Changing Accounting Basis

What changes when my accounting basis changes?

Changing accounting basis changes how transactions are handled - on an accruals basis, transactions are accrued based on their transaction date, in receipts and payments the date of a transaction is based on the date it appears on your bank statement.
Changing requires you to restate your prior year closing balances on your new accounting basis so balances don't just carry between financial years as they usually do.

Click here to find out more about the difference between accounting on a receipts & payments and an accruals basis.

Changing from Receipts and Payments to Accruals

Moving from Receipts and Payments to Accruals accounting basis, is a relatively simple change. You can simply switch to an accruals accounting basis within ExpensePlus (within the system settings screen) and add in any end-of-year accruals for the prior year (via the adjustments module) at the point your prior year balances get restarted on an accruals basis.

From that point onwards, ExpensePlus will automatically accrue any purchases entered and any customer invoices created if you enable auto-accruals, and if you need to add in any additional accruals or deferrals you can easily do so via the adjustment module.

Note: If you are setting up ExpensePlus and accidentally selected the wrong option, you can change your accounting basis to accruals in system settings and then in your opening balance setup.

Changing from Accruals to Receipts & Payments

This change is much harder. You can't just adjust your accounting basis within ExpensePlus from Accruals to Receipts and Payments, because you will already have transactions created on an accruals basis, which can't be altered.

Note: If you are setting up ExpensePlus and accidentally selected the wrong option, and you have not yet entered any transactions, you can change your accounting basis to receipts and payments first in your opening balance setup and then in the system settings.

Here are the two options you have in you have been accounting on an accruals basis in ExpensePlus:

(a) Continue with an accruals accounting basis

If you are likely to switch back to an accruals accounting basis in future, you might consider not switching to a receipts and payments basis, as the process of switching involves effort itself. This would negate much if not all the benefit of accounting on an receipts and payments basis if you are only going to be doing this for one or two financial years before switching back to accruals.

(b) Set up a new instance of ExpensePlus on a Receipts and Payments basis (FREE)

This option will enable:

transactions in your new financial year to be handled correctly on a receipts and payments basis;
restating your prior year closing balances on your new receipts and payments accounting basis whilst preserving your prior year balances on an accruals basis.

Note: There is NO additional charge for you having a new instance of ExpensePlus - we'll transfer your subscription over to the new instance of ExpensePlus for you. You and all your users will also keep access to your previous instance of ExpensePlus and will still be able to view that data at the click of a button.

Top Tip: Contact us in advance of the financial year you plan to change to a receipts and payments accounting basis to avoid entering transactions on an accruals basis in your existing instance of ExpensePlus, but then having to re-enter these in your new instance of ExpensePlus.

To set up a new instance of ExpensePlus on a Receipts and Payments basis, send a message to support@expenseplus.co.uk. We can transfer over as much of your existing setup as possible (funds/categories/donors/suppliers/payees/memorised bank transactions etc.). The only things we are not able to migrate across are your users (you will need to add to the new instance of ExpensePlus) and any system settings you have customised.

Can't I just switch to Receipts and Payments, but leave ExpensePlus on Accruals?

Whilst this removes the need to create a new instance of ExpensePlus it has some fairly big drawbacks:

transactions have already been accounted for on an accruals basis;
your prior year balances will be on an accruals basis.

To overcome this, within any financial year that is on a receipts & payments basis you would need to:

Remove any investment gains/losses that have been entered (n/a for receipts & payments)
Remove any fixed asset depreciation that has been added (n/a for receipts & payments)
Ensure that all purchases have been coded to 'expenditure' categories (not 'fixed asset' categories)
Rematch any loans received as 'income received (not as 'loan received')
Rematch any loan repayments as 'direct debits' (not as 'loan repayments')
Remove any manual accruals or deferrals that have been entered within the creditors & debtors screen*

Note: you would also need to do this for any manual accruals or deferrals from the prior financial year too, in order to ensure the opening balance for these in the financial year that is on a receipts and payments accounting basis are zero.

Prevent any auto-generated accruals from showing up on your year-end balance sheet, by updating the transaction dates of any transactions showing up as either accounts receivable or accounts payable to ensure the transaction dates of these are within the same financial year as the income/expenditure appears within your bank statements

Note: you only need to fix auto-generated accruals that are outstanding at year-end, as auto-generated accruals that are 'mid-year' won't affect your year-end financial reporting.

You will also need to make manual adjustments outside of ExpensePlus when creating accounts at year-end when stating:

Investments
Fixed Assets
Loans

Note: the balances for these are likely to be higher/lower than stated within ExpensePlus as the balances within ExpensePlus will be 'frozen in time'.

Top Tip: there is no cost-saving with this option, so we'd recommend you only do this if:

(a) you are wanting to switch to a receipts and payments basis for a financial year that has already been accounted for within ExpensePlus on an accruals basis, AND

(b) you feel confident with what you need to do, and accept you may need to make manual adjustments outside of ExpensePlus when creating your accounts.

What if I need help with this?

If you need help changing your accounting basis, then we can support you with this. However, this isn't included in the regular software support that we offer.

Click here to find out more about getting additional help and support.