Token Accounting

[RealScott]

I started switching my site (5ss bays 6 vacs & 8 vending) over to one dollar value tokens today (not trying to start a $ vs token debate here) I am just curious as to how those of you with token experience account for the token sales. I plan to run some marketing campaigns, giveaways, etc. with the tokens. So I if I just count tokens in vaults I will be counting freebies as income, plus I would have to pay the tax man for the promotional loss. I will still accept customer’s quarters in all equipment. My accountant and I came up with an uber complicated way of tracking token sales with a double entry four step type of process in Quickbooks that tracks outstanding (sold) tokens as liabilities, it looks like it’s going to be a nightmare to manage and take a lot of time.

For the past year I have been counting all money in equipment separately to track what % is getting used, I think I have enough % data on this for now so I do not feel the need to continue this level of individual accounting. I will still keep type separated: vending, SS, vacs.

So what are your thoughts on the most time efficient but accurate accounting method for token flow management?

If I give away tokens as marketing, would you just take a lump sum deduction at time of giveaway to offset future income?

Do you treat tokens as assets or inventory?

Maybe I am just over analyzing all of it…… Thanks for any input!

 

[I.B. Washincars]

IMO, the token is just part of the equipment that the customer uses to clean their car, much like the hose on the vacuum. The hose on the vac eventually wears out and you put on a new one. The token supply dwindles "from walk-off and float" and you buy more to replenish. I do no accounting at all on my tokens, just buy more when the supply gets low. It's much like my tool box, it's just there, but if my 1/2" wrench disappears I go buy a new one.

 

[Earl Weiss]

IMO token use should no be counted as income. Only $ you recieve from whatever source is income.

You sell tokens. The purchase cost is cost of goods sold like water, soap etc. Any time you write a check (or pay with credit card) to buy a supply of tokens it's a cost of goods sold expense like soap vbending supplies etc. Some accountant may want to treat it like an asset / inventory. The inventory / asset value is nominal. Treat it as an expense.

 

[JGinther]

Since tokens aren't money that Mr. Sam cares about, I see no need to track anything other than for your personal information as to where they are spending it and how much comes back vs gave out. As far as accounting, I would:

1. just expense cost of the actual tokens (how much you paid for them with actual money)
2. remember how many tokens there are 'out there' and subtract from how many came back only for knowing what to tell someone that may be buying the car wash business at a later date
3. record the income (when people purchase the tokens from you with actual money) from token sales as 'promotional sales'

The benefit and trouble with the tokens in this regard is that while some is walk away income, you never really know how much is actually going to come back later - which is an issue when selling the place. The buyer will want to know how much 'potential payables' there are out there and will want to discount the price of the business accordingly; or risk ticking off some of the best customers of the location if they end acceptance of tokens.

 

[PaulLovesJamie]

I think most of us do our accounting (for self serve) on a cash basis, primarily because it is an order of magnitude simpler.
In cash basis accounting tokens do not = cash, so as the others mentioned you only track what you want to about tokens so that you can run your business more effectively.
Why are you using accrual basis accounting? We evaluated the advantages/disadvantages for our businesses, and for our wash using cash basis was a no brainer - but perhaps your circumstances are different or there is something I dont know?? Seriously, I'd like to know.

 

[RealScott]

I.B.W. – In this scenario how/when do you classify the “walk-off” income if you are not “selling the tokens”?

Earl – I like this method for efficiency, I would just lose the ability to track any sales type within QB ie. vending, vac, ss.? The biggest issue here is that I inventory my vending products. Am I not understanding you?

PLJ – I am cash basis and agree that it is the way to go. Like mentioned by JG above if tokens out of the changer are income, customers then walk off with tokens with the intent to come back and use them later, you technically have a liability out there. I suppose it would be easiest to not track this in QB but in a spreadsheet for my own knowledge or for future business valuation.

So do you guys not inventory your chemicals and vending products? I inventory all chemicals (used for car wash sales not for site cleaning) and adjust quantities on hand at the end of every month so I can buy larger quantities and expense them in the month they were used. I inventory all vending products individually and write a sales receipt for type of product & quantity sold, every time I clean out the vending machines.

Dangit, I’m over thinking it……

 

[PaulLovesJamie]

In a nutshell, cash basis means all you need to account for is cash. Cash basis means you dont have to do all that tracking of walkoff, inventorying, etc.
All that other stuff is only to help you make more profitable business decisions. Decide what you will use data for before you start to gather it, otherwise you can spend a lot of time (aka $) unnecessarily. (Thats a rather broad statement, I know.)

 

[I.B. Washincars]

Keep in mind, I am not a number crunching person. Accounting confuses the hell out of me, and at 56 years of age I don't think I'm ever going to "get it". With the exception of vending items, any money that comes into the wash is "cars washed". As far as I'm concerned, tokens are rented, not sold. A token "rented" = a car washed. If a customer doesn't use it, well I still got paid for washing the car.

That's my story and I'm sticking to it.

 

[Ric]

I consider the tokens to be a vended item. The pictures of dead presidents are income.

 

[Earl Weiss]

I.B.W. – In this scenario how/when do you classify the “walk-off” income if you are not “selling the tokens”?

Earl – I like this method for efficiency, I would just lose the ability to track any sales type within QB ie. vending, vac, ss.? The biggest issue here is that I inventory my vending products. Am I not understanding you?

PLJ – I am cash basis and agree that it is the way to go. Like mentioned by JG above if tokens out of the changer are income, customers then walk off with tokens with the intent to come back and use them later, you technically have a liability out there. I suppose it would be easiest to not track this in QB but in a spreadsheet for my own knowledge or for future business valuation.

So do you guys not inventory your chemicals and vending products? I inventory all chemicals (used for car wash sales not for site cleaning) and adjust quantities on hand at the end of every month so I can buy larger quantities and expense them in the month they were used. I inventory all vending products individually and write a sales receipt for type of product & quantity sold, every time I clean out the vending machines.

Dangit, I’m over thinking it……

Yep, you are over thinking it. All money you recieve is income. All else is something else. When you get $ for tokens it's income irrespective if the token is used immediately, later or never.

Like PLJ says, you can keep tack of other stuff to keep a handle on expenses (i.e. solutions or vending products used vs tokens rec'd) but that just helps you keep track of expenses for efficiency or find out if there is theft.

Really they are no different than utility expense. It's an expense irrespective of how many tokens or cash you recieve, but tracking it vis a vis tokens rec'd is a way of keeping a handle on efficiencies, but then you need to track tjhings like bay tokens rec'd vs. those rec'd for vending.