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Re: Proposed changes to make it easier to ship after billing

On Sun, May 26, 2013 at 4:01 PM, Erik Huelsmann <..hidden..> wrote:

On May 26, 2013 11:59 PM, "Brian Wolf" <..hidden..> wrote:
> >>I am trying to figure out the best way to support easy shipping after billing.  The big problem right now is that unless and until we >>completely re-engineer both the invoice and order logic, getting a perfect solution in place is going to be a prohibitively large amount of >>work.  The basic point is that ideally unshipped orders should enter the system as orders, and only after they are shipped/delivered >>should they be invoiced.
> Unfortunately, that's not how most companies operate.  Instead, they will not ship the product until it's paid for.
> Perhaps the issue here is whether to look at it as an accounting workflow (the current sequence, which you've described) or a business operations workflow (the way most companies actually operate).

Well, I do think we should support the "pay before shipping"  workflow. The question is how to best map the required business workflow to a valid accounting workflow though.

Reading the wikipedia page on invoices confirms my understanding of the position of the invoice document. If you want to receive money in advance, a proforma invoice can be used, or an order can state pre-payment is required before shipment will take place.

If LSMB could automatically pay invoices for pre-paid orders, that might help, I'd say. Wouldn't it?

Just to clarify the accounting here:  Income is supposed to be recognized once the product has shipped, not before.  If you receive a prepayment, that is "unearned income" which affects the balance sheet but not the income statement.  Once you have done the work and finished the project, you get to report it as income.  This is done by invoicing.  Technically you aren't supposed to realize income until right of return has lapsed unless you estimate the portion of returned goods, according to my recollection of FASB/IASB memos.

This is a purely accounting question on this side.

So the point is to get to support the workflow Brian describes which is (including accounting steps at the end):

1.  Customer makes order.
2.  Customer pays for order.
3.  Goods get shipped
4.  Income gets realized.

Best wishes,
Chris Travers