# Accounts Receivable

Accounts Receivable (or A/R) refers to products or services provided by your company for which payment has not yet been received.

## Overview of Business Features

The accounting needs of a business are quite different from that of a person. Businesses have customers that owe money, vendors which are owed money, employee payroll, more complex tax laws, etc. &app; offers business oriented features to facilitate these needs.

Accounts Receivable (A/R) are used by businesses to record sales for which they are not immediately paid. Accounts Payable (A/P) record bills that they have received, but might not pay until later. These types of accounts are used primarily when you have a lot of bills and receipts flowing in and out, and do not want to lose track of them just because you do not pay or get paid right away. For most home users, A/R and A/P are too complicated to be worth the effort.

## Basic Concepts

Accounts Receivable (or A/R) refers to products or services provided by your company for which payment has not yet been received. This is represented on the balance sheet as an asset, because the expectation is that you will receive payment soon.

## Initial Setup

To set up &app; to handle accounts receivable for a company two preliminary things must be done. The first is to build an appropriate Account Hierarchy and the second is to register the company in &app;.

### Account Setup

There are many different ways to set up a business account hierarchy. You can start with the Business Accounts setup which is available from the New Account Hierarchy assistant, or you could build one manually. To access the prebuilt Business Accounts, start &app; and click on File New File and proceed until you see the list of available accounts, select Business Accounts.

The prebuilt Business Account hierarchy will not meet your needs exactly. You will need make adjustments for the hierarchy to function well with your particular situation. It should be close enough that it is recommended you begin with it.

Accounts Receivable (or A/R) refers to products or services provided by the company on credit for which payment has not yet been received. This is represented on the balance sheet as an asset, because you expect to receive payment soon. To use &app;’s integrated accounts receivable system, you must first set up an account (usually a sub-account under Assets) defined with account type A/Receivable. It is within this account that the integrated A/R system will place transactions.

    Basic A/R Account Hierarchy:

    -Assets
       -Checking
       -Accounts Receivable
    -Income
       -Sales

You need to add additional asset, expense, and income accounts to this hierarchy for it to be useful. The important aspects of this hierarchy are the use of an income account and the Accounts Receivable asset account, with account type set to A/Receivable.

You do not need to create an individual A/R account for each customer. &app; keeps track of customers internally and provides per-customer reports based on the internal tracking.

### Company Registration

After you have built the account structure, register the &app; file as belonging to your company. To register your company, select File Properties:

- Enter the name of your company along with contact information such as your phone number, fax number, e-mail address and website URL.

- Enter your company’s tax payer id number in the Company ID field.

- Select default tax tables applicable to your most common customers and vendors.

## System Components

&app; has an integrated accounts receivable system. The transactions generated by the A/R system are recorded within the Accounts Receivable account. You generally do not work directly with this account. You generally work with the four integrated &app; A/R application components available through the Business Customer sub-menu. These four components are:

- Customers are people or companies to whom you sell products or services on credit.

- Invoices represent the physical invoice you send to a customer to request payment. This invoice contains an itemized list of things you sold.

- Jobs (optional) is where you register Customer Jobs. Jobs are a mechanism by which you can group multiple invoices to a particular customer.

- Process Payments is used to register payments you received from a customer.

The following sections introduce the individual components in more detail.

## Customers

Customers are people or companies to whom you sell goods or services. They must be registered within the A/R system.

### New

To register a new customer, enter the menu Business Customer New Customer. Fill in customer information, such as Company Name, Address, Phone, Fax, etc. Below is a list of the other options:

- Identification - Customer Number - can be any number by which you would like to refer to this customer. You may leave it blank and a number will be chosen automatically.

- Identification - Active - differentiates active customers from inactive ones. This is useful when you have many past customers, and you want to see only those marked active.

- Billing Address - Name - is the contact name of the person to receive the invoices.

- Notes - records any additional comments about the customer.

- Billing Information - Currency - specifies the default billing currency.

- Billing Information - Terms - specifies the default billing terms for this customer. Billing terms must be preregistered using Business Billing Terms Editor.

- Billing Information - Discount - gives the customer a default percentage based discount at the time of invoice creation. Enter a value from 0 to 100. You can override the default discount when you create an invoice.

- Billing Information - Credit Limit - stores the maximum credit you are willing to extend to the customer. This field is for your reference purposes only. &app; does not use the value.

- Billing Information - Tax Included - this specifies whether nor not tax is included in invoice amounts by default. You can choose Yes, No, or Use Global.

  - Yes means that the tax is already included in amounts on invoices.

  - No means tax is not included.

  - Use Global means to use the setting made in the global preferences accessible through Edit Preferences (Gnucash Preferences on Mac OS X).

- Billing Information - Tax Table - specifies a default tax table to apply to invoice line items. Tax tables must be registered from the Business Tax Table Editor menu item.

- Shipping Address - records the customer’s shipping address if it is different from the billing address. The shipping address is for your reference. &app; does not use the value.

This is what the New Customer registration window looks like:

New Customer Registration Window

New Customer Registration Window

### Find and Edit

To search for an existing customer, use the Business Customer Find Customer window. You select a customer to View/Edit from the results of the search. This window is also used to look up customers when creating invoices and processing payments.

Find Customer Window

Find Customer Window

If many customers match the search criteria you provide, the search can be refined by running an additional search within the current results. The current result set is searched when the Refine Current Search radio button is selected. In fact, &app; selects this option for you after you run the initial search.

If the customer you are searching for does not match the supplied search criteria, change the search criteria, click the New Search radio button and then the Find button. The relevant step is the New Search selection. If the customer is not in the result of the original search, and you only search within this set, the customer cannot be found, regardless of new search criteria.

To return a list of all registered active customers, set the search criterion to matches regex, and place a single dot "." in the text field area. Make sure Search only active data is checked, then click Find. The regular expression "." means to match anything.

## Invoices

An invoice is the paperwork you send to a customer to request payment for products or services rendered. &app; can generate and track invoices.

### New

To send an invoice to a customer you must first create a new invoice. To create an invoice use Business Customer New Invoice. The New Invoice window must be filled in appropriately:

- Invoice Information - Invoice ID - the identification number of this invoice. This is your internal number for this invoice. If you leave it blank, an invoice number will be generated automatically.

- Invoice Information - Date Opened - the date this invoice was created.

- Billing Information - Customer - the customer who is to receive this invoice. If you remember the company name you entered in the New Customer window for this customer, start to type it in this field and &app; will try auto complete it for you. Else, press the Select... button to access the Find Customer window described in . Highlight the customer you are looking for with a click in the search results, then press the Select button.

- Billing Information - Job (optional) - associates the new invoice with a customer job (see ). If you remember the job name you entered in the New Job window for this job, start to type it in this field and &app; will try auto complete it for you. Else, press the Select... button to access the Find Job window. This window is the same to the one described in . Highlight the job you are looking for with a click in the search results, then press the Select button.

- Billing Information - Billing ID - this is the customer’s PO Number or other customer reference number. You should use it to identify your invoices to this customer (and job, if you have one).

- Billing Information - Terms - the payback terms agreement for this invoice. A list of registered terms is available within the pop up menu. If you specified a default value for the selected customer, this field is initialized with the default.

Creating a New Invoice

Creating a New Invoice

When you click the OK button, the Edit Invoice window opens.

### Edit

From the Edit Invoice window you can enter an itemized list of things you sold on this invoice, in a manner similar to how the account register works.

Edit Invoice Window

Edit Invoice Window

There are 15 columns in the Invoice Entries area:

- Date - The date this item was sold.

- Invoiced? - X means the item is attached to this invoice, an empty box means the item is not attached to this invoice. The item is attached for you when you proceed to the next line item.

- Description (optional) - is what the item or service is called.

- Action (optional) - is a user defined field. You can place Cost Center information here, or use one of the 3 predefined actions, Hours, Material, or Project.

- Income Account - selects which income account is credited with this income.

- Quantity - tracks how many of the items you sold.

- Unit Price - is the unit price of the item.

- Discount Type - is the type of discount:

  - $ means Discount is a monetary value

  - % means Discount is a percentage.

  You can click the field to toggle between the discount types.

- Discount How - the discount can be computed as follows:

  - > means the discount applies after tax.

  - < means the discount applies before tax.

  - = means both discount and tax are applied to the pretax value.

  You can click the field to change the setting.

- Discount (optional) - is the total discount, in monetary units or percentage, depending on Discount Type. You can leave it blank for no discount. Any default discount you specified for the customer will be automatically entered for each new item.

- Taxable? - is this item taxable? X means yes, a blank field means no. You can click the field to toggle the setting.

- Tax Included? - has the tax already been included in the unit price? X means yes, a blank field means no. For example, if there is 1 item of $100 with a tax of 5% then:

  - If Tax Included is empty, then subtotal = $100 and tax = $5.

  - If Tax included is set (X), then subtotal = $95.23 and tax = $4.77. The computation is: Subtotal = Total / (1+taxrate) and Tax = Total - Subtotal = Total - (Total / (1+taxrate)).

- Tax Table (optional) - this is a pop up menu of all the available tax tables. If you make the item taxable, then this table is used to compute the amount of tax. The tax table determines tax percentages and the accounts to which tax is charged.

- Subtotal (uneditable) - is the computed subtotal for this item (less tax).

- Tax (uneditable) - is the computed tax for this item.

When you have finished entering all the items, you can Post and print the invoice.

### Post

When you finish editing an invoice and are ready to print, you must Post the invoice. The invoice does not have to be posted immediately. In fact, you should only post an invoice when you are ready to print it. Posting an invoice places the transactions in an accounts receivable account.

The Post Invoice window appears and asks you to enter information:

Post Invoice Window

Post Invoice Window

- Post Date - specifies the date for the transactions entered into the accounts receivable account. By default this is the invoice’s Date Opened (see for information about that date).

- Due Date - is the date on which payment for the invoice is expected.

  - If you specified payment terms when you created the invoice, the date is calculated according to selected terms, and the entry field is insensitive.

  - If you did not specify payment terms, enter the expected payment due date here.

- Description - is an arbitrary description. When invoice transactions are placed in the accounts receivable account, this description is entered in the memo field of those transactions.

- Post To Account - selects the accounts receivable account in which invoice transactions are posted. You can select the account from a list of existing A/Receivable accounts.

- Accumulate Splits - determines if invoice items which transfer to the same account are combined into a single split for that account or entered individually. For the sample invoice which sold Nails and a Hammer, the setting affects post results as follows:

  - Checked (splits are accumulated) - a single transfer of $575.00 from the Income:Sales account is recorded.

  - Not checked - the transaction created in the A/Receivable account, shows two transfers from Income:Sales account $100.00 and $475.00. The memo fields in the splits indicate the sale of Nails and the Hammer (the item descriptions entered on the invoice) respectively.

### Find

To find an existing invoice, use the Business Customer Find Invoice application. From the results of the search, you can select an invoice to edit or view.

Before you can edit a posted invoice, you will need to Unpost it.

One of the design goals in &app;’s Account Receivable system was to allow different processes to get to the same state, so you can reach an invoice from different directions based on the way you think about the problem:

- You can search for the customer first, then list their invoices.

- You can search for invoices by number or by company name.

- You can list invoices associated with a customer job.

### Print

After you post an invoice, you should print it and send it to your customer. To print an invoice use File Print Invoice menu item.

An example of the default &app; invoice print output is shown below.

Invoice Print Output

Invoice Print Output

You can modify the appearance of the invoice, IE: add a company logo, etc. To do so, see the .

Invoices can also be printed from the main window by selecting Reports Business Reports Printable Invoice from the main menu. The resulting report window states that no valid invoice is selected. To select the invoice to print:

1. Use the Options Toolbar button or select Edit Report Options from the main menu.

2. Select the General tab of the report options dialog.

3. Click the Select button next to the Invoice Number field.

4. Search for the invoice as usual.

You can also print invoices from within the Process Payment dialog. See the for instructions on how to do so.

### Assign Starting Invoice Number

There is no easy way to assign an automatic starting invoice number. &app; starts with number 1 and increments from there. You can manually type an invoice number into the text box each time you create an invoice, but this gets tiring and sooner or later leads to duplicate numbers.

You can change the starting invoice number if it is important you. There is no user interface to change the number at this time. You have to hand edit your XML data file. The relevant entry is in the "counters" section near the beginning of the file. The file must be re-opened after editing.

&app; optionally compresses files. Disable compression and save before editing the file. To enable or disable compression use Edit Preferences (Gnucash Preferences on Mac OS X), access the General tab, and select or deselect the Compress Files check box.

## Customer Jobs

Customer Jobs are used to group multiple invoices to the same customer. Use of the Customer Jobs feature is optional. The feature is useful when you have multiple jobs for the same customer, and would like to view all the invoices related to a single job.

To use customer jobs, you must create them using the Business Customer New Job application. You will see the New Job window. The editable fields are:

- Job Info - Job Number (optional) - enter the number for this job. If left blank, a number will be chosen for you.

- Job Info - Job Name - the name you want to assign to the new job.

- Owner Info - Customer - the customer for whom the job is created. If you remember the company name you entered in the New Customer window for this customer, start to type it in this field and &app; will try auto complete it for you. Else, press the Select... button to access the Find Customer window described in . Highlight the customer you are looking for with a click in the search results, then press the Select button.

- Owner Info - Billing ID - the customer’s reference to this job (e.g. their PO Number). This is the "Billing Identification" that they require to correlated your invoices with their order. The Billing ID you enter is used to set the billing id for new invoices associated with this job.

- Job Active - toggles this job being active or not. This is useful when you have many inactive jobs, since it is easier to search only among jobs that are marked active.

New Customer Job

New Customer Job

To edit an existing customer job, use the Business Customer Find Job application. Select the desired job in the search results, and click the View/Edit Job button.

To select from the invoices associated with a given job, use Business Customer Find Job application. Select the desired job in the search results and click the View Invoices button. A window listing invoices associated with this job appears. Select an invoice and click the View Invoice button to open an invoice editor in the main application window.

## Process Payment

Eventually, you will receive payment from your customers for outstanding invoices. To register these payments, use the Process Payment application found in Business Customer Process Payment.

The Process Payment application consists of:

- Payment Information - Customer - the customer who paid you. If you remember the company name you entered in the New Customer window for this customer, start to type it in this field and &app; will try auto complete it for you. Else, press the Select... button to access the Find Customer window described in . Highlight the customer you are looking for with a click in the search results, then press the Select button.

- Payment Information - Invoice - the invoice for which payment was received. If you remember the invoice ID, start to type it in this field and &app; will try auto complete it for you. Else, press the Select... button to access the Find Invoice window described in . Highlight the invoice you are looking for with a click in the search results, then press the Select button.

- Payment Information - Date - the date you you received payment.

- Payment Information - Amount - the amount of money received.

- Payment Information - Num - the check number.

- Payment Information - Memo - any comments about this payment.

- Post To - the A/Receivable account to which to post this transaction.

- Transfer Account - the account where the money will be deposited (a checking account for example).

Below is the &app; Accounts Receivable payment window.

Process Payment

Process Payment Window

## Changing the Invoice Appearance

The default Invoice style, as shown in , is fairly barren. The default invoice style leaves the top part of the form blank, so you can print on company letterhead paper. There are some things you can do to change invoice appearance.

Use File Properties to enter your Company informations in the Business tab of the Book Options window. Some of the entered informations are printed on the right side of invoices.

To add a customized background, heading banner or logo to invoices, modify the invoice style sheets. To do this, go to Edit Style Sheets and select the New button in the Select HTML Style Sheet window that will appear. You will then see a window like this:

New Style Sheet Window

The New Style Sheet window.

Give a Name to the new style sheet (e.g. Custom Invoice) and select the Fancy Template. When you click the OK button, the HTML Style Sheet Properties window is displayed. This window presents you five sections listed in the left pane: Colors, Fonts, General, Images, and Tables. The Colors section allows you to change the colors of various items of the invoice. The Fonts section lets you set fonts type and dimensions. The General section allows you to set the Preparer and Prepared for information, and to Enable Links. The Images section allows you to import graphics into the style sheet. The Tables section allows you to adjust the spacing around the tables which make up the invoice.

To include a company logo, banner heading and background image, use your favorite graphics application such as The Gimp or OpenOffice Draw to save the images in either GIF or PNG format. Then import them into the style sheet using the Images section described above.

Below is an example that imports all three types of images.

HTML Style Sheets example

The HTML Style Sheets window with an example Background Tile, Heading Banner, and Logo.

The images are placed in the invoice as follows. The Background Tile is tiled to become the background image, the Heading Banner goes to above the invoice text, and the Logo is placed in the upper left corner of the invoice to the left of the Heading Banner. You will probably have to try a few different sized images until you get the invoices to print nicely. Some sizing suggestions are that the Logo should be 1 square cm (~0.5 inch), and the Heading Banner should be 15 cm (~6 inches) wide and 1 cm (~0.5 inch) tall.

With the style sheet configured, when you print the invoice, you select the style sheet to use from the Options menu. Below is the resultant invoice after applying the style sheet demonstrated above.

HTML Style Sheets example

The hideous invoice which results from the graphics selected in the style sheet.