One of the biggest pains in the neck when bookkeeping is to account for the payments to utility companies. You know the ones, where what they are billing you for or charging seems to have no relation to the money they took out of your bank account on direct debit ...
Gas, Electricity and Water all seem to fit this bill with some suppliers as I often see issues where payments have been missed and a bill has a brought forward amount on it. This could be either a credit or a debit, which means the amount taken isn't the bill amount, but takes previous bills or credits into consideration.
To do the bookkeeping for these you have two options. You can either:
- Not bother entering any bills or credit notes at all, and when you see payment going out of the bank just do a 'Create' in Xero or a Bank Payment in Sage and allocate to the utilities account or nominal code and use the VAT amount shown on the invoice (5% or 20% or exempt depending on what utility it is for).
The only time this won't work is if you have varying gas or electricity supplies through the year meaning the VAT rates vary between 5% and 20%. Below a certain level, you get charged the lower VAT rate. If this happens you need to choose option 2) or the VAT you are reclaiming could be incorrect.
- Alternatively, when you get the bill create a bill in Xero or an invoice in Sage for the supply on the invoice each time, but be sure not to include any brought forward amount as that should still be showing as outstanding on the account from previous bills. If you are entering everything correctly you should be able to log a payment and click on multiple outstanding bills in order to allocate the full payment.
If your utility bills have got into a mess in your supplier accounts sometimes it is easier at the end of your financial year to just write off any excess that is not due and just make sure what shows as owing at the year-end matches your latest bill so you can start with a clean slate in the next year.
This can be the case especially if you are taking over a bookkeeping job from someone who didn't fully understand the account previously and it has got into a bit of a mess.
If you need support to help you figure out the utility bills in your bookkeeping then you could arrange a 1-2-1 handholding session with me to support you in working out what is going on. Sometimes a fresh pair of eyes looking at the issue is all you need.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.