This article provides a slightly deeper introduction to how you create invoices with tax reduction.
When you create invoices from Work Order or Invoice, Next Project will suggest the Tax Reduction Type and Type of Work that have been set as default under Administration. If the invoice concerns a different Tax Reduction Type or Type of Work, it is possible to correct the selections before the invoice is created.
Tip! Create a running invoice to automatically include reported hours that qualify for tax reduction. This way you avoid entering manual lines and having to ensure they are assigned to the correct account.
After the invoice has been created and any corrections to the invoice lines have been made, the next step is to distribute the tax reduction. This is done in the following order (see also a more detailed description in the subsequent sections):
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Verify that the correct reduction type is selected
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Verify that the correct Type of Work has been selected for your lines
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Distribute the tax reduction
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If revenue accounting: Verify the resulting accounting entries + data to the accounting system
Step 1: Verify that the correct 'Reduction Type' has been selected
If the wrong Reduction Type has been specified, it is possible to correct this on the invoice basis. This is done under the Tax Reduction tab. Please note that any distributions and selections of Type of Work will be cleared at this point. When the reduction type is updated, the amount in "Reduction Amount" will also be reset to zero and a warning will be displayed as shown below.
NOTE: For those of you who have revenue accounting enabled, the recommendation is to delete the invoice and recreate it if the wrong reduction type was selected, as otherwise you will need to manually adjust the Data to Accounting System dialog.
Step 2: Verify that the correct 'Type of Work' has been selected
Under the Basis on this invoice section, the reduction-qualifying amount is displayed broken down by account and Type of Work. If the Type of Work has not been specified, the Type of Work column will be blank and the reduction amount will be "0".
To verify that the Type of Work has been specified for all lines that should qualify for reduction, click Select Type of Work. The Basis for Tax Reduction dialog will then open.
In the dialog, you have the option to
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see which lines qualify for reduction (green checkmark)
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correct the Type of Work at the line level
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To clear selections, click "Clear Type of Work"
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To set the Type of Work for all reduction-qualifying lines, select the desired type from the "Type of Work" dropdown
NOTE: Only the lines that are marked with a type of work will serve as the basis for distribution. This is because the percentage used to calculate the reduction amount is determined by the Type of Work selected.
You also cannot edit the invoice lines in this view.
Step 3: Distribute the tax reduction
Under Property Owner, only the person(s) who have been marked as property owners on the customer card will be displayed. To distribute amounts, click the "Distribute Tax Reduction" button.
Next Project will then:
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Check the available reduction amount by subtracting the used reduction + reduction used by others from the maximum reduction amount for the year and the selected reduction type
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Distribute the amount evenly between the individuals
When distributing the reduction amount, rounding will always occur to the nearest whole dollar, which may result in a difference between the distributed amount and the available reduction amount. See the example below.
It is possible to manually adjust the distributed amounts if needed. For assistance, there is a "Remaining to Distribute" field that will show whether the distributed amount differs from the total reduction amount.
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A positive amount under remaining to distribute means there is still an amount left to distribute
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A negative amount under remaining to distribute means the distributed amount is higher than what is possible
Things to keep in mind
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The check against previously used reduction is only performed at the time of distribution by Next Project, that is, when you click Distribute Tax Reduction, and not at the time of locking. If the amount is manually adjusted, it is your responsibility to verify that you have not distributed an amount that is too high.
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If a credit needs to be issued for any reason, the entire invoice must be credited.
Step 4 (only if revenue accounting): Verify the resulting accounting entries + data to the accounting system
Under the revenue accounting tab and in the "Data to Accounting System" dialog, there is a summary of how the invoice lines on the invoice will appear in the accounting system.
Please note that this dialog, like the general logic for revenue accounting, will not be updated automatically when adjustments are made to the invoice lines, e.g. if the type of work is updated. This is because there is no connection between the invoice lines and the generated basis under the revenue accounting tab.
Below is an example of how the basis might look when the accounting rules have been set up to direct material costs, labor costs, and other costs to different revenue accounts.
To reflect any changes that have been made to the invoice, it is possible to add more lines. This is done by selecting a line and clicking "+". A new line will then be created where the account number, project number, WO/Change Order, item number, profit center, and description are copied from the selected line.
Tip: If a line needs to be split into 2 lines, you can start by entering the amount that should apply to the first line on the original entry and clicking save. The remaining amount will then be displayed on the original accounting line for the relevant work order as shown in the image below.
After saving, select the original entry, click "+", and enter the amount on the new line. At this point, you can also adjust the hours if needed.