As a preference, some clients would like to separate all their Client Expenses and Reimbursements for those expenses. As requested when fixing taxes under certain entities. Right now, Zola Suite allows you to make billable hard costs and billable soft costs. The difference between them is that hard costs not only make an unbilled item but also generate a payment/expense.
There are 2 ways that we can make sure that the firm's books will show the reimbursements as income rather than the default as a contra expense (undoing the expense)
- Generate a hard cost that is not billable (a) and then a billable soft cost (b) for the same transaction.
- By doing so, the hard cost will generate the expense and payment for that expense. The soft cost will then generate the unbilled item. Once invoiced and paid, it will hit the Soft Cost Reimbursement income account on the books
- This method will generate an extra step for each client reimbursement expense transaction and will not directly link the hard cost and soft cost together. We suggest that you create detailed and unique descriptions to match them.
- Generate a billable hard cost as regular (c). By doing so the hard cost will generate the expense and payment for that expense as well as generate the unbilled item that once invoiced and paid will hit the same account selected under the hard cost record, undoing the expense.
- Assuming the firm categorizes/selects one unique account for only their client expenses/reimbursements when generating the hard costs, we can go into the General Ledger at the end of the year before closing the books, or however often you like, to export the General Ledger and th total the amount that was credited/undone to that account. Using that amount we can create a journal entry to move the credited/undone reimbursements from that unique client expense account to an income account. The journal entry (d) would be a debit to the client expense account for the total amount reimbursed and credit the income account that you would like that amount to.
- This method will generate an extra step for each time you would like to move the reimbursements from an expense to an income account and will not be directly linked from journal entry to hard cost expenses and reimbursements. However, if you plan on doing this once a year for tax purposes, right before closing your books, this may be the best method.