Critical Accounting Details

SAM should be viewed as a Subsidiary Ledger to your accounting system. It is a Billing System in the Accounting world. The best way to handle any subsidiary ledger is using Clearing Accounts, which ensure your accounting records match your billing system. We recommend you set-up the following accounts on your balance sheet:

• SAM Customer AR
• SAM NSF Checks
• SAM Refund Checks

We will discuss how you use these accounts later on in this document. But each of these accounts should be zero at each month end; unless you can identify specific items which cause these accounts to maintain a balance. Examples of reasons a balance may exist in each are as follows:


SAM Customer AR – if you have collected a partial payment from a customer. The balance remaining in this account should match your Customer AR Report in SAM.


SAM Refund Checks – Refund(s) entered in your Accounting System which have not yet been entered in SAM. Again, you should be able to identify the specific check(s) which make up this balance.


Why do you need clearing accounts? They are a simple way to enter different cash transactions and the related sales detail associated with them. The below table helps illustrate how these work:

	Cash	Clearing Acct	Revenue Detail
Daily Deposit	Debit $10,000	Credit ($10,000)
GL Report Entry		Debit $10,000	Credit ($10,000)
Balance	Debit $10,000	$0	Credit ($10,000)

You may ask “why not simply enter the Cash and Revenue?” The main reason is you have multiple types of transactions that affect your cash balance, including (a) bank deposits entries, (b) credit card deposit entries, (c) NSF Checks, and (d) Refund Checks. By using a Clearing Account, you need only worry about using this account in your accounting system, and not the detailed revenue line items for each cash transaction. When these are entered into SAM, all the revenue details are tracked for you and summarized in the GL Report.

In addition, you can simply enter in your Revenue Detail once a month, rather than daily. 

Remember, you always want to make sure any entry you make to Cash will match what is going to show up on your bank statement. This simplifies your bank reconciliation process.

Team Credits

Team Credits applied to customers show up on your Sales Report by credit type. These are non-payment credits to Team Accounts. These include Early Payment Discounts, Employee Discounts, and Manager Credits. 

These items flow through SAM on three reports.

1. The GL Report includes them in league revenues along with cash, check and credit card payments. You can choose to run this report excluding credits by checking the appropriate box if you prefer to ignore credits in your accounting reports.
2. The Sales Report lists Team Credits with all other payments. You may enter these as a reduction of revenue. We recommend you record them on a separate line of your financial statement so management can see how much is being credited each period.
3. The Team A/R Report, which details credits by type and team.
   

Option 1: Reporting Team Credits on your Financial Statements

This option allows you to see how much you are “giving away” each period in terms of credits against team balances. Essentially what happens is you report in League Revenue the Gross Amount invoiced to teams, then separate line items showing all team credits given in that period. An example of how your financial statements might look:



Option 2: Ignoring Team Credits on your Financial Statements

This option simplifies your financial statements to just reflect the amount actually paid for your leagues. In the above example, your financial statements would simply report revenue as $95,000.



Accounting Entries for Each Option

For Option Two, you would simply ignore the credits on your daily sales report, and when running your GL Report you would choose to ignore credits. The result would be recording, in the above example, $95,000 when you make your monthly GL Entry.

For Option One, you would record the credits entered each day when you make your Daily Deposit entries from your Sales Report. In the above example, all of these entries would total the $5,000 in credits for the month. On the GL Entry, select the option to include credits, and make your GL Report entry. In the above example, the GL Report would show $100,000 in League Revenue. 

The bottom line for both options is the same. Option One simply provides more detail on your financial statements. You can always see this detail in SAM, so which direction you choose is entirely your decision, and what you think will provide your management team with the best information to run your company.

Daily Deposits

The Sales Report is found on the cash register screen, and under the Reports drop-down window. The Sales Report lists each payment made, credits given to teams, and refunds during a given period of time. This report should be reconciled at the end of each night with the deposit you are making to the bank. WARNING!! If you do not make sure your Sales Report matches your bank deposit, you will have reconciling differences between SAM and your books. The reconciliation process is also a good security practice to follow.

We recommend you treat SAM as your Accounts Receivable and Billing system. If you are familiar with accounting, treat it as a subsidiary ledger for AR and Billing. Set up a balance sheet account called SAM Customer AR. At the end of every month, this should be zero, unless you use the Customer Credit function in SAM; see the Critical Accounting Details section for details.

For every deposit you make, print a Sales Report for that period of time (if you make a deposit every three days, run the report over that three-day period. If you close your tills several times a day, run the report for that span of hours.) Your Journal Entries will be:

Cash and checks: (Open to Closing time)

• DR Bank Account $594.17
• CR SAM Customer AR $594.17
  

Credit cards: Time Frame (Settlement Time, say 9:00 PM)

• DR Bank Account $57
• CR SAM Customer AR $57

You need to know what time your merchant accounts settle each night. If at 10PM, you will want to run your Sales Reports from 10 PM the night before to 10 PM the day of the deposit. This will then match the amount deposited in the bank. Also remember, credit cards may take 2 or 3 business days to reach your bank account.

Customer Credits:

• DR Team Credits Expense (or contra-revenue account)
• CR SAM Customer AR
  

These show up on your Sales Report by credit type. They are non-payment credits to Team Accounts. These include Early Payment Discounts, Employee Discounts, and Manager Credits. You can see the detail for these on the Team Accounts Receivable report.


That's it for Daily Sales Transactions!

Refund Processing

To handle refunds, you will want to make sure your accounting system and SAM reconcile, meaning every refund check written should have been entered into SAM. Operational procedures may vary on how you handle refunds, but a simple reconciliation tool we recommend is setting up a General Ledger Account in your accounting system for Refund Checks. I recommend you do so in your cash account area. Here is how it works:

1. When you write a check, record it to this account:

          CR – Checking Account         Carol King $100

            Note: make sure you note the check number somewhere in the entry detail for ease of month end reconciliation.
When you record the refund in SAM, enter in your company check number in the check field when you check-out. The refund will show up on your Sales Report with all other payments, and in fact will be sub-totaled with all other checks deposited for that period. The entry you make to record this in your accounting system is:


The monthly revenue entry you make will then record the refund into the right sales categories (this entry is discussed below.)

	SAM Customer AR	SAM Refund Acct.	Revenue Detail
Daily Deposit entry	Debit $100	Credit ($100)
GL Report Entry		Debit $100	Credit ($100)
Balance	Debit $100	$0	Credit ($100)

Reconciliation: In your accounting system, make sure your SAM Refund Account has a zero balance at all times. That means every refund check written has been entered into SAM. It also means, all refunds entered into SAM have been recorded in your accounting system (usually meaning you have not forgotten to enter a check.)

NSF Check Entries

These entries are basically identical to a refund. However we recommend you create a separate G/L account named SAM NSF Checks. This will help you reconcile SAM to your Accounting System. 

To handle NSF Checks, you will want to make sure your accounting system and SAM reconcile, meaning every NSF Check returned to you should be entered into SAM. Operational procedures may vary on how you handle NSF Checks, but as stated above, a simple reconciliation tool we recommend is setting up a General Ledger Account in your accounting system for NSF Checks. We recommend you do so in your cash account area. Here is how it works:


1. When you write a check, record it to this account:




2. When you record the NSF in SAM, simply open the invoice for which the original payment was made, proceed as if you were giving a refund, and then enter in the Customer’s Check number followed by the letters “NSF” in the check field when you check-out. The NSF will show up on your Sales Report with all other payments, and in fact will be sub-totaled with all other checks deposited for that period. The entry you make to record this in your accounting system is:



The monthly revenue entry you make will then record the refund into the right sales categories (this entry is discussed below.) 

Option: If you use the Customer Credit function, and want to charge an NSF fee, just add an NSF Fee into the shopping cart, check-out and enter a 0.00 payment. This will record the NSF Fee due on the customers account and you can collect it the next time they are in. We don’t recommend you re-enter the team payment or class fee at that time, as it will appear as though they have in fact paid for those programs and may slip through the cracks of your normal collection processes.

Reconciliation: In your accounting system, make sure your SAM NSF Check Account has a zero balance at all times. That means every NSF Check has been entered into SAM. It also means, all NSF Checks entered into SAM have been recorded in your accounting.

Posting Sales Transactions

Consider entering your sales detail once a month. All the detail is in SAM; you don't need to enter it again in the accounting system. SAM can generate summary or detail sales reports in any period you choose, whether daily, weekly, monthly or any other time increment, the process is the same. 

At the end of the month, run a GL Report for that month. Remember to choose to ignore team credits when running the GL Report if you do NOT want this level of detail on your financial statements; see the Team Credits section for more details. Then make the following entry:


DR SAM Customer AR

CR League Revenue

CR Class Revenue

CR Pro Shop Sales

CR Membership sales

CR Sales Tax Payable


You get the picture. Enter as many revenue types as you want to track in your accounting system. You can enter as detailed as Snickers, Mounds, Skittles, etc., but we don't recommend that. SAM will give you the sales for any product item you create.

The total of this report should match your Sales Report totals for the month, unless you use the Partial Payment function. The only difference in the accounting will be credit card sales, which have not settled by midnight of the last day of the month (remember those sales will post to your bank based on the settlement time of your merchant service.) If you don’t use the Customer Credit function in SAM, your SAM A/R account balance should only have a debit balance for credit card sales not yet settled.

Partial Payments

SAM allows you to invoice a customer now, and let them pay later. You may want to do this in cases where you require a deposit now for a party and pay in full the day of. Or, customers registering for multiple weeks of camp or field rentals, you can invoice them for the whole amount and collect the rest later.

This function, however, creates a “Gap” between the Sales Report total and the GL Report total. Simply put, the Sales Report lists all payments made, while the GL Report shows all invoiced amounts. If you invoice a customer today, and let them pay later, the Sales Report would not list a transaction because no payment was made, while the GL Report would show the amount invoiced to the client. 

Each period you want to see all the transactions that created the “Gap,” you can run the Customer AR Report for the same date range as you have for the Sales Report and Category Sales Report. This report ending balance should also match the balance in your SAM Customer AR account on your General Ledger. 



Reconciliation – To reconcile the reports, follow this format:

          Sales Report Total                                        $ x,xxx.xx

Less: Payment total on Customer AR Report - $ xxx.xx

Accrual Accounting Entries

To convert your financial statements from Cash to Accrual, you will need to make Journal Entries in your accounting system. These entries may include:

• Defer Team Revenue – record team revenue in the same period as the games are played
• Defer Class Revenue – record class revenue in the same period the classes are given
• Defer Camp Revenue – record camp revenue in the same period the camps take place
• Defer Membership Revenue – record membership revenue throughout the period in which the membership is valid
• Defer Rental Revenue – record rental revenues in the period in which the rental takes place
  

The above entries are necessary to meet Generally Accepted Accounting Principals. These principals also consider the materiality of a particular adjustment, which means how significant that adjustment changes the picture your financial statements provide of your current financial position. For Example, if your company’s Total Sales in a year are $2,000,000 you likely need not worry about adjustments that are less than $10,000 at the end of the year. Ultimately, this is your call, but you may want to consult a financial accountant (not tax) to better understand this concept.


Why Accrual Accounting? 

Simply put, accrual accounting provides more accurate information to manage your business and understand your true financial position. A simple example to illustrate is collection of team fees in advance of a season. If you didn’t run the league, would you owe the money back to your teams? Accrual Accounting shows this liability on your books, while cash basis records the team fees as revenue when collected and then negative revenue when you return it. 

Cash basis basically reports what happened in your bank account for a given period. Accrual Accounting is a true representation of the financial performance of your company…good or bad!

Many companies think they are on a cash basis, but are part accrual and part cash. If you have accounts payable, inventory and accounts receivable on your books, you fit into this category. Cash records expenses when you write the check. These types of accounts are accrual accounting.

Suggested Team Revenue Deferral Methodology

Determine at the end of a month, how many games for which you have collected the fees but have yet to provide your customers. We suggest you simply allocate your current season revenues by month based on the number of weeks in each month.

For example, if your Fall Season (September to October) is 8 weeks, and you collect $80,000 for the season, count the number of weeks in each month and recognize the pro-rata amount of revenue in each month. In this example, let’s assume you play 3 weeks in September and 5 in October. At the end of September, you would “owe” your customers 5 games. So, your Deferred Team Revenue account (a liability on your balance sheet) would need to have a balance of 5/8*$80,000 or $50,000. Your journal entry as of September 30th would be:



On October 1st, you want to reverse this journal entry, as you will be making a new one at the end of the month based on a new calculation. The reversal is as follows:



Often it is the case where you have collected money for a future season AND have a game or two remaining in the current season. We suggest you make an entry for each season, so it is clear and simple what each entry is trying to accomplish. The first would be the same as in the above example. The second would be the same entry, but for 100% of the future season fees already collected. To get this amount, simply run the Team AR Report for this season, but limit the report to only show transactions that have taken place as of the end of the month.

Suggested Class Revenue Deferral Methodology

Determine at the end of a month, how many classes for which you have collected the fees but have yet to provide your customers. We suggest you simply allocate your current season revenues by month based on the number of weeks in each month.

For example, if your Fall Session of classes (September to November) is 12 weeks, and you collect $120,000 for the sesson, count the number of weeks in each month and recognize the pro-rata amount of revenue in each month. In this example, let’s assume you have 3 weeks in September, 5 in October and 4 in November. At the end of September, you would “owe” your customers 9 classes. So, your Deferred Class Revenue account (a liability on your balance sheet) would need to have a balance of 9/12*$120,000 or $90,000. Your journal entry as of September 30th would be:


On October 1st, you want to reverse this journal entry, as you will be making a new one at the end of the month based on a new calculation. The reversal is as follows:


On October 31st, you will make a new entry to reflect how many classes you still owe your customers as of the end of October. In this example, you owe them for the 4 classes in November. So, your Deferred Class Revenue calculation is 4/12*$120,000 or $40,000. Your journal entry as of October 31st is:


On November 1st, you want to reverse this journal entry, as you will be making a new one at the end of the month based on a new calculation. The reversal is as follows:


Often it is the case where you have collected money for a future session AND have a class or two remaining in the current season. We suggest you make an entry for each session, so it is clear and simple what each entry is trying to accomplish. The first would be the same as in the above example. The second would be the same entry, but for 100% of the future session fees already collected. In the case of classes, it is most likely nearly all the class fees collected in the month preceding the start of the session are for the next session, not the current session. You may simply want to defer 100% of these fees rather than trying to determine amounts paid for the current session. 

Suggested Camp Revenue Deferral Methodology

Camps are a bit different than teams and classes, simply because many parents pay months in advance for camp registrations. And, many sports facilities have day of camp registrations. The simplest way to make accrual adjustments is to follow these procedures:

• When recording your camp sales through your GL Report entry, record all camp sales in your Deferred Camp Revenue account
• Open each camp page in SAM that takes place in the current month
• Click on Pay History, which will show you the total payments made for that camp
• Add up all the current month pay history totals
• Record this amount as revenue for the month, using the following entry
  

You will not need to reverse this entry. However, at the end of the camp season, your Deferred Camp Revenue account should be zero, as all camps have taken place. If there is a balance, it will likely be small. Simply make the same entry as above to adjust this balance to zero; keeping in mind the entry may be opposite than above if the remaining balance in the Deferred Camp Revenue account is negative at the end of camp season.

For Example, if you have four weeks of camp in July, list the total pay history amount for each camp, total them all for the month and record that as Camp Revenue for July. See the following table:

	Pay History $
July Camp – week 1	$5,000
July Camp – week 2	$7,000
July Camp – week 3	$6,000
July Camp – week 4	$4,000
Total Camp Revenue for July	$20,000

The journal entry would be:

Suggested Membership Revenue Deferral Methodology

Membership Revenue Deferral is not as critical as Team, Class or Camp Revenue deferrals. Simply because in the event your business did not continue, you would not refund the membership. Most facilities have a non-refundable membership as it is.

However, according to Generally Accepted Accounting Principals, you should defer membership revenue and recognize the revenue over the term of the membership. This means if you have a 12 month membership which costs the customer $36, you should recognize $3 each month and leave a balance in your Deferred Membership Revenue liability account on your balance sheet. 

The best way to accomplish this is to group membership sales by month and make one entry for each month. Most accounting systems allow for recurring entries, which makes this process very simple. To do this, follow these procedures:

• Book membership sales to the Deferred Membership Revenue account when recording your GL Report entry each month
• Total the membership sales for the month, grouping by membership term.
• Divide each group by the number of months in the term of the membership
• Record the monthly amount as revenue for the current month
• Have the monthly entry automatically recur each month in the term of the membership