Applying business claim credit to client invoice

MartyHansen

We invoiced a client for a job, that ended up being paid for under our business insurance as neither client nor us was at fault, & product manufacturer would not accept fault. So we had to do another invoice at wholesale price less the gst & they paid that less the excess. How do I process the payment again the invoice so it clears it as fully paid, so far I just have entered the payment, so the $1000 excess is still on the amount outstanding. Also what do I do with the original client invoice. Do I just write off the unpaid bit as a bad debt? Or the whole invoice? Thank Marty

Acctd4

I’m a bit confused - Can you clarify who paid what ? 🤔

MartyHansen

The Business Insurance paid for a new invoice I had to do at wholesale prices, less gst, less our excess.

MartyHansen

Did anyone have an answer for me?

GerryWinter

Could you not just delete the invoice that was not relevant

Acctd4

@MartyHansen

Are the Insurers actually "paying the invoice" (eg they required the invoice to be made out to & sent to them) or are they actually just paying a net settlement claim of that value ?

MartyHansen

The insurer asked for a revised quote as above, and settled the claim, less our excess.

Acctd4

Hi @MartyHansen

OK … If you're on a Cash basis for GST reporting (BAS), delete the Tax Invoice. If you're on Accruals ("Non-Cash" for BAS), create & apply a matching Adjustment Note (eg using the exact same Item(s), tax code & amounts as on the invoice)

This transaction isn't included in your BAS so you can either enter the funds received as a Make Deposit directly to your bank account, or enter a Sales Receipt instead - for the net amount received - using NO tax codes 😊

MartyHansen

so the original invoice that includes the GST that we had to pay on the parts etc will be still reflected in the BAS, as GST paid. But the new invoice non GST , is just a deposit for the one amount that was actually paid to us as a settlement of the claim? Do I have to reflect the Insurance Excess anywhere that has been deducted? I think the Accountant would want that classed as other income maybe ???? thanks so much for replying to me.

Acctd4

Yes, you've claimed the GST paid on the original Bill which is why the insurer only refunds the net (excl GST).

Ah, forgot about the excess though !

In that case, create an Invoice - for the FULL amount (eg including the excess) rather than a Sales Receipt. Receive Payment in full to a Clearing bank account. Out of that Clearing account, enter a Write Chq to the Insurer for the Insurance excess, posting it back to your insurance expense account. If you're using Simplified BAS - eg you only report 3 figures: G1 (Sales) 1A (GST Collected) & 1B (GST Paid) - you can either code the excess as NCF or leave the tax code blank, as expenses aren't reported.

You'll now be left with the actual NET balance you received from the Insurer in the Clearing account. Enter a Transfer Funds or Write Chq to simply transfer this net deposit amount out of the Clearing account, into your bank account.

NOTE: A "Clearing" account is just a dummy (pretend) bank account for the purpose of receiving & making a payment with the same funds (contra)

😊

Acctd4

Just dawned on me … you can actually still use a Sales Receipt (rather than Tax Invoice & Receive Payment). Just make sure it Deposits To the Clearing account still - that’s the crucial part! 😁

MartyHansen

Thank you so much for all your time & help. Your answer makes sense and addresses my concerns with GST. I do everything here by the book, it's very important to me. Thankyou Shaz. I will give that a go today. Have a great Tuesday. 😊