How can I show a loan paying a supplier invoice?

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  • Updated 1 month ago
How can I  show a loan paying a supplier invoice?

We have borrowed some money to pay some invoices from a single supplier. 

The premise is that the loan provider pays our supplier and we pay our loan back in instalments. 

I have set the loan up in the chart of accounts as an 'other expense'. I know how to show the payments from our bank account paying off the loan as a journal entry so I can show what supplier the payments relate to. However, this doesn't deduct the amount off of the supplier invoice. 

I cannot see how to show the loan paying the supplier invoice either in the chart of accounts or the payment screen.

Does any one know if this is possible in Reckon? Or should I just modify the invoice entry to show the whole amount and that it is paid and to refer to the loan?

Thank you
Regards,
Jayne
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Posted 2 months ago

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Hi Jayne

 

Is this similar to Insurance Premium Funding & Invoice Factoring, involving Fees &/or Interest components?  (If so, yes this is possible & works very well in RA)

 

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com


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Nicola

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Hi Jayne

You have two options:
1) set up a cheque account (called Loan xxx) and either process the entire loan under this or at the end of the loan/financial year (even monthly) you can journal whatever has been "paid by" this cheque account, which will bring this account to zero whilst increasing the loan account to match what you owe them.  By doing the whole thing as a cheque account it still works the same but if you are doing it as a long term option, it's not ideal as it then doesn't show as a liability on your BS for your accountant (unless you journal the balance as mentioned above).

But this is most likely the better option: 
2) do a journal - one side is against the loan account (credit) and then the other goes to accounts payable and then put the supplier name in the "Name" field in the journal as the debit line.  If the loan company has paid multiple supplier accounts, you will need to make them all individual lines - so one credit line for the total to the loan account but then say 4 debit lines to the various supplier account, which then balance to total amount paid.  Once you have saved the journal you can go into pay bills and the 'credits' will be sitting there to allocate against the individual suppliers you have had the loan account pay.

Your own payments to the loan company then stay the same.

Thanks
Nicola
Hi Nicola,

I remember doing something similar in the past to your option two. 

So I have done the first part - created a journal with my supplier listed as 'Payee', under that the payment is allocated from the business account because that's where the repayment is coming from and then sliding over to the 'memo' section I just made a note of what the payment is for.

The amount is listed as a 'decrease' against the loan so it brings down the loan total. 

When I go to payments screen there is no 'credit' to apply against the invoice so I must have missed a step.

** I originally didn't realise that this was how the invoice was being paid off on the system. Now that you mention it I understand this process. But obv I have done something wrong or missed something. Can you help at all?

Thank you :) I appreciate it. 

Cheers
Jayne 
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Nicola

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Hi Jayne

You need to do this as two separate transactions - one is when you pay the loan company back - keep that as your existing journal.
Then the second is create a new journal for each time the loan company pay a supplier invoice (or multiple suppliers) on your behalf.  This is when your loan balance will increase but your opposite side is paying off the relevant supplier bills.
In this journal, you need to use Accounts Payable in the "Account" field and then put the specific supplier name in the "Name" field - it must match where the supplier bill has been put to.
Once you have done this, it will then appear as a credit in Pay Bills - but you will need to click on the supplier bill to be able to see the credit, then from there you just allocate the credit.  So no actual payment (or rather a zero) amount will appear in the Amt. To Pay section.
Cheers
Nicola

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Kevin Russell, Accredited Partner

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You don't need a journal entry. Set up a payment type called loan and attach it to the loan account. Easey peasey. Use the payment type to pay the loan. Call me if you get stuck 0407744914
(Edited)
Hi Kevin,

That won't work in this instance. The payment from the loan account would draw it down, which means I wouldn't be able to show the transfer of the funds from the business account to the loan account which is the account that is actually paying the loan. 

This would be the same as paying an invoice from the business account and having that transaction showing up in the business account ledger as a payment which draws down the business account and pays off that invoice. 

I don't want to do that. I need to show the business account drawing down the the loan. 

What Nicola said makes sense. I have obvious just missed something to have the credit show that pays off the invoice. 

Thanks
Jayne
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Nicola

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Hi Kevin
Out of interest how / where can you set up new Payment Type?  I know where you can add in new Payment Methods but as far as I have found these can only be linked to existing Payment Types and I can't see where you can set up new ones - which in your suggestion would link to a loan account or similar?
Would be good to know for any future times when it would work.
Many thanks
Nicola
Nicola, 

If you go Lists - Customer and supplier Profile Lists - payment method list and it shows you all your payment methods. I think you just add a new one from the bottom left hand field that says 'payment method' at the bottom of the page and just go 'new'.

I didn't test this so perhaps someone else has another solution for you but you can give it a go and I guess you just delete or make it inactive if it didn't provide the result you wanted. That is at least where you can view the payment methods set up.
Hi Rhodes

cheat and set up a credit card liability called the loan, pay the bills via paybills from credit card account.

When you pay the loan off pay it off the credit card
(Edited)
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Kevin Russell, Accredited Partner

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You don't have to "cheat", if you understand the accounting it's very easy.

Great idea - I agree with Kwikbooks!

For this particular scenario, this method achieves all the necessary (accounting) outcomes:

 

  • The Loan is correctly reflected as a Liability on the Balance Sheet
  • The Loan can be used to directly “pay” the Invoices (Bills) it represents via “Pay Bills”
  • Just like an actual Credit Card, the Loan can be “paid off” (reduced) via a “Write Chq” payment (directly from the main account posting to the Loan - NO tax code!)

 

 

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com

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Kevin Russell - thanks you just made my argument for me...  if you understand the accounting it's very easy.'.... the community is for those who don't, so work-arounds (cheats) are there to make life easier for those who don't. 
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Kevin Russell, Accredited Partner

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Correction this community for people who wish to implement Reckon correctly. It's Not the place for accounting advice. It's barely the place for bookkeeping advice. Do you hold PI insurance? I know I do.
It is also about assisting people who don't have accounting background, can't cope with jnl entries, just because there is a work around instead of a jnl entry does not make it incorrect, it is a liability account, it can be paid off like a loan, it is a win win, maybe the person who wrote the manual didn't think of it either.  

You can jump up and down all you like in the end the accounting is correct.  Do you hold PI Insurance??