Bank transaction categorization is only relevant for freelancers, but it's not always mandatory. It's also a tool for better management. We'll explain the ins and outs below 🤓
For Freelancers Only
Categorizing bank transactions is only applicable to freelancers. In a company, your accountant handles your transactions. Company accounting is different: it's double-entry bookkeeping, not simplified accounting. This type of accounting is more complex.
Mandatory Categorization for Income
Do you sell your service to individuals? Are you in the medical, paramedical field, or work as a coach, therapist, masseur, beautician, etc.? If so, you don't necessarily issue an invoice. Each amount received from a client for which you don't issue an invoice is considered income. In this case, categorization is mandatory to justify your earnings. You must keep a income journal ✅
The categorization system is designed to allow almost 100% automated management of these bank incomes.
👉🏻 Learn more about creating an income on BILLY.
Optional Categorization
Do you always issue an invoice for your services? Are you, for example, a consultant, lawyer, graphic designer, journalist, or architect and subject to VAT? As long as you always issue a sales invoice for your services, you are not required to categorize your transactions. Categorization is optional and serves as a reminder to not forget anything in your accounting 🔎
1️⃣ Expenses Without Invoice
Some expenses don't have invoices. This is the case for bank fees, paid rents, or fee retrocessions. You can generate an expense in accounting through one of these categorizations. It's an option available to you, but it's not mandatory.
2️⃣ Invoice Reconciliation
As soon as the system detects a reconciliation, it is automatically done for you. If not, you can link the transaction to an invoice. The reverse is also possible; you can link a transaction from the addition of an invoice.
💡 Thanks to this link between payment and invoice, you have a reminder to not forget any purchase invoice. For your sales invoices, you will be able to track the payment status.
3️⃣ Classification of Non-Result Operations
Finally, categorization allows you to select certain categories outside of income and expenses. This means they are accounting operations without impact on your business results.
Feel free to contact us on live chat to learn more about transaction categorization.
See you soon 👋🏻