[moneydance] Using Moneydance for a small business

[Edward Reid]

At 07:40 07/13/07 -0400, Kevin R. Marshall wrote:
>Does anyone here use Moneydance for business purposes?

Unless you're *extremely* small, you'll find it inadequate. I do use it for 
my consulting business, but I am sole proprietor, have never had an 
employee, am not concerned about needing to pass rigorous audit 
requirements, and write two invoices per month. Here are a couple of old 
postings regarding what I do; these may give you an idea of what you're in 
for if you try it. There have been posts by others about the need for other 
software for business use.



Date: Thu, 04 May 2006 02:18:19 -0400
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From: Edward Reid <edward at paleo.org>
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Subject: [moneydance] handling receivables
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I've just finally dived into converting from Quicken 2005 / Mac to MD.

In Quicken, I kept my accounts receivable for my small business in a
Quicken Asset account. Very small business: sole prop, have never had any
employees, average one deposit per month for the past 20 years. Even so, it
was a stretch in Quicken, which had no concept of the invoice date being
different from the payment date, or of multiple partial payments, or of
single payments for multiple invoices. But it simply wasn't worth moving up
to a "business" package just to avoid a bit of kludginess in this one area.

Does anyone here handle receivables within MD? If so, how? Is there
something better than the kludge I've been using in Q?

Edward
Art works by Melynda Reid: http://paleo.org


Date: Tue, 16 May 2006 23:18:42 -0700
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From: Edward Reid <edward at paleo.org>
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I appreciate the suggestions. I don't question that a proper accounting
package is the correct answer, but it just isn't going to happen here. Not
worth the effort. I'm not concerned about auditability. (And yes, a CPA
helped me set up my books, though that was on paper 20+ years ago. He still
does my taxes, knows I keep my books in a personal finance program, and
wouldn't hesitate to tell me if I were leaving myself open for such
problems.) I would never get enough benefit to pay back the cost of
learning to use it. (The out of pocket cash cost is a minor issue.)

What I have come up with -- and I probably could have done it in Q too if
I'd thought of it -- is this. Make a root-level account "Accounts
Receivable". Within it, make a second level account for each client. (This
isn't necessary, and in fact at the rate I'm going I may never have but one
account at this level.) Within each client account, make an asset account
for each invoice.

Huh, you say? An account for every invoice? Yep.

I enter the invoiced amounts as increases -- usually two entries, one for
services and one for expenses. Then I set the account to hide when zero.
When I receive payment -- partial or full -- I enter it as a transfer from
that invoice account (within Accounts Receivable) to my checking account.
Many invoice accounts will never have but three transactions, and as many
as half a dozen will be unusual.

Advantages: invoice date and payment date(s) are tracked independently. The
balance on each invoice is tracked. All open invoices (and only open
invoices) show in the assets list on the home page (and because the root
account's name starts with "A", they are at the start of that list, which
can then flow off the page with little loss). That list shows both the
total outstanding, the amount outstanding from each client, and the amount
outstanding on each invoice. One click from the home page shows invoice
details.

Disadvantages: I'm not sure yet how difficult it will be to report the
information I need for taxes, but in large part that's because I haven't
explored MD reporting at all yet. I'm recording the income category on the
invoice amounts (since the payment is a transfer from AR to checking), but
I do my taxes on a cash rather than accrual basis, so it's the payment date
that's important to me. I will eventually have a LOT of accounts in this
hierarchy -- though AFAIK MD won't have any trouble with this, and once the
invoices are closed, they don't show on the home page. And, I agree, it IS
a kludge within a program not intended for this purpose, not a proper
accounting solution. It certainly is way too much work for a business which
creates even one or two invoices per day -- but so far it seems very
reasonable for creating one or two invoices per month.

I'm interested in hearing whether anyone sees major problems with this
approach. (But not in being told it isn't proper accounting. I accept that.)

Edward
Art works by Melynda Reid: http://paleo.org


Follow up: I did have to complicate this scheme slightly. When I receive a 
payment, I make pairs of entries in the invoice account. For each category 
(usually one for services and one for expenses), I make two entries. One 
entry is in a category "billed to paid", and reduces the asset value of the 
invoice. The second entry is a true income category for the same amount as 
the "billed to paid" entry. Then there's a final single entry to transfer 
the balance to my bank account. This enables me to track the paid date, 
which as I mentioned in the earlier posting is important because I do taxes 
on a cash basis.

Edward