Hi Victoria from HBA Encompass. And today I want to talk about labys or payments in advance, gift cards. So labuys aren’t so popular these days, some of you younger people might not even know what it is. It’s when you buy something, and you pay it off. And when you have made all the payments you get whatever it is that you were purchasing. It has been very popular over the decades. The likes of zip pay and after pay have probably thrown it out the window a little bit. But it is a cheap, effective, generally interest free way of buying something. So if you’re a business, and you’re on the other side of it, whether you sell gift cards or you sell stock on layby then you need to know how to deal with it. And it’s a hard thing because you’re getting money up front for goods or services that may not be actually provided to the customer till down the track. So many My suggestion to you is to open a separate bank account. I’ve talked before about profit first and the five bank accounts, I’d put a six one in, and I would make it my gift card account. And basically every time you sell a gift card, I would put the money in there. And then when a sale is made that someone uses the gift card, then transfer it back to your sales account and deal with it as normal. From an accounting perspective, even if the good or service hasn’t been provided, generally, if you’re on a cash basis if you’ve received money in its income. If you’re accrual, then we can go through and look at the terms and conditions of the deal. And it may not be income until such time as the actual goods or service is provided. On the flip side, if you are providing a laybuy by you have sold stock, but you haven’t received the money from it yet. So that’s a different kettle of fish. Quite often with laybuys, then there is an ability for the person to cancel the laybuy at a later date. So I would do the same thing and put the laybuy monies into a separate bank account so that if the customer were to come along and cancel, you’ve got the money there to refund them the money. So that’s payments in advance gift cards laybuys. To get the intricate details of how to deal with it in your accounting system, best off talking to your accountant or your bookkeeper. Give us a call at the office 54447094 or our website hbaeencompass.com.au and book an appointment if you need one.
HBA Laybys and Gift Cards
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