Handling logical asset accounts like reimbursables

sehseh Posts: 20Member, Beta Tester
edited March 2012 in Desktop (YNAB 3)
I'm coming to YNAB from something like seventeen years as an avid Quicken user, and there's one concept that's still not porting across well: "logical asset accounts," which I use to track things like reimbursable expenses and "IOU" agreements with my spouse.

My approach in Quicken matches my understanding of traditional double-entry accounting. I have an asset account called "Reimbursable Expenses," and if I were to buy dinner on a business trip using my checking account debit card, I want to represent that transaction not as me buying food against my "Dining" category, but rather as a debit against my checking account with a balanced credit to my "Reimbursable Expenses" account. If the meal cost $50, I should have $50 less in my checking account and $50 more in my "Reimbursable Expenses" account, so that my net worth suffers no change. Furthermore, if I want to go back later and audit how much I spent on dining out, I do not want this business trip dinner to show up, because I was effectively spending someone else's money, and that money was not mine for the taking toward any other purpose.

Quicken models categories and transfers as dichotomous; every transaction has a payee, and is assigned either to a category (including each split entry) or as a transfer against some other account. In that sense, categories are like lightweight accounts. By contrast, YNAB models payees and transfers as dichotomous; every transaction either has a payee or is a transfer to another account. In the transfer case, YNAB considers categories to be ignorable, and the UI encourages (if not forces) one to ignore categories for transfers.

At present in YNAB, I have defined a "Reimbursable Expenses" asset account which is off-budget. The problem comes when entering transactions that interact with it: the payee is lost. Note that I see the same problem arise in the YNAB documentation for making a payment to a credit card company, but I don't consider that case to be as egregious. Say that I wish to enter a restaurant transaction against my checking account. If I cite the payee as "Fancy Place," I cannot enter the transaction as a credit against my "Reimbursable Expenses" account. Strangely, though, if I split the transaction, then I can enter some split entries as being transfers to the "Reimbursable Expenses" account, though in the latter case, since the "Reimbursable Expenses" account is off-budget, I'm then encouraged to enter a category, when I don't see which one would apply here.

Looking then at things from the "Reimbursable Expenses" account side, the register never indicates any of the original payees; every transaction is a transfer against some other account, so I can't tell, say, which restaurant was related to the aforementioned $50 credit. (Quicken could mitigate this problem somewhat because it's possible to right-click on any transfer register entry and select "Go to matching transfer," which navigates focus to the other side of the transfer in the other account's register. There's a feature request lurking there.)

It gets even worse: When I'm finally paid back by my company with a check, I want to enter that as a deposit to my checking account from the payee "My Employer" that credits my checking account for $50 and debits my "Reimbursable Expenses" account for $50, with no change in net worth. However, in order to enter the transaction as a transfer from my checking account to my "Reimbursable Expenses" account, I cannot enter a payee.

This makes me think that perhaps YNAB does not want me to model reimbursable expenses with an actual account. I can see creating a category for reimbursable expenses, which would allow the budget to react to funds leaving for pending reimbursement and returning later when the compensatory check from my company lands. However, this would then misrepresent my net worth. My checking account balance would be $50 lower after eating out on the business trip, but my net worth would also be $50 lower, even though an entity out there—my employer—is now carrying debt against me. We can argue that $50 is not a big enough deal to worry about, but I have accumulated pending reimbursements of several thousand dollars at times.

I mentioned "IOU" accounts as another variant. Say that my spouse forgot her credit card while we're at the mall, and I purchase an article of clothing for her, with the intention of her owing me the money back. We maintain an account in Quicken to represent this netherworld of such agreements. This clothing transaction would show me paying Nordstrom from my credit card account, but rather than the category being "clothing," it would be a transfer crediting my "Wife IOU" account. If I were to try to do the same thing in YNAB, I would lose the payee, and there would be no record of Nordstrom having been involved (a note in the "memo" field notwithstanding). That too makes me think that this approach is not how YNAB wants to work.

I'm interested to hear opinions on how to best model this reimbursable credit and debit flow in YNAB. Am I cutting against the grain here?
Post edited by Unknown User on

Comments

  • ElessarElessar Posts: 104Member
    I also switched from double-entry accounting to YNAB and also handle reimbursed business expenses (in fact, I have a budget category explicitly called 'reimbursable expenses'), and I think that's the key sticking factor here.

    It's not necessary to track your business expenses through an account, because that 'account' doesn't actually exist in real life. It's not an asset or liability, but rather a method of categorizing your income and expenses. What I've been doing is that I've been splitting my payroll income to record an inflow into my 'reimburse' budget category. I also categorize all expenditures that are business related as outflows from that budget category. Finally, I set the month-to-month such that the reimbursed balance is carried-over to the next month (because it's unlikely my reimbursements and expenditures zero out in a single month and I don't want that category impacting the rest of the budget).

    Also, another way of thinking about Payee is to consider it a faster way of mapping to a budget category. "Oh I ate at the Bistro, that's always a business expense". The Payee doesn't mean much more then that, which is very different from how double-entry accounting software (I only used Quicken for a year so I'm not as experienced as you are) typically work.

    However you're right, your net worth is being changed by the reimbursable... and I honestly think that's an accurate representation. If you're pending thousands of dollars, then that's money that is not in your pocket working for your (via interest / investments). So whether or not you're lending money to your wife, or owed money by your company. I would roll the reimbursable categories into a key budget category, so that you can quickly remove lent/owed money from your spending reports, but I don't really have a solution for the net worth side of things.

    Personally, my net worth is distorted in both income and expense because of business reimbursements. So I eyeball the difference (savings) and make sure that it is constant (or growing lol). But that's not exactly accurate...
  • PatzerPatzer Posts: 3,793Member, Beta Tester
    seh wrote:
    At present in YNAB, I have defined a "Reimbursable Expenses" asset account which is off-budget. The problem comes when entering transactions that interact with it: the payee is lost. Note that I see the same problem arise in the YNAB documentation for making a payment to a credit card company, but I don't consider that case to be as egregious. Say that I wish to enter a restaurant transaction against my checking account. If I cite the payee as "Fancy Place," I cannot enter the transaction as a credit against my "Reimbursable Expenses" account. Strangely, though, if I split the transaction, then I can enter some split entries as being transfers to the "Reimbursable Expenses" account, though in the latter case, since the "Reimbursable Expenses" account is off-budget, I'm then encouraged to enter a category, when I don't see which one would apply here.

    I'd solve this problem by using a category rather than an account. If you have a lot of this stuff going on, you could create a Reimbursable master category with categories corresponding to however you need to break it down.

    As it happens, I have a category called Business Expense. I don't use it very often, but when I do it's for something my employer will reimburse me for. There are a couple of ways to handle this:

    Option 1: Budget nothing to Business Expense. Let the negative category balance roll forward to next month, and then enter the reimbursement as an inflow to Business Expense to zero out the category. Payees and actual account balances are correct, but Business Expense uses float from other categories for funding. Since I don't have much call to spend on reimbursable stuff, this is what I do.

    Option 2: Budget an amount you're willing to float to Business Expense, once and only once. Say you might have $300 of this type of expense; when the budget is set up, budget $300 to Business Expense and then never budget anything more in the future unless you need to change the maximum amount floated. As you spend, the category balance comes down. When you get reimbursements, the inflows to Business expense drive the category balance goes back up. This would be a good option for people who regularly float business expenses that are large enough that using the float from other categories is not attractive.

    The advantage of either method is that the Business Expense is not really part of my personal budget. Taking the reimbursements directly to the Business Expense category moves that category where it needs to go without muddling the picture of what I'm budgeting for personal use in any month.

    Patzer
  • HAFMACHAFMAC Posts: 22Member
    I don't use a category because it is very difficult to print out a list to reconcile if something isn't right. I use an on-budget account. I list the payee in the memo field since the payee is taken up with Transfer: Reimbursable."
  • sehseh Posts: 20Member, Beta Tester
    seh wrote:
    (Quicken could mitigate this problem somewhat because it's possible to right-click on any transfer register entry and select "Go to matching transfer," which navigates focus to the other side of the transfer in the other account's register. There's a feature request lurking there.)
    I noticed this morning that if one hovers the mouse over the blue/green double-arrow transfer icon in a register transaction entry, the tooltip reads as follows:
    Click to jump to the other side of this transfer transaction.
    Sure enough, clicking on the icon does the same thing as the Quicken menu action I described earlier. Consider that feature request forestalled.
  • sehseh Posts: 20Member, Beta Tester
    Patzer wrote:
    Option 1: Budget nothing to Business Expense. Let the negative category balance roll forward to next month, and then enter the reimbursement as an inflow to Business Expense to zero out the category. Payees and actual account balances are correct, but Business Expense uses float from other categories for funding.
    As of this morning, this is the approach that I'm trying. I created a new master category called "Reimbursable," with two subcategories so far:
    • Business Expenses
    • Other Expenses
    I set both subcategories to roll their over-spending amounts forward to the same category next month ("red arrow to the right").

    After thinking about this problem for another day, I decided that the budget should reflect somehow that some of my otherwise-available money had been tied up temporarily with reimbursable expenses, and was therefore not available for other intended purposes at the moment. Of course, these expenses usually go on one of my credit cards with a limit high enough that there's no actual practical cramping of my available funds, but since we're budgeting to zero anyway, it makes sense to represent the movement in the budget.

    I'll try this approach out for a month or two and see if it satisfies my concerns, despite the temporary inaccuracy in net worth.
  • joshaubryjoshaubry Posts: 5Member
    I'm new to YNAB -- been using gnucash for several years. In gnucash I had an Accounts Receivable account to keep track of random mini-loans we made. Like we buy something at a store for a friend. I'd record the amount lent there as part of the split and then when paid back that'd also go to the A/R account. Helpful for keeping track of those types of situations.

    Also, my wife makes a little money on the side selling stuff and likes to have her own money to spend from that, so we tracked that money outside of the budget. I setup a Liability account for her. Whenever she had income, like she sold something on craigslist for cash. That would be recorded as income to the cash account and would increase the liability to her (the family owed her money). When she purchased something using her own money, but using our credit card, it worked in the opposite way (we paid her back that amount).

    These seem like similar situations to the OP.

    One thing I dont like about recording this as a budget category is I cant get a listing of transactions. Especially helpful for my wife's stuff because she records her transactions manually in a cash book and every month or so we reconcile that with the family's digital info. So, I played a little in YNAB and what I came up with was to make an other type (asset or liability didnt seem to make a difference) account on budget. When she spends or receives money it is recorded as an outflow or inflow in whatever account it was (cash, checking, credit card etc -- all on budget) and the payee is transfer to/from her account. No category.

    Does it sound like this would work or am I getting myself into some unforeseen trouble?
  • sehseh Posts: 20Member, Beta Tester
    joshaubry wrote:
    One thing I dont like about recording this as a budget category is I cant get a listing of transactions.
    You can, but only for the current month. In the budget view, you can click on the "Outflows" amount as a hyperlink, and summon a pop-up report of the contributing transactions for the month. I don't know if it's possible to get such a report for an arbitrary date range.
    joshaubry wrote:
    When she spends or receives money it is recorded as an outflow or inflow in whatever account it was (cash, checking, credit card etc -- all on budget) and the payee is transfer to/from her account. No category.

    Does it sound like this would work or am I getting myself into some unforeseen trouble?
    I think it works to a point, as it's very similar to what I had set up when I first posted here. But my complaint was that the payee is lost. If she goes to Nordstrom and buys something against her account, you'll not find any mention of Nordstrom in the two registers involved. I found that lack disconcerting.
  • joshaubryjoshaubry Posts: 5Member
    seh wrote:
    I think it works to a point, as it's very similar to what I had set up when I first posted here. But my complaint was that the payee is lost. If she goes to Nordstrom and buys something against her account, you'll not find any mention of Nordstrom in the two registers involved. I found that lack disconcerting.

    I intend on putting the payee or payer or whatever details she records (for whenever she sells stuff, the info she really wants is usually something like "little tikes picnic table", when she buys stuff it is usually like you say .. Nordstrom, or Target, etc) into the memo field. I wont be able to report on it, like see all transactions for Nordstrom, but if we wanted to know where that money went for that particular transaction then the detail would be there.
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