Expenses, group documents and sharing profit with partners

Three subjects in this episode, and all three touch your profit directly: expenses, the group document for when one event involves several accounts, and sharing profit between partners. If you have ever looked at a profit figure and felt it was too good to be true, the reason is usually in here.

What you will learn

• How to record an expense with a category, a paying account, an amount and a currency
• How to create a new expense account without leaving the form
• Why a postponed expense makes your profit look bigger than it is
• When one event needs a group document instead of several separate ones
• How to define partners and their percentages
• How the profit distribution document puts each partner's share into their account

Step by step

Pick the expense category

The expense form is very plain. First, what is this expense? Rent, electricity, salaries, travel — you pick one of the ready categories.

Create a new category if you need one

If the category you need isn't there, you can create a new expense account right here without leaving the form. But don't overdo it: fifteen categories are manageable, sixty make the reports hard to read.

Say who paid, then post

Then, who paid this: the cash box, the bank, or a customer account. Enter the amount and the currency, write the description, and post. One line — but behind it is a complete accounting document: the expense account debited, the bank credited.

See the effect in profit and loss

You see the effect straight away in the profit and loss report. Expenses come off the profit — which is exactly why postponing an expense entry means seeing a profit bigger than the real one. The report itself is covered in where is the profit.

Know when to use a group document

The group document is for when a single event touches more than two accounts: when one payment clears three bills, or when one incoming amount is split across several customers.

Build the rows and post

At the top of the form is the fixed side — the single account paying or receiving. Below it, as many rows as you like. First row, the rent; add a row and enter the second item, the electricity bill; and a third, the water bill. Three items, one payment, one document.

Write the description and post it. Nexto works out the total itself, and will not post if the two sides don't balance. The result is one payment out of the bank and three separate entries into three expense accounts — one event recorded exactly as it happened. Group documents also keep their own list, so later you can easily find which event was made up of which items.

Define the partners and their percentages

Most exchange offices have partners, and at the end of the period the same question comes up — who gets what out of the profit? You define the partners on this page, and each partner is, of course, an account. Then the percentages: in this office, sixty forty. Nexto will not let the total be anything other than a hundred, because then part of the profit would belong to nobody.

Calculate and post the distribution

The calculate button takes the net profit of the period and splits it by the percentages. You can also type the figure yourself — if you're distributing only part of the profit, for instance. When you post the distribution document, each partner's share is written to their account: the profit is no longer a calculation, it's a number sitting in the ledger. The in-app page help (the ? icon at the top of the page) has more detail.

Tips

• Record the expense on the day it happens. A postponed expense always makes the profit look bigger than it is.
• Keep the category list short. Fifteen categories are readable; sixty make every expense report hard to use.
• A group document must balance before it will post, and Nexto adds the total up for you — so you never have to reconcile three hand-written documents afterwards.
• When a partner takes money out, that's an ordinary transfer from transfers and payments — partner account to cash box — so the partners' balances in the general ledger always stay right.

FAQ

Why doesn't the profit in the report match what I expected?

Usually because expenses haven't been entered yet. Profit and loss subtracts expenses from your trading result, so anything you haven't recorded is still counted as profit you don't really have.

The expense category I need doesn't exist — what now?

Create a new expense account directly on the expense form, without leaving it. Just be sparing: a long list of categories makes the reports harder to read than the detail is worth.

When should I use a group document instead of separate entries?

Whenever one real event touches more than two accounts — one payment clearing three bills, or one incoming amount split across several customers. It records the event as it actually happened, in a single balanced document, instead of three you would have to keep track of separately.

What if the partners' percentages don't add up to a hundred?

Nexto won't accept it. If the total were anything other than a hundred, part of the profit would belong to nobody — so the page requires the percentages to be complete before you can calculate and post the distribution.