Sales Invoicing at Year End

At year end, unpaid and partially paid sales invoices will carry into P1 of the new financial year automatically (in a similar way to purchase orders).

What financial year should the income be accounted for in?

1. If the anticipated income from a sales invoice should be accounted for in the current FY, a Debtor accrual should be posted for the nett amount.
   • This means the Actual Income figure on the Budget Vs Actual Vs Committed report will include the accrued value. When the income is received in the new FY, the unpaid sales value will reduce. The nett effect on the new FY income figure will be zero (as the income was accounted for in the previous FY).
2. If the anticipated income should be accounted for when received, no action is required prior to year end.
   • The Budget Vs Actual Vs Committed report can be run in Period 13 to show zero value unpaid sales (as they have been carried into the new year).
   • The VAT liability on sales invoices is incurred as soon as the sales invoice is raised.
   • This may mean the VAT liability is paid to HMRC before all income is received from the customer (which could be in the following financial year) causing an imbalance on an external spreadsheet.

You may need to consider the position of each sales invoice on an individual basis to determine in which year the income should be accounted for.
For example:

• If the sales invoice was raised for hall hire, and the hire took place, the anticipated income should be considered a debtor (as the service was used) and should be accounted for in the current FY.
• If the sales invoice was raised for a parent for lunches in the next term, the anticipated income should be considered a commitment, and so should be carried into the next FY and accounted for as income there.

Sales Invoice VAT Liability

The VAT liability on a sales invoice is incurred as soon as the invoice is posted.
This means that the liability may be due to HMRC before any income has been received. This income may not be received until the following financial year.

In Arbor Finance the VAT debtor is carried from one year, however if you post figures from Arbor Finance (which is a single entry system) to an external spreadsheet/balance sheet a balancing figure should be posted on your spreadsheet to reflect the liability for the VAT on Unpaid Sales at year end.
The amount of unpaid sales VAT can be found on the Unpaid Sales Invoice report, in Reporting > Transactions > Sales > Unpaid Sales Invoice, in the 'Unpaid VAT' column.

Please seek advice from your local authority/finance adviser on which Financial Year anticipated income and associated VAT liability should be accounted for.

Cancelling any outstanding balance due on sales invoices

Where a sales invoice has been raised, but for whatever reason you are not anticipating that the final balance will be paid, and don’t want to carry the unpaid amount into the following year, follow the steps below:
ie Sales Invoice raised for a nominal amount of £100, of which £90 has been received. The remaining £10 will never be received, and you are happy to accept £90 as full payment for the service delivered.

IT IS IMPORTANT THAT YOU FOLLOW THE STEPS IN THE ORDER BELOW, TO ENSURE THAT NO ADDITIONAL BALANCE IS CREATED.

1. Select the sales invoice. From the Actions drop down, select ‘Issue Credit note and cancel invoice’.
   The impact of this is that the monies received (£90) are moved to the SIOA budget/analysis account. The £10 unpaid sales income is cleared.
2. Duplicate the original sales invoice. Amend the line amount to reflect the monies received (£90)
   Note: the total gross value on this new sales invoice should reflect the monies received. If the original sales invoice had multiple orders, you should amend it accordingly.

The balance of this new sales invoice will then be paid in full with the monies already received and on the SIOA budget/analysis.

NOTE: Where the school has already incurred an expense, i.e. they have paid the monies for the school trip, but the same income has not been received from the parent, you should consider how the expense is accounted for within the school records. Please discuss with your school accountant regarding the process for recording bad debt, and the process for VAT Relief on bad debt.