USA Invoicing and revenue recognition

[monalisa]

Question on invoicing arose. We have a process we are using now, but that process creates issues when it comes time to ship product. Please see below for current process and the change I am hoping we can make



Current process:

• customer places order on shopify platform
• Payment page allows them to opt for either credit card payment OR an invoice with net30 terms that is generated from a shopify plug-in (NOT from SOS)
• Two paths from there:
  • Pay immediately with credit card >> order marked as PAID in shopify, order flows automatically into SOS as sales order, order flows automatically to warehouse for fulfillment. In this scenario, they still receive in invoice that shows they do not owe anything.
  • Pay later with invoice>> order marked as UNPAID in shopify, order flows automatically into SOS as sales order, order DOES NOT flow to warehouse for fulfillment because it is marked as “unpaid” in shopify. Invoice is emailed to customer. We have to manually mark these as PAID in shopify when we receive payment.
    • ISSUE: Because these orders are not marked as paid in shopify, they cannot be sent for fulfillment automatically so the warehouse will not get the order to fulfill unless we send it over manually.

Proposed new process:

• Sports customer places order on shopify platform
• Payment page allows them to opt for either credit card payment OR an invoice with net30 terms that is generated from a shopify plug-in (NOT from SOS)
• Two paths from there:
  • Pay immediately with credit card >> order marked as PAID in shopify, order flows automatically into SOS as sales order, order flows automatically to warehouse for fulfillment. In this scenario, they still receive in invoice that shows they do not owe anything.
  • Pay later with invoice>> order automatically marked as PAID in shopify, order flows automatically into SOS as sales order, order flows to warehouse for fulfillment and Invoice is emailed to customer. We find a way to make sure accounting gets a copy of the invoice to keep track of AR.
    • POTENTIAL RISKS:
      • If we mark these orders as PAID automatically in shopify, even if we have not collected payment, does this mess with our visibility into AR?
        • Is this problem solved if a copy of invoice is emailed to accounting?
      • Since we are not invoicing out of SOS and are using a shopify plug-in, we would move all orders to sales receipts instead of sales orders since they would be automatically marked as paid.
        • Is this an issue from an accounting/tracking/management perspective? How else can we mark these as paid so they can flow automatically to our warehouse and still make sure we track open invoices internally?
      • Any other risks we aren’t aware of?

 

[ca_iram_rizvi]

Hello Monalisa,

Can you please let me know the plug in you are using and also if you are using QBO to record your transactions.

 

[Praz Finpoint]

Big risk - marking an Invoice as paid when it is not paid will not show up as an Outstanding Accounts Receivable in your Accounts Receivable Ageing Detailed Report, and because the Sales Order paid and not paid cannot be clearly differentiated, it would be a nightmare for the Accounts Team to know with certainty which Invoice is paid or not. This will create alot of complexities in terms of identifying, monitoring and following up with customers who have not paid but received the goods.