Goodbye Quickbooks: Use YNAB to Track Accounts Receivable REALLY Easily

You can track anything in YNAB, really.

Taylor, our lead developer, uses YNAB to track household chores:

@Spankachu My fiancé and I have a “chore” file in @ynab. Each chore is a cat. Do chore, enter inflow trans with amount = suggested points

— Taylor Brown (@thetaytay) January 11, 2014

If you’re a small business owner, freelancer, etc. you could certainly use YNAB to track your Accounts Receivable. Accounts Receivable, for those of you that didn’t spend your early 20’s sitting in accounting classes, is just a fancy way of saying, “Money that people owe me.”

I’m going to pretend that I’m a designer, and I have three clients: Acer, Broncos (the Denver, winning kind), and Chrysler.

First, I set up my Accounts Receivable account. It’s Off Budget because I don’t spend from it.

Oh, and I’ve set up a checking account, which we’ll need once we collect money.

I do some work for Acer, and send them an invoice for $1,000. No cash has changed hands at this point, so I obviously don’t mess with my checking account. But my transaction in the Accounts Receivable account might look like this:

Let’s invoice for some more work accomplished:

  • Broncos on 1/20 for $2,000.
  • Chrysler on 1/22 for $800.
  • Acer on 1/25 for $1,200.
  • Acer again on 1/31 for $1,500.
  • Broncos on 2/2 for $2,300.

These transactions would look like this:

At this point, you’ve done a lot of work, but haven’t collected any money. That’s no good. But you’re not worried. You can look at a few different points of data to see how things are going.

For instance, how much are you owed in total? That one’s easy. You look at your Accounts Receivable account balance:

But wait, how much do the Broncos owe you? A payee search gets you there, looking specifically at the search total at the bottom:

Chrysler inquires about an invoice: “We lost it. But want to cut you a check today. What was the amount owed on invoice 0003?”

Easy. We’ll search the memo field for Invoice: 0003 and pull it up:

This is all well and good. But thank heavens, Acer actually paid us some of what they owe us. Today we received a check for $2,200. On the check stub, they specify that the $2,200 is payment for Invoices 0001 and 0004.

We deposit the check. At this point, this is the first time we’re dealing with actual cash, so this is the first time we’re thinking about The Budget.

We record the inflow in our checking account:

A few key points to remember:

  • This is a “transfer” because we’re transforming money owed to us into cash in our checking account. It goes from being a receivable, to being money in the bank to be budgeted accordingly.
  • The “category” could honestly be anything. You could record it to a specific type of work you did (Design: Logo, or Design: Branding), you could have each of your clients be a category if you wanted to track it in such a granular way (that could get messy), or you could just use the generic Income category.
  • The “memo” field is a great place to record which Invoices were paid.
  • Obviously the inflow is for the amount of the check received from Acer.

The flip side of the transfer transaction looks like this:

Not much to report here. It’s a “transfer” out of the Accounts Receivable account, and into the Checking account.

You can see that our Checking account balance increased to $2,200 (the amount of the check deposited), and our Accounts Receivable balance decreased by $2,200, down to $6,600:

I f you wanted to be particularly careful on tracking specific invoices paid, you could flag the specific transactions in the register of the Accounts Receivable account. I picked red for no good reason:

Marking paid invoices with a flag allows you to become a Search Ninja, and answer the question that Acer sends you in an email the following day: “Can you please give us the invoice numbers for any remaining amounts owed?”

That’s easy. Search for “Payee: Acer, Flag: None”

If they asked you to send them a list of all invoices paid for the year, you’d change the search only slightly: “Payee: Acer, Flag: Red”

As you can see, the sky’s the limit on exactly how you track receivables in YNAB, but is it doable? Absolutely. Does it mean you can ditch Quickbooks? Absolutely. Quickbooks is, for most small business owners, a quagmire of confusion, feature bloat, and in 95% of small business use-cases, pure overkill.

Think about this: the joy of using YNAB to plan and allocate your resources according to the vision you have for your small business and being able to collect what you’re owed. Perfect!