How do I account for Membership Prepayments made in a Prior-Year?

Our membership years begin on the 1 April; however we have a number of Members who pay their annual subscription between 01 January and 31 March in the previous financial year for the following year.  How do I account for this?

The approach here depends on whether you are doing cash accounting or accrual accounting.

With both methods you should run your Billing Renewals process to create and release draft Membership Billing Lines for your current Financial Year  - please see Tutorial 5.2 -  https://clubtreasurer.com/blog/5-managing-recurring-billing-renewals/

1. Cash Accounting

With the cash accounting method, you are simply recording your (Membership) payment Receipts when you received them regardless of which financial year you receive them in. So here, you would simply create (or import) your Membership Receipt Transactions directly against the Members and Membership Billing Lines.  

2. Accrual Accounting

If you operate this accounting method you will need to report your member prepayments as Creditors in your prior-year accounts and then reverse these when the Membership is due in your current year. 

The simplest way to do this is as follows:

• Step 1.1: Create an Account Transfer transaction from your Creditor A/c to Bank A/c when monies are received in your Prior Year:   
• Step 1.2: Importantly - click the “Show Members?” box to show the Member & Membership Billing Lines fields in the Transfer To section, 

This will record the monies receipted into your Bank Account and create a Creditor liability balance. 

(TIP - you may want to create a separate “Membership Creditors” Account to keep Membership Cr. balances separate to other operational creditors. Make sure you select the ‘Creditors’ Account Type when creating the Account. 

It will also record the payment against the Members/Membership Billing Lines to correctly reflect when the monies were received in the Members' records.

• Step 2.1: To reverse the creditors, create (or import) a Receipt Transaction for the Membership payment against the Creditor A/c when the Membership is due (assume 1st April).
• Step 2.2: Make sure you select the Member and, importantly, Non-Membership Transaction 

This will reverse the Creditor balance and your P&L report will correctly show this as Membership Income in April 2024.