Pre Sold Sponsorships: Accounting Best Practices

You hold a summer community celebration every year, and it’s common for event sponsors to pay for their sponsorships early, before you even get the event set up in GrowthZone. So you set up an invoice and apply the payment (or take a payment online) and go on with business as usual until you finally get the event set up in GrowthZone.

But wait! How do I get that presold sponsorship and show that payment as revenue in the event?

Depending on how long ago the payment was, or even the type of payment, it’s likely those funds have already been deposited- so unapplying the payment in an effort to apply it to a new invoice for the actual event sponsorship is likely not an option. 

In addition, you would need the ability to  void the original invoice, register the sponsor in the event, and apply the overpayment to the newly created invoice, but depending on your accounting settings or policies, voiding an invoice may not be an option either.

If unapplying the payment and voiding the original invoice isn't available to you, here are a couple of "easy" options (but they have their drawbacks):

• You could create a staff-only registration type for $0 and register that sponsor for the event. The sponsor then receives their sponsor display benefits. The caveat to this option is the already-invoiced payment will not count as revenue for the event.
• You could register your sponsor as you normally would and allow the event invoice to be created; then apply a "payment" to that invoice (probably a check, or a trade/external payment type) that indicates the previous invoice number and payment. While your event revenue totals will then be correct, it’s possible that you’re doubling up on the actual received revenue, as that single payment will appear in your accounting twice (once for the original invoice, and again on the “actual” event invoice for the sponsorship).

Both of these options have pros (simple!) and cons (inaccurate revenue recognition).

Instead of the above, here is a suggested process* that will make sure the appropriate accounts are debited and credited and also ensure the event itself shows the revenue:

1. Create a credit memo for the amount of the previously paid invoice (making sure to use the original fee item that was used to create the original invoice). Best Practice: include the full name of the event in the Notes portion of the credit memo being issued. This will allow you to use that field as a filter for the Credit Memo Report and will help during the Event Revenue reconciliation process.
   TIP! Credits cannot be created or applied within the event. Create or apply credits from the Contact's record on the Billing tab. See “Add or Apply Credit Memos” for more information.
2. Register the sponsor for the event and let the system generate the invoice for the sponsorship
3. Apply the credit to the new invoice

All processes and transactions suggested by GrowthZone should be vetted by your accountant.