How Sage 50 Handles Cash-Basis
We have defined cash-basis accounting as a system that recognizes income and expenses when actual cash (including checks or money orders) is received or disbursed. In the accounting world, there are different varieties of cash-basis accounting.
Sage 50 offers the cash-basis company two important benefits of an accrual system:
- customer and vendor aging
- projected cash flow, via customer and vendor ledgers
To reap these benefits, you must enter customer and vendor invoices
in a timely fashion.
Customer and Vendor Aging
If you enter customer and/or vendor invoices, Sage 50 will compute and track aging for receivables and payables, even for cash-basis companies. This includes automatically tracking discounts for timely payment. For sales, you can calculate finance charges for overdue customer invoices. For purchases, you can select a batch of bills to pay, based on due date, discount date, and other criteria. In addition, you can use the Collection Manager and Payment Manager to analyze receivables and payables, and to generate collection letters (Collection Manager) or select bills to pay (Payment Manager).
Projected Cash Flow
Cash-basis companies that record customer and vendor invoices can still accurately project cash flow. The two main tools for this in Sage 50 Accounting are the Cash Flow Statement and the Cash Flow Manager.
Payroll
Because of their vital importance to your business, Sage 50 handles payroll taxes in an accrual fashion, even for cash-basis companies. When you enter and post a payroll check, Sage 50 immediately updates all payroll tax expense accounts, even if the check date is a future date.
Inventory
If you buy and sell inventory items, you should use the accrual method of accounting. However, Sage 50 updates inventory costing in accrual fashion, even for cash-basis companies. In other words, when you post a purchase of inventory items, the cost of the item is recalculated then, not when payment is made.