Let us say that you are about to make your first sale on credit. You will soon be creating an invoice and sending it to your customer. Prior to that, we are going to do two preparatory steps. First, we are going to set up a billing term of 2/10 Net 30. Next we are going to add the name and other details of Acme Inc, the customer, from whom you are about to win a contract:
- Prerequisites: Make sure you have an Accounts Receivable account in your account hierarchy. Typically, you will find this under Assets | Current Assets. If you do not have one, go ahead and create a new Accounts Receivable account. This should be of type A/Receivable and, preferably, have Current Assets as the parent.
- Register Your Company: After you have built your account structure, you will want to register the GnuCash file as belonging to your company. This information is required for creating the invoice. Click on File | Properties. In the Business tab, type your Company Name and Company Address. In Company ID add your GST number: GST: 1234-5678RT. Click on OK.
- Create Billing Term: Before entering a new customer and creating an invoice, it is preferable to enter your billing terms. Select from the menu Business | Billing Terms Editor. The Terms window will open. Click on New and the New Billing Term window will open.
Note
As we said earlier, if you can persuade your customer to pay cash on delivery, it will help your cash flow. Even better, of course, will be if you can get an advance payment. If you can't get either of those terms, try to keep the credit period as low as possible. Also, offer an incentive for your customers to pay earlier by offering an attractive discount.
- Enter Std for Name, Standard for Description, and Days for Type. Enter 30 in Due Days, 10 in Discount Days and 2.00 in Discount % as shown in the following screenshot.
- Click on OK. You have now created a billing term that you can use while creating the invoice. Also create another Extended billing term as shown in the following screenshot:
- You are now all set to add your first customer to the system. From the menu, select Business | Customer | New Customer. In the Identification pane of the Customer tab, leave Customer Number blank. GnuCash will generate numbers sequentially. Fill in Acme Inc in the Company Name and enter a Billing Address. Leave the Active checkbox checked; otherwise this invoice won't appear in searches.
- In the Billing Information tab select Std from the dropdown list. Enter 20 in Discount and enter 20000.00 in Credit Limit. Leave the two tax fields untouched for now as shown in the following screenshot:
- Leave the Shipping Address tab blank for now. Click on OK. You have now created your first customer.
You may have standard payment terms that you may want to quote as a matter of routine. However, if there is a special opportunity either by way of a large contract or if there is a potential for an ongoing business opportunity you may relax that and be willing to offer special terms. For the benefit of your team as well as for your own clarity, you might want to codify these options in advance and define what the standard terms are and what could be special terms.