Recording RewardsPilot payments in Xero or QuickBooks

The example

A supplier invoices the business, and the business elects to pay it through RewardsPilot.

Two invoices, two supplies

The supplier invoice should be entered into the accounting software in the normal way, against the original supplier, using the appropriate VAT treatment for that purchase.

The RewardsPilot invoice should be recorded separately against YTY LTD trading as RewardsPilot, using the appropriate service/expense account and VAT treatment agreed with your accountant.

The accounting records therefore recognise two separate invoices relating to two separate supplies:

The original £6,000 supplier invoice for the underlying goods or services.

The £7,200 RewardsPilot invoice for the separate services provided through the RewardsPilot programme.

How the original supplier balance is settled

If £7,200 has been paid to RewardsPilot rather than £6,000 directly to the supplier, how do I prevent the original supplier invoice from continuing to show as unpaid?

The supplier invoice should not simply remain permanently outstanding. Once RewardsPilot executes the £6,000 payment to the supplier on your behalf, the accounting records should reflect that the original supplier liability has been settled through the RewardsPilot payment process. For example, in software such as Xero, an appropriate RewardsPilot payment or clearing account can be used to maintain the audit trail.

A typical accounting flow

• Step 1 – Record the supplier invoice. Enter the original £6,000 supplier invoice as normal.
• Step 2 – Record the RewardsPilot invoice. Enter the separate £7,200 RewardsPilot VAT invoice against YTY LTD trading as RewardsPilot.
• Step 3 – Record the payment to RewardsPilot. Record the £7,200 leaving your normal business bank account and allocate/reconcile it appropriately against the RewardsPilot transaction.
• Step 4 – Record settlement of the supplier. When RewardsPilot executes the £6,000 payment to the original supplier, record the corresponding movement through the RewardsPilot/clearing account and allocate it against the original £6,000 supplier invoice.
• Step 5 – Reconcile the transaction. The clearing account can then be reconciled against the RewardsPilot payment record and supporting documentation.

The end result should show the original supplier invoice as settled, rather than leaving an artificial creditor balance suggesting that the supplier remains unpaid.

At the same time, the RewardsPilot invoice remains separately recorded because it relates to the separate service supplied by RewardsPilot.

Original supplier invoice → RewardsPilot transaction → payment executed to supplier → supplier liability settled. The RewardsPilot invoice and associated VAT remain separately identifiable.

The above is an illustrative accounting treatment rather than prescribed accounting advice. Accounting systems, VAT schemes and individual circumstances differ, so clients should agree the appropriate nominal accounts, VAT codes and reconciliation method with their own accountant.

This is not a duplicate VAT claim

• The £1,000 VAT on the original supplier invoice relates to the underlying goods or services supplied by the original supplier.
• The £1,200 VAT on the RewardsPilot invoice relates to the separate commercial services supplied by RewardsPilot.
• They arise from different supplies and different VAT invoices. The business should account for each transaction separately and any input VAT recovery remains subject to its normal VAT entitlement and individual circumstances.

Support for your accountant

As part of our Corporate Membership and Business Services Ecosystem, clients have exclusive access to complimentary VAT and tax support. We would be more than happy to speak directly with your accountant, explain the commercial structure and provide the relevant supporting information so that they can assess the treatment properly.

Questions