You'll notice in your Finances summary report that Gift sales are listed separately from Sales. This is because of the differences in how gift cards and sales are treated under accounting standards.
A gift card vs. a sale
Regular sales are those where your business delivers a service, prepares an invoice, and your client pays for it once the service has been completed. These types of sales are reflected in your Finances summary report.
With gift cards, the opposite occurs. Your client pays for a gift card upfront but the service hasn’t yet been booked or completed. As a business, you are required to perform this service at a later, often unspecified date.
As a form of credit that is owed to your client, gift cards that have yet to be redeemed will be reflected as debt, and not as sales. Once a gift card has been redeemed, it will be classed as revenue and added to your sales report.
Changes in reports when selling a gift card
When you sell a gift card, there will be a number of noticeable changes on your financial statements:
- The full value of the gift card will be reflected under the Payments transactions report and other payment associated reports.
- As this is classed as credit and can be redeemed at a future date, the value of the gift card will be added to the total Gift cards outstanding balance.
- Since you cannot yet recognise revenue until the service has been completed, there is no effect on any sales reports.
Changes in reports when redeeming a gift card
- Your gift card sales during this period will remain unchanged.
- The invoice you generate will increase your sales but the full value of the gift card.
- Your payments remain unchanged as you did not collect any new cash or credit.
In the Gift card sales report, you'll see a summary of all gift cards sold online and in-store, during this period, and in the Finances summary report. you'll see the gift card redemptions reflected in both Sales and Gift cards.
PRO TIP: You can track all the gift cards you have issued or redeemed, as well as track their expiry dates by going to Sales and selecting the Gift cards sold. This is also a great place to track gift cards codes for redemption.