Tuesday, February 1, 2011
Accounting for reimbursements
HasGeek’s legal registration is more or less complete, our bank account is operational, and the first of our sponsor cheques has cleared. It’s time to start reimbursing everyone who incurred an expense during our events.
I am therefore flummoxed to discover my accounting software has no apparent way to record a reimbursement.
Imagine this scenario: you run a startup, and your startup needs a VPS for the website, so you buy one. You can only pay for it with a credit card, but your company doesn’t have one. It has no credit history. You use your own credit card, but buy in the company’s name and then reimburse yourself from the company account. On company records, it was billed by the service provider, but paid out to you. Chances are your company did not even exist at the time you made the purchase, so you are reimbursing yourself long after the fact. Common enough? And yet, I can’t find a way to record this.
One way to get around this is to simply record it as paid out to the original service provider. Another is to treat each of these individuals as the service provider. But, Kesava Reddy, Kiran Jonnalagadda and Ravi Srinivasan do not provide air travel services. We merely booked tickets from Cleartrip using personal credit cards, on company business, and we need to be reimbursed individually.
Either I’m violating acceptable accounting standards by keeping such a record, or this is an oversight in the accounting software. I’m not sure which.
For many years I’ve kept personal accounts using GnuCash, which I absolutely loved, but is rather long in the tooth. GnuCash can only be used as an archaic cross-platform desktop app. There is no cloud version, no sync between instances, no multi-user ability. I thought I’d build my own web-based clone, designed specifically around reimbursements, but my needs are growing faster than my spare time. The prudent thing is to use something off the shelf, so when Zoho announced their new Zoho Books product, I jumped.
It’s been a great few days with Zoho Books, with their incredibly well thought out interface for small businesses. Books integrates features from their earlier CRM and invoicing products and has just the right amount of functionality to suit my needs. Except, I can’t record reimbursements.
Reimbursements wouldn’t have been a problem in GnuCash where everything is — in accounting parlance — a “manual journal”, a direct transaction between two ledgers. I could easily make three types of ledgers: an “asset” ledger for the company account, an “expense” ledger for servers, travel and others, and a “liability” ledger for each person who needs to be reimbursed. The original transaction would be between an expense and liability ledger, and the reimbursement between asset and liability. This way I record all the relevant facts — how much was spent on an expense, when, who paid for it, how much each had to be reimbursed, and when they were reimbursed.
Zoho Books and other accounting apps frown on manual entries, preferring that you make all ledger entries via the front-end tools of quotations, bills and invoices. I like this — it gives me a better sense of the company’s health — but there is no front-end tool for reimbursements.
What do I do?
Update: The folks at Zoho Books found me a workaround, by treating each reimbursable party as a credit card account. I’ve decided to stay with Zoho Books since their customer service makes it worthwhile.