Changing your business activities to help deal with Coronavirus? You might need to change your bookkeeping too.
At this point, I think it’s pretty safe to say that business has changed for everyone. No one remains unaffected by the Coronovirus. And, unfortunately, no one knows how far-reaching or long-lasting this is going to be.
How are you dealing with the changes? What are you doing to pivot or diversify your business? What are you doing to stimulate sales?
Here are some things to consider that, unfortunately, will probably raise more questions than they answer but my goal here is to make sure you’re aware of them and, if you have any questions, please feel free to reach out. We can set aside a 30 minute window to answer any questions you may have, free of charge.
I’ve heard already that businesses are pushing gift certificates and offering discounts. Did you know that these are different types of accounting entries?
The revenue from a gift certificate sold is actually classified as “unearned revenue” and is a liability until such a time when the certificate is redeemed and the revenue is considered earned. You also need to account for a percentage of the gift certificates sold not being redeemed. If you haven’t previously sold gift certificates that can be tricky to estimate given you have no historical data to work from.
If your business is offering discounts, make sure you don’t enter a lower revenue amount. The discounted amount should actually be entered as a debit to the Sales Discounts account which will reduce the total Revenue amount on the Income Statement.
Because things are so uncertain right now and people are having to stay home from their jobs, possibly not earning any income, you may need to consider that some of your Accounts Receivable might need to be written off as Bad Debt. If you’re considering this, or think you might need to, we recommend speaking with your accountant.
So is anyone else laughing that we used to say “it’s a constantly changing world”… we didn’t know what change was back then!!! I don’t know about you but I’m no longer wondering when business will go back to normal, but if business will go back to normal.
And on that cheery note, here’s a puppy on a rhino!