Accounting

The accounting feature in OrderTrac allows you to generate journal entries to get accurate financial data as of any given data. You can then view this financial data in a report, or you can even set up the Quickbooks integration to automatically sync this financial data to QuickBooks.

Cash and Accrual accounting methods are supported. In fact, the accounting method is very flexible in that it allows you to generate financial data in many different ways.

All data is created as a journal entry. A journal entry is simply a record that states what financial account has been adjusted and by how much and on what date. For example, when you receive a cash payment of $100, you can have a journal entry created and sent to Quickbooks that increases the cash assets account by $100, so Quickbooks is aware of the $100 you received.

This accounting feature allows you to break up your revenue into categories such as Furniture revenue, Fee revenue, Outdoor revenue, etc very accurately.

If you are on the cash accounting method, you would recognize the revenue when the payment is received. If you received that $100 payment on a sales order that had a $900 dining table on it and a $100 delivery fee, you would be able to prorate the $100 payment between the table and delivery fee to recognize $90 in Furniture Revenue and $10 in delivery fee revenue.

If you are on accrual accounting method, you would recognize the $900 dining revenue when the table is delivered, and the $100 delivery fee will count as revenue once the entire sale is delivered and completed. You can also track deferred revenue and accounts receivable, so you can easily see the sales that have been written and not completed, which would be deferred revenue, and payments that you are expecting but not received, which is accounts receivable.

This is a powerful method to see your exact revenue figures at any given point in time, both currently and at any given point in the past. For example, you could see as of December 31, you can see the exact accounts receivable balance as of that date.

Enable Accounting

Accounting is an optional add-on that must be subscribed to. The overhead of all the extra accounting data and support requires an extra subscription for this feature. First, click on your name on the top right and click Billing. From there, click the Add-ons tab and select the Accounting add-on and click Save.

Quickbooks Integration (Optional)

Chances are, you probably use QuickBooks since it is so popular among small business. OrderTrac has a built in Quickbooks integration which allows financial generated by OrderTrac to be automatically synced to QuickBooks. To enable this integration, go to Settings > Integrations and click on the Connect button.

This will take you to the integration settings page where you can click Connect again to initiate the connection to your Quickbooks account:

This will redirect you to the Intuit login page where you will need to log in to your Intuit/QuickBooks account:

You will then need to hit Connect to give OrderTrac permission to connect to your Quickbooks account:

After successfully logging in, you will be redirected to OrderTrac, where you will see your company ID and company name:

OrderTrac is now connected to your QuickBooks account and you are ready for the next steps.

GL Account Setup

First, you need to set up your GL Accounts. These are financial accounts that you would find in your Chart of Accounts in your accounting software. You will need to add each account that you want OrderTrac to track financial data for.

In the Accounting section of the main menu, select GL Accounts. Next, click New GL Account on the top right. Enter a Code for the new account. This should match the ID of the account in your accounting software. If you are connected to Quickbooks, you will see a dropdown of all available accounts in Quickbooks instead of an input box where you type in the code.

In this example, we will create a revenue account for Furniture revenue. This is the account we will tie all furniture revenue to. Select the appropriate Type using the guide at the bottom of the page.

Repeat until all GL accounts you plan to use are added to OrderTrac. This is just an example, your GL accounts will probably look different because they should mirror your accounting software.

Accounting Rules

Next, it is time to set up your account rules. These rules are what determine how journal entries are created. These rule will vary depending on what type of accounting method you use as well as what specific data you want to report on and/or transmit to Quickbooks.

In this example, we will create rules for a typical Accrual accounting setup. You may want to contact your accountant to help identify the format of the journal entries that will be generated. These rules determine which account is debited and which are credited so it will require a bit of accounting knowledge if you are not the accounting brains for your operation.

Navigate to Accounting > Accounting Rules and select New Accounting Rule. First will will give the rule a name. For this rule, we want to generate journal entries for every written sale that debits the Accounts Receivable account and credits the Deferred Revenue account. This lets us track how much is sold but not paid for, and how much is sold and not yet earned revenue.

This rule we will name Future Revenue. Since we have the Quickbooks integration connected, we can select Quickbooks from the integration dropdown to indicate we will sync the journal entries created by this rule to Quickbooks. We will select 1 Day as the auto run frequency and 7:00 PM as the preferred run time to indicate we want this rule to auto generate journal entries at 7pm every day. The start date is set to July 1, meaning we only want to generate entries for changes made on July 1 and after. For example, this rule is going to generate entries for each sales order item written, so this will only include items sold on July 1 and after. If you have been manually transferring accounting data to Quickbooks, select the date that you last entered data for so you are not duplicating financial data.

Finally, click Save. This will enable the option to add steps to this rule. Click on Add New Step.

First, we want to create a step to Debit the Accounts Receivable account for each new item sold. For the Data Source, we will select Written Sales. This means we will be grabbing the total of all written sales since the last time this rule ran. For the Journal Entry Method, select Debit. For the Categories option, we will keep All Categories selected. This gives you the option to target only certain categories of items sold if you wish to generate journal entries for different accounts depending on the item category. For the GL Account field, we will choose the Accounts Receivable GL account we set up earlier.

Click Save when complete. Next we will create more steps until we have the following steps created. The last step we created has a data source of Balance Entry and the method set to Credit for the account Deferred Revenue. This means we will credit the Deferred Revenue account for sum of all the Debits in this rule. If the sum of all debits came to $951.20, then the credit will be set to 951.20. This creates a balances entry which is required for double entry accounting.

Now that we have the rule created, we can review what will happen when this rule is run. Every time this rule runs, it will collect a list of all sales order items that have been written since the last time this rule was run. So if this rule was run yesterday at 7pm, and today you sold 3 items: a $200 chair, a $1000 table, and a $100 delivery fee. In total the tax for the 3 items came to $75:

Description	Subtotal	Tax	Total
Table	1000.00	50.00	1050.00
Chair	200.00	20.00	225.00
Delivery Fee	100.00	5.00	105.00
TOTAL	1300.00	75.00	1375.00

The rule will collect these 3 new items and generate the following journal entry:

Account	Debit	Credit
Accounts Receivable	1375.00
Deferred Revenue		1375.00

This entry will automatically be generated in Quickbooks if you have the Quickbooks integration enabled. This indicates the amount you are owed has increased by 1375.00 and the amount of revenue you expect to earn in the future when the items are delivered also increased by 1375.00.

This takes care of the future revenue portion of accrual accounting. Now we need to set up a rule to reduce the accounts receivable any time a payment is made. For this, we will create a rule called Payments with these steps:

When a payment is received in OrderTrac, that will credit (reduce) the accounts receivable account indicated you are now owed that much less. The Asset account is debited (increased) since you just received a payment.

Finally we need to create a rule that accounts for revenue that is earned when you deliver the item to the customer. Accrual accounting means you do not count revenue until the sale is complete and the product is delivered or the service is rendered. So we will create a rule called Revenue with the following steps:

When an product is delivered to the customer (item is delivered or picked up/taken home by the customer), this triggers that the item is ready to be picked up by this rule. The data source is Completed Sales meaning it will only collect data once an item is completed/delivered. This rule will create a journal entry that credits the revenue account for the subtotal of items completed, will credit the Taxes collected account for the amount of tax on the items that were completed, and the Deferred Revenue account will be debited which reduces that balance of unearned revenue and increased the earned revenue accounts.

Here is a sample of what your rules could look like for each accounting methods:

Cash Accounting

Cash accounting revenue is earned when a payment is received. In this example, we split up the revenue into different accounts based on the category. This is not required, but maybe useful for accounting/report to view actual revenue by category. We can set up these steps all under 1 rule:

Data Source	Options	GL Account	Method
Paid Sales	Categories: All furniture categories	Furniture Revenue	Credit
Paid Sales	Categories: Delivery	Delivery Revenue	Credit
Paid Sales	Categories: All other categories	Other Revenue	Credit
Paid Taxes	Taxes: All taxes	Taxes Collected	Credit
Balance Entry	--	Cash	Debit

Accrual Accounting

Accrual accounting revenue is earned when a product or service is delivered to the customer. Accrual also tracks how much is sold but not delivered (Deferred or unearned revenue) as well as payments you expect but not yet received (Accounts receivable). Here we have an example of 3 rules we can create to manage each of these areas of accrual based accounting:

Rule 1: Future Revenue:
This generates journal entries at the time a sales is written to record the total amount of revenue we expect to earn in the future (deferred revenue) and total payments we expect to receive in the future (accounts receivable)

Data Source	Options	GL Account	Method
Written Sales	All categories	Accounts Receivable	Debit
Written Taxes	All taxes	Accounts Receivable	Debit
Balance Entry		Deferred Revenue	Credit

Rule 2: Payments:
This creates journal entries when a payment is received to reduce the amount we expect to receive in the future (accounts receivable) and increase the amount we received now (cash/assets)

Data Source	Options	GL Account	Method
Payments	All methods	Cash	Debit
Balance Entry		Accounts Receivable	Credit

Rule 3: Revenue
This generates entries at the time an item has been delivered or picked up to record the revenue we no long expect to earn in the future (deferred revenue) and the amount of revenue we have now earned (revenue)

Data Source	Options	GL Account	Method
Completed Sales	Categories: All furniture categories	Furniture Revenue	Credit
Completed Sales	Categories: Delivery	Delivery Revenue	Credit
Completed Sales	Categories: All other categories	Other Revenue	Credit
Completed Taxes	Taxes: All taxes	Taxes Collected	Credit
Balance Entry	--	Deferred Revenue	Debit

Remember, these are just suggestions. These are typical settings for proper cash basis and accrual basis accounting, however it is recommended talk to your accountant to determine which journal entries are appropriate for your accounting setup. OrderTrac is very flexible in all the ways it allows you to generate journal entries so you can set it up to generate entries in the same way you currently manually send financial data to your accounting software.

Accounting Adjustments

Accounting adjustment are how financial changes are tracked in OrderTrac. For example, if you receive a $50 payment, a 50.00 adjustments will be created. The next time an accounting rule runs that has a data source of Payment, it will look for any accounting adjustments that need to be processed that haven't already processed. Once it is processed, it will not process again.

Likewise if you were to add a new sales order item to a sales order on Monday for $1000, a 1000.00 accounting adjustment will be created right away. If you were to edit that item on Tuesday and change the price to 1200.00, a 200.00 adjustment will be created to record the change that was made right then. The accounting adjustments are recorded on the date the action happens, so we can have a point in time financial picture. As of Monday evening, written sales were 1000, however on Tuesday, written sales increased by 200. This allows us to not only track what the financial picture is right now, but what the picture was at any given point in the past.

You can get a peek into what the accounting adjustments look like by clicking the View Accounting Adjustments option in the option menu next to sales order items, sales order payments, pos transaction items, pos payments, etc:

This will show you every adjustment that has been made for that item and when the adjustment was made. We can even see which adjustments have processed already and which have not yet. Not all adjustments will be processed if no rule is set up to process that adjustment type.

Here we can see the accounting adjustments for an item that is 1000. It has also been delivered so the completed adjustements equal 1000. It has only partially been paid, so we are expecting more Paid Amount adjustments when a payment is added to this sales order:

View the history

After the rule has run, there is a good chance you will want to review what it just did. This is what the History page is for. Under the Accounting section of the main menu, click History.

Every time a rule is run, a batch is created. You can click on the batch to view all the journal entries that were created. You can click on a journal entry to view what accounting adjustments contributed to the total of that journal entry.

Here we selected a batch created when the Revenue rule ran. If we select the Furniture Revenue entry that was created, we can see the 2,200 credit came from 2 different items completed: The side chairs for 1,200 and the table for 1,000:

Reports

The Journal Entry Summary report is very useful to answer questions such as, what is the accounts receivable balance, which basically means, how much am I still owed? Or, what is the balance of the Deferred Revenue account, which means how much revenue am I expecting to earn once everything that is currently on order is delivered?

This report will show you the amount of journal entries posted for each GL Account. For example, here we can see for Accounts Receivable, during the current year, we have debited 2,438.00 and credited 500.00. This leaves a balance of 1,938.00 indicating we still are owed $1938 for sales that have been made but not fully paid for.