This help file is created for the purpose of providing general instructions for Clarity Accounting user to enter payment information on outstanding invoices.

Overview: why do we need to enter payment on invoices?

In an accrual accounting system, when an invoice is issued to a customer with payment terms such as “net 30″ (due in 30 days) or “due upon receipt” (due as soon as the customer receives the invoice), the income is immediately considered as taxable income and the invoice is now an “Accounts Receivable (A/R)” item within the accounting system.  This system also allows business owners to track outstanding invoices and keep an eye on payments that may become overdue via the “Aged Receivables” report.

Entering Invoice Payments in Clarity Accounting

When a customer supples a payment on an invoice, it must be recorded so that the list of unpaid invoices and your bank account balances are correct.

There are 2 ways to enter a payment for an invoice with our online accounting software.

Method #1: Entering payments from the income data entry box:

1. From the “Dashboard” or the “Income” section, find the green coloured “Enter Payment” tab
   
2. Once you have clicked on the “Enter Payment” tab, you will see the following view:
   
3. Select a customer with an outstanding invoice and the associated currency (it is usually the default currency, but it may be a different currency depending on how an invoice was created).
   
   Once a customer and currency has been selected, a list of outstanding invoices associated with this particular customer will show up with the “Invoice Date” and “Due Date”.  You are welcome to click on the invoice number links to view a particular invoice.
4. To enter an invoice payment from the Enter Payment tab, you will need to fill in the payment date, the payment account (the bank account) that the payment has been deposited into and the amount paid for each invoice.  The blue arrow on the right side of the “balance due” is a short cut for you to simply copy the full amount over to the text box.
   

   Click “Add” to complete the enter payment process.

Method #2: Entering Payment from the Record View

Invoice payments can also be entered when vieweing a record.

1. From the Dashboard, select the “Income” link on the vertical navigation.
2. Select the income record you would like to add a payment to.
   
3. You will see the details of the income record along with the invoice date, due date, and all the accounts affected
   
4. After you have saved the payment, you can also download a PDF Invoice of this transaction showing the “Balance Due” as “0.00″.  If you had previously entered a pre-payment or a partial payment, you can download a PDF Invoice showing how much your client had paid so far as well as any outstanding balances owed.
   

We have tried to make the “enter payment” process as easy as we can, if you have any feedback or suggestions, please do not hesitate to contact us directly.

The purpose of this help file is to explain the concepts of income,  invoices, and payments within the context of small businesses accounting using an online accounting software.

Clarity Accounting Enter Income View

Online Accounting Software | Enter Income

This is the enter income view users will see as soon as they sign in and enter the “Dashboard” area.

It is split into 4 sections using horizontal tabs:

Enter Income
Enter Invoice
Enter Payment
Detailed

Enter Income

This section is mainly for users who collect income on commission or receiving regular income cheques without having to invoice clients to be paid.  A classic example would be a real estate agent who just need to enter an commission income cheque / deposit.  Use this section to enter an income if you have already been paid.

Payment Account

If an income does not have a payment term (due date) attached to it, it is assumed that this income has been paid.  In which case, you can select an appropriate bank account where the payment has been deposited.  For instructions on how to set up accounts, please view our help file for Accounts Set Up.

Enter Invoice

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 information:

• Invoice Number
• Invoice Date
• Vendor Contact Information
• Client Contact Information
• Payment Terms / Due Date
• 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)

For general instructions on how to create PDF invoices, please refer to the help file “Create PDF Invoices”.

Accounts Receivable (AR)

One of the intricacies of small businesses accounting for tax purposes is that an income is incurred as soon as an invoice is sent regardless of whether or not a payment has been made.  If a business has an outstanding invoice of $1500 to Test Company that has never been paid during the fiscal year, then the government assumes the $1500 invoice you sent to Test Company as “taxable income”.  Don’t worry, if this seems unfair, you can actually deduct $1500 off as bad debt (expense) when it comes time to report your income to the government.

It is important to note that when a business sends out an invoice, it does not mean that the invoice has been paid.  Businesses genearlly uses the following payment terms (listing from most common to least common):

• Net 30 (due 30 days after the invoice has been issued)
• Due upon receipt (due as soon as the client receives the invoice - hoping they will pay quickly)
• Net 60 (due 60 days after the invoice has been issued)
• Net 90 (due 90 days after the invoice has been issued)

Accounts Receivable is a term generally used in accounting and it basically means outstanding invoices yet to be paid.  Whenever an invoice is created that is not marked as “paid”, you will see the outstanding balance in the Accounts Receivable section on your Clarity Accounting Dashboard.

Clarity Accounting Enter Invoice View

Online Accounting Software | Enter Invoice

Enter Payment

Every invoice created with a payment term gives rise to the need to collect the payment and recording this payment into the accounting system.  For example, if an invoice of $1500 was issued to Test Company on September 4th with a Due Upon Receipt payment term, then we would hope that Test Company will pay as soon as they receive the invoice so a payment can be recorded.

Clarity Accounting Enter Payment View

Online Accounting Software | Enter Payment

For detaled instructions on how to enter invoice payments, please refer to the help file “Invoice Payments”.

Detailed View

The “Detailed” tab in the income section is simply a combination of data entry fields from the “Enter Invoice” tab and the “Enter Payment” type.  We found that many accountants and bookkeepers prefer using this view when doing their data entry but it is basically there for people who would like to the option to include a lot of detail when entering data.

Clarity Accounting Detailed View

Online Accounting Software | Invoice Detailed View