Setup system for cash basis accounting

ERPNext
1

How do I set up ERPNext for a small business using cash-basis accounting?

I need my revenue accounts and tax/vat accounts to reflect entries based on the payment date for each transaction.

Thanks

2

Hi there,

ERPNext is built to use accrual-basis accounting. You can probably make cash-basis work, at least approximately, depending on what exactly you need. Both Sales and Purchase Invoices allow you to include payments with submission, for example.

3

Thanks for your comment Peter.

So assuming that there is no system options to configure cash basis accounting, I am thinking of following two methods to make it work anyway:

  1. Only book transactions once cash flows
    1. Pro: transaction recorded on correct date for cash account
    2. Con: the booking date for an invoice doesn’t correspond to the invoice date anymore
  2. Setup reporting so that reports consider cash flow dates (based on actual payments and cash transactions) instead of booking dates for transaction amounts
    1. Pro: erpnext could be used as usual
    2. Con: potentially complex??

Appreciate any inputs from you or others on these thoughts and/or how others have solved for using the software for cash basis accounting.

4

If you need cash basis accounting, my first recommendation would be to see if there’s other software out there that serves your needs better. ERPNext is just not really designed for that.

That said, if you decide to go ahead with it, I’d suggest using the Sales Order doctype to send bills to customers and only create a Sales Invoice when money comes in. For both Sales and Purchases, Invoices have accounting entries; Orders don’t.

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5

+1 for using Sales Orders for sale date and Sales Invoice for payment date.

One thing that can be “annoying” with Sales orders is the Delivery Status or percentage delivered.

I created Client and Server scripts to “forcefully” edit the delivered as 100%.

Others perfer to close the Sales Order when not using Delivery Notes.

You can see my scripts here.

Does your company maintain inventory?

1 Like
6

Dolibarr ERP allows you to do both and is opensource.

1 Like
8

We are in similar situation - all cash & no credit but we need to use the other modules of ERPNext like Education and HRMS so Quickbooks was not enough (we even created apps in Microsoft Access to sync with Quickbooks)
Check out Cash payments and receipts just like QuickBooks · Issue #48399 · frappe/erpnext · GitHub for the current sollution we are using
Problem is the accounting will hit the supplier/customer accounts and zero them out which is just an small extra baggage. Its very much worth it since ERPNext is really an amazing product (and free! :slight_smile: )
Alternatively you could just use journal entries and create a party custom field to keep the history of who you have paid and received from
Hope it helps

9

Thanks everyone for your suggestions.

We will probably stick to ERPNext given its nice UI, easy to use options for VAT management and tax reporting. For context, we process only very few sales per year (final custom outputs) and mostly have purchase receipts (materials and expenses).

I have tried following now in order to stick to one entry form: in the sales invoice I created a new field called “invoice date” which is used by the slightly modified print template for the invoice date when generating the invoice PDF. So I would save the sales invoice, generate the PDF with the invoice date and once payment hits the bank account, do the final booking it with the correct valuation date.

Is this approach somehow flawed in any way? Better to stick to the sales order after all for some reasons I have not grasped yet? (What I maybe don’t like about this approach is that legally I think we should send out the invoice thats also recorded in the system, while in fact we would send out the sales order and modify its name in the print template to be an invoice.)

10

If I’m understanding you correctly, the process you’re describing is:

  1. Save the invoice (but don’t submit it)
  2. Send the invoice to customer
  3. Submit the invoice, with updated date, when the payment is received

That should work fine. I do something similar for pro-forma invoices when needed. From a workflow standpoint, one thing to keep in mind with this approach is that the invoice will still be modifiable even after it’s been sent. It’s up to you and your auditor, though, to decide if that’s a problem or not.

11

It will matter if you want to use ERPNext Payments app. This app integration allows sending Payment Request docType with payment link. I believe the Sales Invoice needs to be submitted in order to generate the Payment Request. This would be the only reason I can think of that would suggest using a submitted Sales Order to generate the Payment Request docType.