Supplier payment on account
This article covers how to manage supplier payments if you have a utility account. It gives some options for how you can record expenditure based on the amount used and invoiced for, rather than on the direct debit your utility provider takes.
Note that if you simply want to track your utility account balance to find out how much energy you are using and whether your account is in balance, this is typically best done within the online portal for your energy provider.
In this article:
Option 1: Making manual adjustments
This method is for charities that create accounts on an accruals basis.
Accounting for your utility account balance at year end
If you are accounting on an accruals basis and the balance on your utility account is significant at year end, then from an accounting perspective, the correct way to account for this is to add a manual adjustment.
This would be either:
- a prepayment adjustment if your account is in credit (the provider owes you money) OR
- an accounts payable adjustment if your account is in debit (you owe your utility provider money).
Making monthly adjustments
Making year-end adjustments is important when accounting on an accruals basis.
You can also make an adjustment at the end of each month. However, adjustments within the year make no difference for your year-end accounts, so most charities do not feel the need to do this.
Typically, the reason you might choose to make monthly adjustments is if the balance amount on your utility account:
- is significant, and
- the month-end amount varies widely between months.
Option 2: Using petty cash to record expenditure
This alternate method is for organisations that account either on an accruals basis or a receipts and payments basis.
You can set up a petty cash account to track your utility expenditure based on your monthly usage rather than based on the direct debit paid. You may wish to call the petty cash account 'utility provider'.
When your utility provider issues you with an invoice, you can record this within the petty cash screen as expenditure.
When a payment is taken from your bank account to the utility provider (for example by direct debit), you will need to record this as a 'transfer to petty cash'.
If this is done correctly:
- your petty cash balance will always match your utility provider account balance
- expenditure will be recorded based on the invoices you are issued.
To help you better understand the Adjustments module, please visit the module overview page here.