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Discussion Starter #1
I'd like to ask my customers to give me a security deposit up front to engage my service this winter. I don't want to work for free. Like paying a months rent up front when renting.

When renting this is legal but you must hold the deposit in a special account. May not apply to my business but not a bad idea.

Any one have an idea how to enter the deposit in Quickbooks (pro) so the computer can keep track? I don't want to have it shown as income until the winter's end when I actually earn it, which would put the income in '09.

I've mentioned the idea to a few new customers and they were fine with the deposit. Problably lose a few accounts but might end no pays.
 

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I dont have an answer to your question specifically, but can relate to the situation. The proper term is a retainer. And it's completely legal, but as far as I know, it's income when the customer pays it. Holding it until next year may be considered illegal, I'd check with your legal advisor on that one.

With respect to the non-payers, I have one that was a problem last year, he got an attitude with me when asking for payment and didn't pay until July when I threatened legal action. This year, I waited until 2 days ago, and sent him a cancelation leter exercising our 30-day out (cancels just before our usual first plowable event). With the cancellation letter, I sent him a new contract that requires payment in full up front. :D This way, I'm not being a bank, not financing his snowplowing, and dont have to wait for my money. I'm also not gonna get screwed by not getting paid, because nothing gets done until I have money in hand. This doesn't help with new customers, but either eliminates the deadbeat gets 'em paid up before they become a problem.

Also, my only mistake in dealing with this example was not canceling them sooner due to nonpayment. My contracts give me the ability to cancel in 7 days if there's no payment for the previous bill. I gave this customer, a family friend, the benefit of the doubt, and he had no motivation (not getting plowed out) to get his bill paid. In the future, I'll be jumping on the non-payers much more quickly and dropping them before they owe me even more money...

Example #2, a business, pays cash after each event, this after they bounced a couple checks on me 2 years ago. Kind of a PITA, but at least I get paid. They dont get plowed for another event until they've paid for the one they owe me. This also protects me from being owed too much money.
 

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I'm leaning toward retainers for any new customers. I had several that had issues last year. I got paid, but they had issues.

One of my customers got shot by the cops 2 nights ago, so I won't be plowing that driveway this year.:eek:
 

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I dont have an answer to your question specifically, but can relate to the situation. The proper term is a retainer. And it's completely legal, but as far as I know, it's income when the customer pays it. Holding it until next year may be considered illegal, I'd check with your legal advisor on that one.
I think the term is deferred income and could possibly be considered a liablility as opposed to an asset.

Not sure why it would be illegal, it's sort of like a layaway.

Can't help out with how to handle it in QB, sorry. Who's that certified QB trainer on LTS? Maybe he can chime in.
 

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Yea, first responded for ems. All I can say is wow, seen a lot of shootings, but wow. Don't point a gun at cops, it's gonna hurt.


As for QB, I can't remember who it is either, but he was at Erie this year and I had a nice chat with him. Chuck would know.

I like the retainer idea and plan to use it. It beats taking on a new customer that you don't know or are unsure of and getting burned. I've had enough of them.:mad:
 

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you can enter a payment into QB before there are any invoices created. (you must create a customer profile however) You're simply putting in an overpayment. It'll ask you if you want to create a memo, leave it as a credit or you can refund it.

Just check the 'leave credit to be used later' box and away you go.
 

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Discussion Starter #9
accounting

When I started college they gave us a test that lasted days, thousands of quick questions, meant to determine which fields you would probably succeed in. It was actually quite accurate, told me things about myself I had no idea of.

The test was scaled one to one hundred for lots of potential occupations.

I actually went completely off the scale and got a negative number in accounting - I think it was a negative eight!

Mark Oomkes, now that I've actually tried reading about accounting (and pulling my hair out), I've found that I am totally flummoxed by liabilities and assets. The first half of assets I understand quite well and really appreciate! (LOL). But accountants seem to call them opposite of what I would expect. I hope you will not try to explain it to me, it would only hurt us both.
 

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you can enter a payment into QB before there are any invoices created. (you must create a customer profile however) You're simply putting in an overpayment. It'll ask you if you want to create a memo, leave it as a credit or you can refund it.

Just check the 'leave credit to be used later' box and away you go.
Dead on advice here... However if its in your bank before 09 i dont know how your gonna get out of paying 08 income tax.

For me providing we didnt start pushing until T day i would often run a 45 day billing cycle so statements didnt go out til Jan 1 this made it 09 income, kinda slanted a bit but true. The way the IRS interpets income is in your bank even with a seperate account the bank is still gonna report the income i would be real careful,,, i think a personal check can be held for 30days and buss check 45 days before cashing or depositing another option i suppose is hold them until jan 1.

So regardless of how you enter it into QB has a criedt or not if your intent is to spend, depoist, or use it before Jan 1 then its 08 income.
 

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How much of a deposit is it going to be? percentage wise, if you're getting 10-20% of the season upfront, is it really going to be that big of a deal on your taxes to tack that deposit onto 08 and have the rest fall in 09? Seems like a lot to do for not much benefit? I'd rather have quick cashflow than holding it to 09. but that's just me.
 

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Discussion Starter #12
Fred I guess I got my idea from rental laws. I don't know if they vary by state but most likely they do.

Here in Maine you have to put security deposits in a separate account, the account number must be made known to the renter if they ask (if my memory serves). The money actually belongs to the renter until the final accounting at which time the landlord must return it if all rent is paid and no damages are evident.

In fact, most don't pay the last month's rent and do leave damage and the landowner holding the loss. The deposit helps offset the losses.

Thus with the special account - not your personal or business checking account - your intention is to hold the money for the renter but you do not own it, they do.

I think I remember reading tax law that specfically states that when you receive money is the date you enter it and holding it over till the next year is not legal. I don't know how they could enforce that with mail delivery and slow to mail customers who hold or predate their checks.

Anyway I'm the last person to ask for accounting info, that's why I threw it out for discussion. Thanks to all who add their ideas.
 

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Discussion Starter #13
BSD, I'm not looking for cash flow, I'm looking for leverage. If the snow stops I would be returning the deposit. I was thinking about a four storm average cost.

I did work my way into a higher than comfortable tax bracket this year, so not throwing away a percentage of the money in extra taxes is a consideration.

I don't think it would be much trouble with the computer to keep track, actually no extra trouble.

I expect with the current ecomomy to be in a lower bracket next year so I will keep more of what I make.

I just don't like to pay taxes on money I haven't earned that I can't spend. To me a deposit is very different than contract prepay which is mine and can be spent.

Also I'm looking for a better way to set up the billing system where I'm not at risk lending money with no collateral. I'm not really in the lending business, I'm just a workman and expect to be paid and paid promptly.

And this is a good year to protect yourself, see Fred's thread on repro's. The banks are in the lending business and they do protect themselves. I never knew they had a key to my trucks!
 

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The technical term for these sorts of accounts are either escrow accounts or trust accounts and neither makes much sense for this business.

If you receive income, you must recognize it as income and report it. Unless you use accrual accounting, in which case you report it as income when you bill it. Most here are cash basis taxpayers. Simple rule: If you find money in the street--it is income.

Another option would be to migrate to a credit card payment system. You have the cash soon, and so long as you protect the database, no issues.

If you have a valid agreement, have performed, then you have an enforceable right to be paid whatever the agreed amount is. Don't know what the Maine law is on point, but would guess there is a mechanics lien statute. Usually it only requires a couple of carefully crafted letters...........

If you ask for a deposit or retainer, then you bill against that until it's gone and then you start over. It can be a headache.

Stick to a simpler approach. If you think you will have to carry an account for a while, then insert an interest provision in the agreement, or provide an incentive for early payment.
 

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I have always used the stick approach, as opposed to the carrot. Liens work good, and you can collect full interest.

That being said, the carrot approach is nice, as you have their money and you know you will be paid on time.

As for the credit card aproach, it is akin to a rotten tomato. Not only do you have the hassle of cc companies and tying your bank account to them, but now you loose a percentage of each plowing. Seems like a loose-loose situation for the small guy. In bulk it may be something to look at, but the fees and hassle seems like a waste.

Last year I was stiffed on a grand total of $ 188.15, $150.00 of which is from a nice lady who is presently institutionalized and will pay when she gets back on her feet.

Anyway, stargazer, I wouldn't hesitate to do the retainer method and collect on it Dec. 1 to be cashed Jan. 1.
 

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Alan

I know everyone runs diff size companys but in ref to taking criedt cards and keeping cash flow, paying vendors , and wages ill gladly pay the 1.8 percent for taking them.

Last month alone had we not accepted CC's iam not sure i would have had the stomach to look at my accounts rec.

Peter is who really turned me onto the idea of taking payments from my snow accounts, i had accepted CC's for 7 yrs for the Repair buss why not take advantage of it with snow. Most of my snow cust's frankley didnt know we accepted them for payment methods, trust me its alot easyer to call in the invoice punch in the numbers, batch out at night and know your accounts are payed up.

Just a FYI and it may not apply to everyone but taking a check on dec 1st and cashing it Jan1 understand the person that writes that check has every bit the right to write that off has buss expense for this year , should the IRS get involved wether you cashed it or not your gonna have to do some explaining.
 

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Fred, my overhead door guy was here today installing the last over head door opener (woo hoo, pics to follow in the garage thread) and asked me if I take cc.

He just changed his around, costs him 1.79 % of each transaction, $39.99 / month for one fee and $79.00 per month for another fee. I agree it would be handy, but I have no issues with people paying (yet) so can't see spending that money. Without hiring employees I can't expand any further, so I'm not looking to expand my business so adding work is not an incentive. I can see it's advantages, but the cost are signifigant for a guy my size. I suspect stargazer is in the same boat and is a tightwad Mainer like me.:wink:D
 

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Just a FYI and it may not apply to everyone but taking a check on dec 1st and cashing it Jan1 understand the person that writes that check has every bit the right to write that off has buss expense for this year , should the IRS get involved wether you cashed it or not your gonna have to do some explaining.
I wasn't going to say anything, but exactly. Seems like a lot to do about nothing. There is no advantage to playing hide the sausage with the IRS. Either way you're going to get boned if you're investigated. Just take the deposit, pay your tax on it and move on. It'll work itself out the next year.
 
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