(MF-1) Finances - The Concepts

Workshop Angel can manage all the finances to do with your activities, and you can potentially use it to manage the finances of other parts of your business too.
We have created the financial parts of the app to give you the most flexibility, which also means there are a few important concepts to understand before you can make the most of what is available.
Let's take a look at the financial ideas of invoices, payments and the way they are correlated with things called "allocations".

What Actually Is An Invoice?

So let's start with the idea of an invoice. You may be familiar with the name, but not necessary exactly what an invoice is.
Let's start with a definition that is available if you search "invoice meaning" on Google:
"a list of goods sent or services provided, with a statement of the sum due for these"
So at the most basic level, an invoice is a list of things you provided to a customer and how much they cost.
This is used by you and your client to:
  • Know how much you are owed (or for the client, how much needs to be paid)
  • (Maybe) Be able to report on your business to the tax authorities

Invoices and Bookings

Since Workshop Angel is an application for taking bookings, then while you are working with your attendees, we refer to the idea of a Booking. Here is an example of how this is shown on the Bookings - Payments page:
Inside the app, a Booking contains lots of information about the specific activity, the attendees who have booked, and how much is owed. So from an accounting point of view, a Booking contains all the information that is required for an Invoice.
Hence it is important to understand that:
An Invoice is a list of goods or services provided and the amount due for these.
In Workshop Angel, we consider a Booking and an Invoice to be the same thing.
Does that make sense?
The Booking contains all the information an Invoice requires. So when talking about who booked onto an activity, we call it a Booking. When talking more about financial aspects of a Booking, we refer to it as an Invoice. It means we are using the right terminology in the right places.
You can see this swap of terminology if you click on the [... More] button next to a booking on the Bookings - Payments view: it will open a popup window which is entitled "Manage Invoice":
We will look at how to use all the functions available in the Invoice window throughout this chapter of the documentation.
Sometimes you might sell a product or service to a particular client which is not about attending an activity. There are options available to create a separate invoice for this situation from the Contacts and Finances areas of the app.

Payments

When a client pays you some money, Workshop Angel allows you to record this through creating a Payment item. This will specify things like:
  • Who made the payment
  • When they made it
  • How much it was for
  • How they paid
This is stored in a Payment item in Workshop Angel, which in the most simple definition:
A Payment item records money received
Here is an example of how this is shown in the Payments window:
Most event management systems just allow you to take a full payment at the time the booking is made. Hence those systems will only have invoices that have been fully paid, and may not have this concept of recording a Payment as a separate item.
Workshop Angel is much more flexible, and allow you to have invoices which are unpaid or partly paid.
Which raises a very important question.
If you record a payment, how do you know which Booking/Invoice it is for?
To manage this, we have the idea of an "Allocation".

Allocations

An Allocation defines which Payment is for which Invoice.
As simple as that.
Well almost. We need to cover off a few situations that could arise...
  • You could have an overpayment. Someone owed £100 but paid £110 by accident.
  • You could have a payment which covers two invoices at once.
So a more precise definition is that:
An Allocation defines which part of a payment is for which Invoice.
In most cases, a payment will be made which is all, or an agreed part of, what still needs paying for an invoice.

An Allocation Example

As a picture paints a thousand words, let's look at this using a diagram to represent how an invoice for 100 (pounds/dollars/euros etc) which has been fully paid is represented in Workshop Angel (and indeed in many accounting specific packages):
We have the Booking/Invoice X for 100, a Payment A for 100, and an Allocation saying that "100 of Payment A is allocated to Invoice X".
So everything is neatly tied up.
Invoices and Payments have a status. In this case:
  • The Invoice is "Fully Paid". If this was not the case, it would "have an amount outstanding".
  • the Payment is "Fully Allocated". If this was not the case, it would "contain a credit".
You can start to see vital role of allocations. Without them you would have all your invoices showing unpaid, and all your payments showing as a credit to your client!
In most situations, this allocation process will be managed for you. However you need to understand and be able to manage this very important concept to keep track of your finances correctly.
The great news is that Workshop Angel makes this many times easier than trying to do it yourself!

Credit Notes and Refunds

Sometimes you may want to offer a client a lower price for what they initially were going to pay. An example of this may be if they book onto an activity but you then offer them a discount to help out with some practicalities. Another case could be if they have a valid complaint about your activity and you wish to give them some kind of refund.
Let's imagine you have taken a booking for a price of 100, and decide to give a 20 discount.
In the world of invoices, you could record this discount in one of two ways:
  1. 1.
    By modifying the invoice, adding an extra line item with a negative value (in this case -20) to reduce the invoice amount (in this case to 80).
  2. 2.
    By creating another invoice which has a negative amount (in this case -20).
An invoice with a negative amount due is called a Credit Note.
Either method is valid, but method (2) can be more useful if the time the discount is given is much later than the time of the original booking, as it more accurately reflects the state of your business' finances in different time periods.
Workshop Angel allows you to use either method.

Refunds

If the client has already paid for the booking, then defining the discount may then involve you needing to refund them some money. Once you have used one of the methods above to define the discount, then their payment will contain a credit. Workshop Angel offers the option to refund this credit to their payment card or to record a refund made by another method such as bank transfer.
A refund is recorded as a Payment item which has a negative value for the amount.

Payment Schedules

The final concept to look at with regard to finances is that of an invoice having a "Payment Schedule".
A Payment Schedule is a list of dates and amounts when a payment for an invoice is due to be made.
Each date and amount in a Payment Schedule is known as a "Scheduled Payment".
Having a Payment Schedule means the app can track when a new payment is due, and allow a payment reminder email to be sent out a few days before.
Let's look at a couple of examples of how a Payment Schedule may look, based on a booking made on 1st January, which is priced at 1000 (£,$,€), for an activity which starts on 1st July.
Full payment at the time of booking - this has one Scheduled Payment
Deposit payment at time of booking plus a final payment - there are two Scheduled Payments
Payment by Instalments - there are more than two Scheduled Payments
As payments are made and allocated to an invoice, then the amount paid towards each Scheduled Payment is tracked for you.
The dates and amount of a Payment Schedule are determined by the various settings you can change for the Activity itself, such whether a deposit can be paid, when the final payment is due, and whether payment by instalments is allowed.
You have complete flexibility to amend the Payment Schedule for a client if you choose to do that to meet their specific needs.
The Payment Schedule can be managed within the Invoices window:

Concepts Complete!

There you go... a more theoretical but very important lesson, that will enable you to understand what follows and manage your finances with style!