This article is a continuation of last week’s topic. In last week’s post, we listed several transaction types with account type restrictions, here we will examine two use cases and show how the techniques listed last week can be used.
Example #1: Corporate Credit card used to pay Vendor Bill
A client of ours has an external expense reporting system which includes a corporate credit card integration with NetSuite. Each month’s credit card bill syncs with NetSuite to create credit card charges on a (non-reimbursable) expense report. Non-reimbursable expense reports result in a credit to the corporate card liability account and debits to various expense accounts, based on a mapping of Expense Categories and GL Accounts in NetSuite.
Sometimes, however, the corporate card is used to pay a vendor bill that has already been entered in NetSuite. This immediately results in two potential problems. 1) The expense already has been entered via the vendor bill, and the expense report created with the integration will include the charge, potentially resulting in double entry. 2) The vendor bill needs to be “paid” in NetSuite using the credit card account, and the expense report already creates the necessary credit card charge to that account.
In theory, the solution is simple. All we need to do is use a clearing account. Map an Expense Category to the clearing account and enter a Vendor Bill Payment using the same clearing account. Result:
Credit Card Expense Report (Imported):
- Dr Clearing Account
- Cr Credit Card Liability
Vendor Bill Payment (using clearing account as the header account)
- Dr Accounts Payable
- Cr Clearing Account
Here is where we encounter an issue with Account Type restrictions. Our clearing account needs to be used on the line level of the Expense Report (a type of Vendor Bill) and also on the header of a Vendor Bill Payment. NetSuite will not allow an Account Type of “Bank” to be used on the Expense Report lines, and yet this is the type of account which the Vendor Bill Payment will need.
Instead of setting up a clearing account using an account of the type “Bank Account”, we can use an account of the type “Credit Card” as the clearing account, which can be targeted on the Expense Report line as well as on the Vendor Bill Payment header.
See the screenshots below. Notice that the net result of the two transactions is a credit to the “real” credit card account and a debit to Accounts Payable, which is exactly what the net result should be.
Example #2: Create an invoice for Cash Advances
At times, companies may borrow or lend funds and wish to Age the loans using the Accounts Payable/ Accounts Receivable subledger system, and efficiently close out the loans when paid. The most natural and error-free way to do this would be to use native transactions, rather than Journal Entries (see part I of this topic). This is difficult, however, as most item types in NetSuite cannot be configured to Debit or Credit an Account of the type “Bank”, and the impact needed is:
- DR Accounts Receivable
- CR Bank
- DR Bank
- CR Account Payable
There are two solutions for loans receivable, and one for loans payable.
Solution 1: “Payment” Item
There is an item type which can be used on an invoice, called “Payment”. This item type is meant to be used with a negative amount to reduce the net Receivable amount of an invoice, showing payment received against positive revenue lines, but we can use it differently for our purposes. This item type does allow a Bank Account to be selected as the “account”, and thus when used on an invoice will credit the bank account, achieving the desired Debit to A/R, Credit to Cash. This solution will not work for Loans Payable since “Payment” items cannot be used on Vendor Bills.
Solution 2: Bank Deposit Transaction
This solution will work for both scenarios. Enter a Bank Deposit, and on the “Other Deposit” subtab, enter the A/R Account or A/P Account. For a Loan Payable (incoming funds), enter a positive amount and a Vendor name representing the lending entity. For a Loan Receivable (outgoing funds), enter a negative amount, and a Customer name representing the borrowing entity. Note that upon “save”, the amount will show under the “Cash Back” subtab as positive, but the amount will still be tagged with the customer name if you observe the GL Impact.
I hope these examples were helpful. There are lots of ways to maximize NetSuite with some creativity. If you’d like to learn more about overcoming native functionality, I’d be happy to hear from you!