Advice needed on dealing with cash payments as a ltd company.

[LeeT]

Hi folks,

I've recently started my own company which invents, manufactures and sells products. I work alone using 3d printers and crafting so it's alot less glamourous and lucrative than it sounds.

Until now all my transactions have been online direct to my business account. Earlier today and customer who happens to live round the corner from me contacted me via telephone and came and payed cash.

He didn't ask for an invoice or receipt and I didn't even think about it until I thought about paying this into my account. It's only a £15 but I do plan to grow my direct sales so I need to learn how to handle cash payments in terms of invoices or receipts?

Many thanks for reading!

 

[Scalloway]

My favoured method for one off cash receipts is just to record it as a sale when the money appears on the bank statement. What system do you use for keeping your accounts?

 

[LeeT]

Thanks for the info. Do you just mark it as "sale" on your bank account with no invoice or receipt of what was sold or to who?

I just need to clarify what I should be recording. One scenario I face, I produce a couple of products for a particular car and I plan to attend some of the regular forum meet ups where I can deliver items and get new sales.
If for example, I made £200 in cash from one meet, would I need to breakdown everything I sold with individual receipts or I could I put it all under one transaction?

 

[LeeT]

What system do you use for keeping your accounts?

Nothing at moment, I have kept a record of every transaction as it's been online until now. Should I be using this?

 

[Paul Norman]

The answer is going to vary a lot.

I would raise an invoice as usual and bank the money.

In the stores, we used to raise a sale on the till, which was integrated with our web site back office, and it used to keep a record of the sales along with online and credit card sales.

In my current businesses I would be slightly taken aback if offered cash, but would obvious accept it and pay it in as above.

 

[Scalloway]

I've recently started my own company

Do you mean by thištaht you have started a limited company or do you mean in a more generic manner? In this forum company is usually taken to mean a limited company registered at Companies House rather than a business.

If you have indeed started a limited company then I strongly suggest getting an accountant now to help you set up your accounting system as getting it right now will save a lot of heartache down the line,

 

[paulears]

I’m a sole trader. Have been since 2004, full time. I’m useless at manual book keeping so have always used software so I can keep track, and work out if I am actually making a profit.

if you have a business bank account, then often, you can get accounting software as a free deal. I didn’t get that and pay for mine. FreeAgent is what I use. One of its best features for me is the matching of bank transactions. Money in and out is monitored, so if you create an invoice, the money coming in automatically pays off the balance. It the. Warns you when this does not happen. For me, this usually means I made a mistake. Entering 78 quid as £780, daft things like that. But often nowadays it shows money did not arrive and you can chase it. Bills work the same way. You order things, receive them and occasionally, they don’t take the money straight away. Then you spend money you think you have in the bank, then they take their money. grrrrrrrr.

accounts software stops all this and gets you organised. Dont forget that HMRC are moving to all businesses using software. VAT is software only now, and Soon it will be all businesses. Excel spreadsheets can be bodged to talk to HMRC but unless you are on the ball, they’re too error prone for normal folk to rely on, unless you are very good at writing them. FreeAgent costs me, but it reduces my tax accountancy because my accountant, pops into it when he is work light, and does stuff, making his end of year work easier, and for me, cheaper.

little things trip you up. Many people go over the VAT threshold without knowing. 80 odd grand as profit would be nice, but my turnover is very high, the actual margin between costs and income modest. It’s so easy to forget this. I know little of 3d printing but what kind of invoice totals in and out do you have? If you earn minimum wage from your business, with common margins, you might be over the VAT threshold already.

 

[LeeT]

The answer is going to vary a lot.

I would raise an invoice as usual and bank the money.

In the stores, we used to raise a sale on the till, which was integrated with our web site back office, and it used to keep a record of the sales along with online and credit card sales.

In my current businesses I would be slightly taken aback if offered cash, but would obvious accept it and pay it in as above.

Thanks for the info. This was my thinking, I can do a invoice for each sale.

Do you mean by thištaht you have started a limited company or do you mean in a more generic manner? In this forum company is usually taken to mean a limited company registered at Companies House rather than a business.

If you have indeed started a limited company then I strongly suggest getting an accountant now to help you set up your accounting system as getting it right now will save a lot of heartache down the line,

Thanks for your reply. Sorry, I did mean a ltd, I should have specified.

Thanks. I did run a ltd in past and did my own accounts but this was over 10 years ago so I understand things might have changed. I do have an accountant who is doing my payslips, I shall speak with her.

I’m a sole trader. Have been since 2004, full time. I’m useless at manual book keeping so have always used software so I can keep track, and work out if I am actually making a profit.

if you have a business bank account, then often, you can get accounting software as a free deal. I didn’t get that and pay for mine. FreeAgent is what I use. One of its best features for me is the matching of bank transactions. Money in and out is monitored, so if you create an invoice, the money coming in automatically pays off the balance. It the. Warns you when this does not happen. For me, this usually means I made a mistake. Entering 78 quid as £780, daft things like that. But often nowadays it shows money did not arrive and you can chase it. Bills work the same way. You order things, receive them and occasionally, they don’t take the money straight away. Then you spend money you think you have in the bank, then they take their money. grrrrrrrr.

accounts software stops all this and gets you organised. Dont forget that HMRC are moving to all businesses using software. VAT is software only now, and Soon it will be all businesses. Excel spreadsheets can be bodged to talk to HMRC but unless you are on the ball, they’re too error prone for normal folk to rely on, unless you are very good at writing them. FreeAgent costs me, but it reduces my tax accountancy because my accountant, pops into it when he is work light, and does stuff, making his end of year work easier, and for me, cheaper.

little things trip you up. Many people go over the VAT threshold without knowing. 80 odd grand as profit would be nice, but my turnover is very high, the actual margin between costs and income modest. It’s so easy to forget this. I know little of 3d printing but what kind of invoice totals in and out do you have? If you earn minimum wage from your business, with common margins, you might be over the VAT threshold already.

Thanks for all this info and advice, Paul. I will be getting some software that is compatible with HMRC. I will speak to my accountant and check with my bank because I think it does mention some free software that's included.

I'm not making anywhere near the VAT threshold yet, the margins are pretty good but my biggest expenses are selling fees and postage. The materials are about only 10% or less of the total sale value. That's why I plan to do more direct sales as it cuts my biggest expenses out.

 

[Ozzy]

Lots of accurate advice already but throwing my thoughts into the ring assuming this isn't a frequent occurrence.
Create a second bank account in your bookkeeping software called Petty Cash or something like that. The cash is marked as a sale received into the Petty Cash bank account, and then when you buy milk and sugar and what have you for the office, toiletries that sort of thing, pay for it out of the petty cash and put the receipts through petty cash. Treat it like a separate cash float bank account.

 

[OMGVape]

We get occasional cash purchases, I note the customers name then put the cash in my pocket.
At the end of each month I raise an invoice “Cash Sales” then transfer the total from my personal account to the business account.

 

[LeeT]

Lots of accurate advice already but throwing my thoughts into the ring assuming this isn't a frequent occurrence.
Create a second bank account in your bookkeeping software called Petty Cash or something like that. The cash is marked as a sale received into the Petty Cash bank account, and then when you buy milk and sugar and what have you for the office, toiletries that sort of thing, pay for it out of the petty cash and put the receipts through petty cash. Treat it like a separate cash float bank account.

Thanks. It's only happened once but I do plan to increase my direct sales so I'd rather pay into my account as I don't use much petty cash.

We get occasional cash purchases, I note the customers name then put the cash in my pocket.
At the end of each month I raise an invoice “Cash Sales” then transfer the total from my personal account to the business account.

Thanks. Does this mean you combine all your cash sales into 1 invoice? Does an invoice not need the customer name and address?

 

[Scalloway]

Does an invoice not need the customer name and address?

I've noticed that my local builders merchants just give me an invoice addressed to Cash Sales.

 

[DontAsk]

Cash sales are just sales, like any other sales, no matter how large or small. No need to overthink things. Why would you not issue an invoice? Unless you are planning to fiddle the books and pocket the cash?

I do pocket the cash, but I invoice, record the sale, credit the cash account and then transfer to the Directors Loan account to keep everything straight. The DL owes me, so transferring a cash sale reduces what it owes.

 

[LeeT]

I've noticed that my local builders merchants just give me an invoice addressed to Cash Sales.

Thanks, yes, I have received many invoices similar myself, I just weren't sure if this was correct as it was always from small businesses.

Cash sales are just sales, like any other sales, no matter how large or small. No need to overthink things. Why would you not issue an invoice? Unless you are planning to fiddle the books and pocket the cash?

I do pocket the cash, but I invoice, record the sale, credit the cash account and then transfer to the Directors Loan account to keep everything straight. The DL owes me, so transferring a cash sale reduces what it owes.

They are not like other sales for businesses that have only dealt with online payments. I didn't issue an invoice because I didn't think about it till afterwards then I came on here just to ensure I issue this one and any future ones are done correctly. It was never suggested I wouldn't issue an invoice.

I don't have a DL, I just pay myself a salary at moment but next year I might do things different depending on whatever works out best at that time so that might be an option in the future.