Accounting Model Concept & Workflow
Accounting Model Concept
cieTrade.net’s primary purpose with respect to accounting is to define your “top line” gross margin, or the net result of sales after direct costs, such as purchases and shipping, on a trade by trade basis. By doing so, it allows you to use its specialized reports to produce critical metrics, analyze business performance, and track sales rep contribution in ways that accounting software alone cannot.
Unlike a traditional accounting system, where sales and expenses are expressed as separate AR and AP transactions with no connection, cieTrade.net uses what we call a “buy/sell” Worksheet to represent each shipment and all its related financials. The Worksheet matches the revenue from each shipment with any related purchases and expenses on one transaction form that also defines gross profit. There can also be sales and purchase adjustments attached to Worksheets with their own impact on gross profit.
The revenue and costs on each worksheet are “recognized” or included on financial reports in cieTrade.net whenever a Worksheet is saved in INVOICE status. Worksheets in any other status have no impact on accounting and are merely staged loads. Unlike in accounting software where expenses impact P&L as soon as a vendor invoice is received, in cieTrade.net, expenses (what we call expense accruals) impact P&L the moment a Worksheet is saved in INVOICE status. Later, when a vendor invoice arrives and is matched up against cieTrade.net’s expense accruals, only the difference (if any) between the accrual amount and the invoice will impact your P&L. This results in gross profit always being defined by matching up revenue against expected costs, providing a more accurate representation of profitability and also makes it possible to evaluate the true productivity of sales reps.
At month end, the gross profit defined by cieTrade.net is transferred to your accounting system using a summary journal entry that’s provided by our Closing Adjustment report. This entry distributes the sales and expenses that have accrued over the financial period to the appropriate sales and expense distribution accounts in your accounting system while also offsetting balance sheet accrual accounts that are used when sales invoices and vendor bills are initially created by cieTrade.net.
cieTrade.net always posts expenses to a balance sheet accrual account (A/P Accrual) whenever it creates AP vouchers for two main reasons:
1. It makes it much easier to reconcile since automated sales and expense transactions from cieTrade.net are only distributed to accounts that would not normally be posted to by an end-user making direct entries in the accounting system (I.E. Posting to segregated accounts).
2. It avoids inadvertently showing skewed or overstated income by financial reports in your accounting system within the financial period since expense accruals against revenue (tracked by cieTrade.net) are not posted (distributed) until month-end.
The sales transactions will post directly to the AR account and all AR detail will be housed in cieTrade Accounts Receivable reports.
If you choose not to use the cieTrade AR Module then sales will post to a balance sheet accrued asset account (Accrued Sales).
Once the month-end closing adjustment is posted in your accounting system, The cieTrade.net month end Accounts Aging report will match the AR balance in your accounting system and the balance in the accrued payables account should match the total on cieTrade.net’s Open Payable Report when run as of the last day of your closing period.
If not using the AR module in cieTrade, the balance in the Accrued Sales account should be zero.
Assuming there are no discrepancies, the final step would be to complete your normal month-end close in accounting (i.e. reconcile cash) and run your financial statements.
Accounting Workflow
The following diagram and outline provides an overview of how accounting functions are handled by cieTrade.net and how it interacts with your accounting software. It illustrates where typical accounting transactions are posted, what information automatically flows to your accounting software and how both systems are kept in balance.
Each brokerage transaction or container shipment is represented in cieTrade.net by a Worksheet. The Worksheet form is a like a buy/sell ticket that defines actual sales revenue, expected purchase costs and expenses and any adjustments that might occur.
1. Sales As sales transactions are billed, the Worksheets they are represented on will be saved in “
Invoice” status which will instantly create an invoice in cieTrade that matches the Worksheet. Each invoice will create an entry on the month end closing adjustment report
If you do not use the AR module, as sales transactions are billed, the Worksheets they’re represented on will be saved in “Invoice” status which will instantly create an invoice in your accounting software with an invoice number that matches the Worksheet. Each accounting invoice will credit an Accrued Sales account. Accrued Sales is a balance sheet account used to separate cieTrade.net booked sales from any other direct postings to make it easier to reconcile at month-end.
Any changes made to sales on Worksheets in cieTrade.net will automatically update the invoice in accounting. If a Worksheet is taken out of invoice status then the corresponding accounting invoice will be either deleted or set to zero depending on the accounting software used.
2. Cash Receipts Cash receipts, sales discounts and bank charges and any other transactions related to receipt of payment are posted directly into cieTrade where accounts receivable balances are also tracked. If you do not use the AR module, customer payments and reporting will be handled in your account system.
3. Vendor Bills As vendor bills are received for direct trading expenses (material purchases, freight, etc.) they’re matched up to the expense accruals already tracked in cieTrade.net by checking them off from our AP Ledger tool. Once one or more marked accruals are posted, a voucher is instantly created in your accounting software for the net (total) amount of the selected accruals. If the vendor payment does not exactly match the totals accruals, then the difference will be accounted for by automatically posting a proportional adjustment against each accrual. Each voucher will debit an accrued payables account instead of an expense account to avoid overstating liabilities within the month and to make it easier to reconcile at month-end.
Corrections to posted vouchers are handled by reversing the posting in cieTrade.net with the Voucher Inquiry tool (Never by make direct changes in accounting) . The reversing procedure either deletes or zeros out the corresponding voucher depending on what accounting software is used. Note that vouchers can only be reversed if they are posted to an OPEN financial period. Vouchers in closed periods or paid vouchers can only be corrected using adjustments posted from cieTrade.net.
4. Payments Vendor invoices (vouchers) are aged and payments are processed directly in the A/P module of your accounting system (same as today) .
5. Indirect Expenses Bills for indirect or overhead related expenses such as phone, payroll, office supplies, etc. are always posted (received) directly into your accounting software the same as you do today. These types of expenses should never be recorded in cieTrade.net unless they are trade related such as freight, handling, claims, processing.
6. Sales Adjustments Sales adjustment or memos in cieTrade.net are always created from the “Adjustments” tab on individual Worksheets (Invoices). Adjustments with a positive values increase sales and create either an invoice or a debit memo directly into your accounting software. Negative adjustments decrease sales and create a credit memo in accounting. In both cases the sales amount will always be distributed to accrued sales as discussed earlier.
7. Purchase Adjustments Purchase adjustments for material and expenses are also initially staged on Worksheets but are only posted to accounting from the A/P Ledger where vendor bills are matched as discussed earlier. Users have the option to either net Adjustments against other payables or post adjustments individually as AP invoices or memos in your accounting software. An AP Ledger posting with a net positive value will create a voucher or bill in accounting. Negative value postings create debit memos in accounting that can be “applied” against other posted vouchers.
8. Month-End Closing When you’re ready to close the month, the first step is to lock the financial period in cieTrade.net so your numbers won’t change. Next, the Closing Adjustments report (under the Accounting Menu) should be run for the period being closed. This report provides a summary journal entry that breaks out sales and purchases to the distribution accounts tracked throughout the period. (See Closing Procedures for more information)
9. Financial Statements Once your closing journal entry is complete and you’ve reconciled with cieTrade.net, financial reports such as your P&L Statement or Balance Sheet can be produced from the accounting system the same as you do today. Your financial statements can include as much or as little account detail as required depending on how you have mapped general ledger accounts in cieTrade.net.
Important Note: The single most important aspect of cieTrade.net’s accounting workflow is that any changes to direct sales purchases or related expenses should ALWAYS be handled through cieTrade.net –not with direct postings in your accounting system. Otherwise, it will result in either gross profit or Open Payables not reconciling.
If you have additional questions, please contact the Support Team via email to support@cietrade.net.