This feature has recently been made available to our accounting software due to client request.  The instructions are listed below:

1. Log in to your Clarity Accounting Dashboard.
2. Under “Reports” click on “Profit and Loss”.
   
3. At the top of the Profit and Loss page, choose a date range.  for example “as of” October 1, 2008 “until” October 31, 2008.
   
4. Choose a report “by” Item, this can also be done by accounts, vendors / customers, and sales taxes.
   
5. You can also choose to further customize this report by Income or Expenses under the “focus” area
   Leave this field blank if you would like a report with both income and expense categories.
   
6. You should get a breakdown of your items by quantity and amount.

There is a well known saying that “you got to spend money to make money”.  This may be true for many businesses who are in operation today.  It is certainly true for our online accounting software.  Luckily, most governments and jurisdictions allow businesses to submit expenses as “deductions” to the total revenue before filing taxes.

Keeping track of expenses is one of the most important bookkeeping activities a business will do.  Not only does this allow a business to write off tax deductible expenses, it also allows a business to keep track of their spending.  This is where many small businesses often run into trouble, they do not realize how much money they were spending in comparison to their income until it is too late.

Keeping track of expenses in Clarity Accounting is easy.  The purpose of this help file is to provide some clear instructions on how to enter expenses into Clarity Accounting.

There are 2 places to enter expenses within Clarity Accounting:

1. Directly from the Dashboard
2. In the “Expense” section
   

Clarity Accounting Enter Expense View

There are 4 different “Tabs” on the Enter Expense data entry box:

1. Enter Expense: for straight forward expenses
2. Enter Bill: for bills with a due date to be tracked as an Aged Payable; also for multi-currency support
3. Pay Bill: for recording bill payments when a bill has been paid
4. Detailed: a section for users to record all expense & bill related transactions

Data Entry Fields

Date: when did you purchase an item or received a bill?
Vendor: where did you buy the expense item from or who sent you a bill?
Invoice number: a transaction number that is automatically generated unless you have received an invoice with a specific invoice number.
Expense Account: what is the expense category? For example, buying coffee for a client meeting at Starbucks would be considered a “meals and entertainment” expense.  You are welcome to add as many expense accounts as you wish.
Description: Optional field for you to enter notes to yourself about a bill or expense.
Quantity: how many of the same item did you purchase? This field always default to a quantity of one.
Price: what is the actual cost / price of your expense item?
Sales Taxes: If you are tracking sales taxes you can get back from the government with your business related expenses, you can enter the tax here and Clarity Accounting will keep track of how much sales taxes the government owes you.

Sample Case Study

A small business owner ran out of black printer ink cartridges for his printer and he went to a local stationary supply store called Staples and spent $29.99 + 5% sales taxes on ink cartridges.  He went on October 23, 2008 and used his business Visa card to make the purchase.  Ink cartridges are considered to be a office expense since it is something that is consumable (by the printer, not the business owner of course).  Equipments such as computers and monitors cannot be considered an office supply expense.

Information being tracked on Clarity Accounting

Based on this specific expense data, Clarity Accounting tracks how much a business spends on a particular vendor, how much money was spent using the Visa (or deducted from other bank accounts), the total amount spent on each “expense account” (for tax preparation purposes), the amount of sales taxes paid for business related expenses, as well as how much the business is spending in total (this can be found in the “Profit and Loss” report).

How is this information useful?

Recently a client told me that she had no idea she spent so much money on networking.  While networking is a valid form of marketing, different networking groups yield different results.  This allowed her to focus her time on only one networking group that yielded the most results for her so far.

A business can also look at how much money they are spending on advertising and marketing in comparison to their income in a given period of time shortly after a campaign to assess the effectiveness of a marketing or advertising campaign.  We allow clients to choose a date range when viewing their profit and loss statements to see their income and expenses in a given period of time.

Need more help?

If you require more help with figuring out how to enter expenses in Clarity Accounting, please do not hesitate to contact us.  We will always respond within 1 business day or sooner.

The purpose of this help file is to show Clarity Accounting users how to enter invoices as well as creating and downloading PDF Invoices.

Invoices can be entered right on the Dashboard or under the “Income” section on the vertical navigation bar.

Clarity Accounting Invoice View

This section is used for small businesses whose primary method of getting paid is through “Invoicing”.  Invoices are generally issued by businesses providing products or services to their clients.  An invoice usually consists of the following elements:

• Invoice Number
• Invoice Date
• Vendor Contact Information
• Client Contact Information
• Payment Terms / Due Date
• Income Account
  
• Quantity (number of items sold / number of hours worked)
• Price / Rate (cost per item / hourly rate)
• Subtotal
• Applicable Taxes
• Balance Due
• Pre-payments (if applicable)

Terms & Payment Accounts

There are 2 ways income records can be recorded.  They can be recorded as “Paid” or “Unpaid”.

Paid income records generally refer to products and services that are paid immediately with cash, credit card, or direct deposit.

Unpaid income records are generally used for invoicing.  In an accrual / double ledger accounting system, when you invoice a client for your products or services, you are considered to have “earned” that income regardless of whether or not you are paid.  Invoices usually have a “payment term” associated with it, allowing customers to pay days after the initial invoice was sent.  Outstanding invoices are referred to as “Aged Receivables” in accounting terms.  Unpaid income records will also require businesses to track down payments and entering payments into the accounting software when payments are received.  If for some unfortunate reason, an invoice was not paid, then it can be an expense written off as “bad debt” .

To enter a “Paid” invoice, select one of the rows with “Paid” in the second column, and the bank, cash, or credit card account into which the payment is deposited.  For example, if you received a cheque and deposited it into the bank, you would select your Checking Account.

To enter an “Unpaid” invoice, select one of the rows with “Unpaid” in the second column, and the number of days the receiver has after the invoice date to pay.  For example, if you receive a bill that has “net 30″ terms (due 30 days after receipt), you would select “30 days”.

Income Accounts

Income accounts are used to differentiate revenue from different sources of income that will show up in your profit and loss statement.  This is also a great indicator of which products or services are most profitable to your business.  When you first create a business with Clarity Accounting, you will be asked to fill in your income sources.  However, if you did not list all the income sources at the time you set up your business profile, you can always click on the “New Income Account” link to add more income accounts.

For each line item on the invoice/income record, select the income account that best matches that item, or add a new one if it doesn’t fit an existing category.

Sample Case Study:

Clarity Accounting recently demonstrated their online accounting software at a very successful Launch Party event put together by Bootup Labs.  They received overwhelming requests from bloggers and freelancers to integrate Clarity Accounting with Freshbooks.  This is because Freshbooks is an awesome online invoicing software and Clarity Accounting is an awesome online accounting software.  Freelancers thought such an integration would allow those who use Freshbooks to generate Balance Sheet and Profit and Loss reports within Clarity Accounting.

Creators of Clarity Accounting took user suggestions seriously and contracted Habitsoft, Inc. to implement the Clarity Accounting - Freshbooks integration.  It took Habitsoft, Inc. 40 hours of work to complete the project and Habitsoft charges an hourly rate of $100 / hour.  Habitsoft sends an invoice to Clarity Accounting with a 30 day term (payment of the invoice is due within 30 days of the date the invoice was created).  There was also a 5% sales tax applicable to this invoice.

This is how the data entry fields look like:

After Habitsoft clicks “Add”, it will be given several options:

Download PDF

Click this link to download a PDF of the invoice.  Users can add their own logo on the PDF invoice.  Please refer to the help file “Uploading logo to Invoices” for instructions on uploading your own logo.

Here is what the PDF invoice for this example looks like:

Please note: Addresses and contact information shown on the invoice will depend on how much information is included when filling out the Business Profile information as well as the Customer information when adding a new customer.  You can edit the customer information by going to the “Customer” link on the Dashboard under “Setup”.

Edit

The edit option will bring you to a summary of this particular record, allowing you to change anything you need to change.

Repeat

This option allows you to “repeat” this transaction.  Many people use this feature if they are entering an income record with very similar elements such as same customer with the same payment and income accounts.  This allows users to make minor changes with date, description, or price without re-entering all the information.

Entering Payments

When Habitsoft receives a payment from Clarity Accounting, it will have to enter the payment into the accounting system with an associated Bank and Income Account.  For detailed information on how to add invoice payments, please refer to the help file “Adding Invoice Payments”.