Skip to main content
C
cubicon
January 30, 2025
Question

brokerage service accounting

  • January 30, 2025
  • 1 reply
  • 0 views

I have a car sales business dealing with large clients. I get a percentage brokerage fee on the car producer side and car consumer side. I never take possession of the car. Advise on how to record the books on both the producer and consumer and still show the brokerage.

1 reply

Rainflurry
Rainflurry
January 30, 2025

@cubicon 

 

How does the flow of funds work?  Does the consumer pay the producer directly and you get paid by the producer?  Do you sometimes get paid by the consumer too?  Do you bill the producer and/or the consumer?  Does the vehicle cost ever flow through you (consumer pays you, you pay producer) or are the only funds you receive your commission/fee?   

C
cubiconAuthor
January 31, 2025

 

The vehicle valuation is usually agreed beforehand with the producer. I have contracts with the producer where i either get paid full amount by buyer, deduct my fee and remit the rest to the producer or where the producer gets paid full amount and pays me my fee. 

I usually bill all the consumers though. And share the account sales with the producers.

 

Rainflurry
Rainflurry
February 3, 2025

@cubicon 

 

Here's how I would do it:

 

In the case where you bill the consumer and the consumer pays the producer, create the invoice for the car (set up the car as a non-inventory item) and send it to the consumer.  However, from an accounting standpoint, you don't want that transaction in QB because it doesn't apply to your business - only the fee you earned on the sale applies to your business.  After sending the invoice to the consumer, zero it out (change the car line item price to $0) and make a note in the memo field of the cost billed to the consumer so you have a record of it.  Then, create a second invoice for your fee to the producer.  Set up a service product for your fee assigned to the income account you're using to track your fee income and receive payment on that invoice when paid.

 

In the case where you bill the consumer, collect the funds, and retain your fee, that's a bit more involved.  First, set up an other current liability (OCL) account called 'Due to Producers' or something similar.  Then, create an invoice for the car (set up the car as a non-inventory item and assign the newly-created 'Due to Producers' OCL as the income account on the item set-up) for the full sale price and send the invoice to the consumer.  Receive payment on the invoice when you receive the funds.  At this point, you have the cash on your books and a corresponding amount in your 'Due to Producers' OCL account.  To pay the producer and record your fee, issue a check/payment to the producer.  On the check, list the 'Due to Producers' OCL at the full amount of the sale price and an additional line item for your fee as a negative amount.  Your fee line item should be assigned to the income account you're using to track your fee income.  You now have your fee income recorded, the consumer's invoice is paid, and the producer has been paid the sale price less your fee.  

 

Hope that helps.        

    Terms & ConditionsAccessibility statement