggestion, that brings the money directly into our CAD account on TransferWise. So we'd have nothing coming in as USD. Correct me if I'm wrong Ben. (But also, yes, mentioning USD seems a good idea!)

As long as the funds are stored in CAD this should work!

thanks!

patcon commented 4 years ago

Summary: Shareholder Loan: Understand it and Avoid Trouble with the CRA

Main thoughts:

patcon commented 4 years ago

Started adding bookkeeper/accountant questions here: https://github.com/hyphacoop/organizing/issues/122

patcon commented 4 years ago

Finds related to pro forma invoices that @YurkoWasHere mentioned in chat:

USD and Invoices: She had a novel solution for this issue. In the past when dealing with multi currency she would do a PRO FORMA invoice instead of an invoice.

This way the invoice is issued, the payment is made, then we can adjust the proformal invoice with the correct canadian amount and issue a final invoice with all the information updated and correct

Tutorial for proforma invoices in Quickbooks as "estimates": https://www.arbitrue.com/blog/how-to-issue-estimates-and-pro-forma-invoices-in-quickbooks/

In QuickBooks, estimates have a similar list of default elements to invoices with some differences.

  • Due dates and payment terms, such as Net 30, are not available

https://quickbooks.intuit.com/ca/resources/invoicing/5-things-you-need-to-know-about-invoicing/

Not stating the terms of payment on your invoice is similar to handing someone a blank cheque;

https://debitoor.com/blog/5-things-to-know-about-proforma-invoices

Because they don’t meet the requirements of a true invoice, proforma invoices don’t carry the same legal weight, which means that:

  • Customers aren’t required to pay the amount listed on a proforma invoice
  • The total amount due shouldn’t be recorded under a customer’s accounts payable or a supplier’s accounts receivable
  • You can’t use proforma invoices to reclaim VAT. 👈 "don't need to consider HST yet?"

tl;dr - Seems that pro forma means "this is not yet due" in legalese. So despite advice, thinking we could prob stick with our original strategy of "issue prelim invoice, and change after"?

dcwalk commented 4 years ago

@patcon We aren't a shareholder corporation, so while those concerns flagged by CRA make sense, we aren't in the same position in terms of a relationship of owners to shareholders by making a cash loan.

That might not make a difference with respect to the "worst" implication for us: double income, but the amount is so low I'm not sure an extra $150 being reported as income is going to significantly impact anyones return...?

benhylau commented 4 years ago

re: shareholder loan +1 to what @dcwalk said re: amount being low. I think further researching it and having everyone to read it is not a good use of our time. My proposal is we book it the way @YurkoWasHere has done, then let our bookkeeper/accountant decide whether adjustments need to be made when it comes time for filing.

benhylau commented 4 years ago

@YurkoWasHere idk what is the difference between these two from perspective of bookkeeping:

  1. Issue invoice, receive payment, adjust invoice
  2. Issue pro forma invoice, receive payment, create invoice

I know @patcon is concerned that pro forma isn't legally binding. I am personally not super concerned with current clients not paying, but I wonder if it may confuse some finance departments of larger future clients. Like if a big org needs to pay us, and they forward the pro forma to their finance dep, will they be like "huh? can you send me the final invoice?"

I have paid pro formas before, but they are usually to purchase stuff, which means the invoices were never "due", as they wouldn't ship me the thing until it's paid :)

I am happy to start with either 1 and 2, then if the method we use create confusion / accounting nightmare, we switch to the other. I think they are pretty close that it doesn't have to be a big discussion, and would propose to let the person in charge of the books set up, aka. @YurkoWasHere, to make this decision. @patcon are you okay with that?

YurkoWasHere commented 4 years ago

Issue invoice, receive payment, adjust invoice

Looks shady from book keeping practice. I think usually adjustments like that you issue a NEW invoice or issue a credit something-or-another to adjust out the balance for the client.

This may be a good question to the book keeper during the review.

patcon commented 4 years ago

Rodica said that the way we're doing shareholder loans looks fine.

patcon commented 4 years ago

Cash vs Accrual resource for agencies: https://agencymanagementinstitute.com/why-do-agencies-use-the-accrual-method-of-accounting/

Asked question in Coops Tech forum for later: https://community.coops.tech/t/cash-vs-accrual-what-accounting-method-do-you-use/1941