[Only System Administrators and/or bookkeepers need to read this section.]
While each design firm may operate differently, it is important to understand the "default" way client deposits work in DesignSmart. Below is a typical work flow.
1.The designer will create a project in DesignSmart and add a client to the project.
2.The designer will add items to the project and create a proposal that is submitted to the client.
3.The proposal will show the total proposal amount and the required client deposit.
4.For this example, suppose the total proposal amount is $10,000 and the required client deposit is $5,000.
5.Based on the amount specified on the proposal, the client will mail a check for the $5,000, or pay by credit card or wire the funds.
6.When the money is received, the user with the QuickBooks Connector who is connected to QuickBooks, will enter the deposit in DesignSmart for that project.
7.DesignSmart will automatically push the deposit to QuickBooks.
8.Typically the deposit amount will be recorded in QuickBooks to a "Other Current Liability" account since most firms do not want to consider a client deposit as revenue. They prefer to wait until the item is shipped before moving the deposit from the liability account to a revenue account.
9.What is important to understand at this point, is that these items have not been sold. You have only received working capital to purchase the items.
10. Since the items have not been delivered, the client has not been invoiced. Therefore there will not be a sales tax liability for these client deposits when they are received.
11. A week or a month, or more, may pass by, but at some point the items are about to be delivered or have been delivered so the client needs to be invoiced.
12. When an invoice is created for these items, DesignSmart will automatically apply the correct client deposit to the invoice. And the invoice will show the client's remaining balance for that invoice.
13. At the moment the invoice is created, DesignSmart will automatically move the client deposit funds that are applied on the invoice from the other current liability account to an income account.
14. A sales tax liability will be accrued for that client deposit amount.
15. The sales tax liability for the balance of the invoice will depend if your firm is based on the cash or accrual accounting method.
The Smart Designer does not claim that the client deposit work-flow described above is the proper accounting procedure for all clients. It is our client's responsibility to review the above with their accountant. If there need to be modifications to the way the process above, please contact the staff at The Smart Designer to discuss you firm's specific requirements.
We recommend that only the merchandise amount be factored in. This means the client will not pay a deposit on the freight or the tax. |
 | What happens if I need to change one item on the proposal for another? |
This is not a problem. Simply add the new items and apply set the client deposit from the previous item. |