Introduction

Deferred accounting is a critical process for businesses that deal with advance payments (deferred revenue) or prepaid expenses (deferred expense). Properly managing deferred accounting ensures that revenue and expenses are recognized in the correct accounting periods, providing accurate financial reporting and compliance with accounting standards.

 iVendNext offers both manual and automatic options for processing deferred accounting entries, giving businesses the flexibility to choose the method that best suits their needs. This article will explore the differences between manual and automatic deferred accounting, the benefits of each, and how to configure and use both methods in iVendNext.

What is Deferred Accounting?

Deferred accounting refers to the process of recognizing revenue or expenses over time rather than at the point of payment. This is particularly important for businesses that receive payments in advance (deferred revenue) or pay for services upfront (deferred expense). Properly managing deferred accounting ensures that revenue and expenses are recognized in the correct accounting periods, providing a more accurate picture of your financial health.

Before implementing deferred accounting, it's important to familiarize yourself with the following settings, as they will provide you with greater control over its management.

Manual vs. Automatic Deferred Accounting: Key Differences

iVendNext provides two options for processing deferred accounting entries: manual and automatic. Here’s a breakdown of the key differences between the two:

When to Use Manual Deferred Accounting

Manual deferred accounting is ideal for businesses that:

• Require greater control over the timing and accuracy of deferred entries.

• Have complex accounting needs that may not fit standard automated processes.

• Prefer to review and approve deferred entries before they are posted.

When to Use Automatic Deferred Accounting

Automatic deferred accounting is ideal for businesses that:

• When you want to save time by automating repetitive tasks.

• Have standard accounting processes that fit well with automation.

• Prefer to minimize manual intervention and reduce the risk of errors.

How to Configure Manual and Automatic Deferred Accounting in iVendNext

iVendNext allows you to configure deferred accounting settings to suit your business needs. Here’s how to set up both manual and automatic deferred accounting:

1. Configuring Automatic Deferred Accounting

1. Enable Automatic Processing:

• Go to Home > Accounting > Accounting Masters > Accounts Settings.

• Under the Deferred Accounting section, ensure that the Automatically Process Deferred Accounting Entry setting is enabled.

• This setting is enabled by default, allowing iVendNext to automatically process deferred accounting entries.

2. Set Booking Method:

• Choose between Days or Months for allocating deferred revenue or expense.

• Days: Allocates the deferred amount based on the number of days in each month.

• Months: Allocates the deferred amount evenly each month.

3. Journal Entry Options:

• If you prefer to book deferred entries via journal entries, enable the Book Deferred Entries Via Journal Entry option.

• To automatically submit journal entries, enable the Submit Journal Entries option.

2. Configuring Manual Deferred Accounting

1. Disable Automatic Processing:

• Go to Home > Accounting > Accounting Masters > Accounts Settings.

• Under the Deferred Accounting section, disable the Automatically Process Deferred Accounting Entry setting.

• This will require you to process deferred accounting entries manually.

2. Manual Processing:

• To manually process deferred accounting entries, go to Home > Accounting > General Ledger > Process Deferred Accounting.

• Click on New to create a new deferred accounting entry.

• Enter the Company, select the Type (Income for deferred revenue or Expense for deferred expense), and specify the Service Start Date and End Date.

• Save and submit the document to create the deferred accounting entries.

3. Using the Deferred Revenue/Expense Report

Whether you choose manual or automatic deferred accounting, iVendNext provides a Deferred Revenue/Expense Report to help you track and review deferred entries. Here’s how to use it:

1. Go to Home > Accounting > Reports > Deferred Revenue/Expense Report.

2. The report shows the actual and expected postings for deferred revenue and expense at both the item and invoice levels.

3. Use the report to ensure that deferred entries are being processed correctly and to reconcile your accounts.

Important Points to Remember

1. Automatic Processing Saves Time:
   Automatic deferred accounting is more efficient for businesses with standard accounting processes.

2. Manual Processing Offers Greater Control:
   Manual deferred accounting is ideal for businesses with complex needs or those that prefer to review entries before posting.

3. Regularly Review Reports:
   Use the Deferred Revenue/Expense Report to ensure that deferred entries are being processed correctly, regardless of whether you use manual or automatic processing.

4. Configure Settings Based on Your Needs:
   Choose the booking method (Days or Months) and journal entry options that best suit your business.

Conclusion

Both manual and automatic deferred accounting have their advantages, and the choice between the two depends on your business’s specific needs. iVendNext provides the flexibility to configure and use both methods, ensuring that your deferred revenue and expense are recognized accurately and in compliance with accounting standards. By following the steps outlined in this guide, you can choose the deferred accounting method that works best for your business and streamline your financial management processes.