Paying commissions on accommodation sales to a booking service

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I have an accommodation business (motel) and I get bookings through various Internet booking services.  Whilst some of them invoice me for their commission at the end of each month (which is straightforward to process as an expense), some providers give me a virtual credit card number for the nett payment after deducting their commission.  When I record the sale, I want to show the room at full cost, then show the commission deduction so that I have the correct nett sales receipt and I also have the commission allocating correctly as an expense in the Chart of Accounts.  Can someone tell me how I can achieve this via Sales Receipts?
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Barb Evans

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Posted 5 years ago

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Kevin Russell, Accredited Partner

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Yes. Yes I can.
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Pat Killalea

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Hmm. My issue is very similar and I am not entirely happy with how I handle it. I too have accommodation and this how I receive payments in Sales Receipts. I record the full amount for the booking and then under an Item called "Booking Fees" I record a negative amount for the commission. I have recently discovered that this negative amount does not show up in Expenses but I believe that the nett result at least is correct. The negative amount also includes a negative GST amount.  When I pay an invoice directly to a website for commissions I use the same Item "Booking Fees" and THIS time it does show up as an expense. I can't quite work that out and help would be appreciated.
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Kevin V. Russell, Accredited Partner

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The reason the negative amount does not show up as an expense is because you have tied the item to a revenue account. Here's your problem with the way Reckon handles this. You cannot have two tax codes on the same transaction. Graham mate, are you there? You're the guru. 
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Pat Killalea

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But is it really a problem for me? I mean does it matter that the negative amount does not show up as an expense?( On the other hand it would be nice to see the total of those booking fees.) If it is a problem that should be fixed how might I do this please?
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Kevin V. Russell, Accredited Partner

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Oh and FYI we have the same problem recording daily receipts from a cash register tape where eftpos is involved because what hits the bank is always the net sales figure i.e. net of merchant fees. You can't record eftpos sales and merchant fees on the same sales receipt because once again, Reckon forces you to have different tax codes for the debit and credit sides of the ledger. 
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Charles van Rotterdam

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Guys you need to use a Clearing account; Sales Receipt to Clearing (Bank) account then Cheque from Clearing account for commission then transfer fro Operating account to Clearing account to zero it out
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Pat Killalea

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Struth! that's too much for me to follow. Do I really need to work that out or am I ok with what I am doing?
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Kevin V. Russell, Accredited Partner

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Charlie mate, seems a lot of overhead for a simple transaction. 

I agree with Charles guys .....

I have a client in this exact situation & this method works like a dream.

In order to correctly record the (1) Income, (2) Expense & (3) (Net) Deposit into your bank account, the process involves 3 transactions .....

Firstly, create a new "Bank"-type account called "Clearing"

  1. Record Income - Record the FULL amount via Sales Receipt (but "Deposit To" your newly-created "Clearing" Bank account.  (BEFORE you "Save & Close" this Sales Receipt, "Memorise" it!!! - Edit>Memorise Sales Receipt.  Give it a "Name" eg "Accom S/Rcpt", select "Don't remind me", then "OK")


     2. Enter a "Write Cheque" (from the "Clearing" bank account) for the online booking fees/commissions (BEFORE you "Save & Close" this Cheque, "Memorise" it!!! - Edit>Memorise Cheque.  Give it a "Name" eg "Bkg Fee", select "Don't remind me", then "OK")


You have now correctly recorded the "Income" & "Expense" & will be left with a balance in your "Clearing" bank account that matches the net amount of your deposit .  (You can either enter this as  "Make Deposit" transaction, with "Deposit to" being to your actual bank account, with the Clearing bank account in the "Account" column OR .....)


     3.  Enter a "Write Cheque" (from the "Clearing" bank account) posting to your actual bank account (NO TAX CODE!) for the correct (net) deposit amount you actually received.  (BEFORE you "Save & Close" this Cheque/Deposit, "Memorise" it!!! - Edit>Memorise Cheque/Deposit.  Give it a "Name" eg "Net Dep", select "Don't remind me", then "OK")


  • Go to your "Memorised Transaction List" (Lists>Memorised Transaction List)
  • Create a new "Group" (Right-click anywhere in the window & select "New Group")
  • Give this group a relevant name eg "Accom" & select "Don't remind me"
  • Move your newly created memorised Transactions "Under" this Group (You can either drag them by hovering your mouse over the diamond at the beginning of the name, then when your cursor changes to a double-headed arrow cross, hold down your mouse & "drag" the line under the new group OR right-click on each of the 3 memorised transactions, select "Edit memorised transaction", select "With Transactions in Group" & choose your new Group name from the dropdown list)
You have now accurately set up these transactions to record correctly whenever you need them, without having to remember the above!

Once you have a look at the registers & the P&L, you will see that this method actually makes sense.

Hope this helps .

(Edited)
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Pat Killalea

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Wow! That looks like something I can follow thanks Shaz. Thanks for taking the time to explain it simply.  But do I need to do this? What is the advantage over what I have been doing?
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Sally McIntosh, Accredited Consultant, Accredited Partner

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Hi Pat,

This is exactly how it should be done, I follow the same method for rental properties too. Except for step 3 where you write another cheque, I just use the transfer funds feature.

The reason you do it this way is so you have the correct detail everywhere. Correct income, correct expenses, correct bank account, correct tax codes, etc.

It does seem long winded, but it is actually quite simple!

Kind regards,

Sally McIntosh (Sally@samsolutions.com.au)

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Pat Killalea

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Thank you Shaz and Sally. I will definitely try that out and let you know how it goes. Happy new Year.
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Graham Boast, Accredited Partner

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Hi Pat

I would just like to add a little to this discussion to give you my perspective on it.

The process is necessarily long-winded to fulfill the requirements of the GST regulations for Recipient Created Tax Invoices (RCTIs).  Essentially, you cannot just record the Net Income; you must record the Gross Income as income and the Expense component as an expense.

The only way to correctly do this in Reckon is via a clearing account, as per the above advice of my learned colleagues.  

My step by step guide is here:
http://reckonhelp.com.au/Help/QuickBooksHelp/Recipient%20Created%20Tax%20Invoices%20-%20Sellers%20Pe...

For a situation like yours, where you potentially have a lot of transactions with a small expense component, I use the following method.

Create the Clearing account: In my paper a bank account called "RCTI Clearing" but you may prefer to call yours "Commission Clearing".

Create an Item called "Commission Clearing" linked to the "Commission Clearing" Bank Account.  Tax Code Blank or "X" see http://reckonhelp.com.au/Help/QuickBooksHelp/Understanding%20and%20Using%20QuickBooks%20Tax%20Codes....



You can then use item in a Sales Receipt .  Note that if you use a % in the Rate column, you need to increase it by 10% to factor in the GST (2% = 2.2%, 3% = 3.3% etc - here 2.5% become 2.75%, but it is still 2.5% of the gross).




Note that the net amount goes directly to the Bank Account.


The other way to save time is to not process each transaction's commission, but to process one "write cheque" at the end of the month for the total month's commission. (this figure may be reconcilable with a monthly statement from the accommodation service.

Say the total commission for the month is $77, then you would use "write cheque" from the Commission Clearing for $77 Allocation Account = Commission Paid, Tax Code = NCG.  The crucial issue here is that at the end of the month, the balance of the clearing account should be zero.


Hope this helps


Graham Boast 0409317366
Reckon Accredited Consultant
graham@reckonhelp.com.au
http://reckonhelp.com.au/remotesupport.htm



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Kevin Russell, Accredited Partner

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Graeme mate, doesn't it depend on how I am invoiced for the commissions? Can you point me to the regulations which support your approach. Happy ny Graeme
(Edited)
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Graham Boast, Accredited Partner

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Hi Keven

From GSTR 2000/10.

Set-off
50. It is common for a recipient (who has issued an RCTI) to supply services in relation to the goods or services that are the subject of the RCTI, for example, analysing and testing sugar by a mill, and the provision of services required for processing cotton. It is also common for the recipient to deduct the charges for these services from the price payable by it to the supplier, paying the net amount to the supplier.

51. Even though there is a close connection between the supply to the recipient and the supply made by that recipient, each is a separate supply and the GST law does not allow the price for one supply to be reduced by the price of another. The GST included in the price of each supply must be included in the calculation of the net amount by each supplier and each recipient can then claim input tax credits for that tax.

Graham
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Kevin Russell, Accredited Partner

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Ni9ce work Graham. Now take the rest of the day off;)
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Graham Boast, Accredited Partner

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no such luck
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Ken Nakanishi

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Hello,

I'm in a similar situation, but I want to make the booking keeping component a bit easier. My clients (property owners) receive a Sales Receipt/Tax Invoice every month, which will have itemised items such as the accommodation fee (credit), Commission (debit) and general expenses (cleaning fee and misc - debit). This normally works out the balance that I need to pay towards my client.

I also use Reckon to put together invoices for the renters. So can I assign invoices to a particular property as a credit note?? Also so that when my auto bank reconciliation is done, I can track that amount easily.  Then in this case, every month when I put together the Sales Receipt/Tax Invoice, it opens with credit notes (which are the total amount of accommodation income), I can then apply my commission % and add billable hours (that I have already got link via time sheets).

If I can assign all the invoices and expenses to each property/client, that would make it a bit easily for me to manage...

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