Please would other accountants in practice who spread their annual fees over monthly instalments assist with the following:
1. When do you invoice? Monthly, annually etc and if annual then at the start of the accounting period or the end?
2. How do you recognise the income in your management accounts - on a cash basis when each SO/DD is received or do you set up the customer invoice in your bookkeeping system as a debtor and allocate each receipt to that customer?
3. If you do not issue monthly invoices but are VAT registered then when do you reclaim the VAT for clients? On quarterly returns or only when the annual invoice is raised?
Thanks for any assistance.
Replies (11)
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Standing orders
I think you need to bone up on the VAT rules on a continuous supply of services, which give you 90% of the answers here.
1. When a new client signs up on standing order, you send them a schedule of the year ahead showing net, VAT and gross for each of the payments.
2. As each payment comes in, that is then the tax point.
3. You make a note - create a file - to update each schedule on an annual basis.
In my view you are missing a trick if you do not offer a discount to clients who take up standing orders. This is because those who do not - I offer a 17% discount - fall into 2 camps:
1. Wealthy ones who don't care about the discount.
2. Slow pay / no pay.
When a client declines the standing order it is easy to assess whether he or she is in the first or second grouping. So you end up with near zero bad debts. In my case, with £90k of recurring fees per year, total bad debts since setting up in October 2009 are £701.
Get the impression we're in the minority, with most accounts who do this invoicing annually and it just being the payments that are monthly.
However, we invoice monthly, with each invoice being standalone. Sure, with some tasks being done annually there may be some months where we do more work than others...but in practice because we hold our clients hand throughout the year and check in regularly on their books, the year end accounts production is typically a straight forward affair.
Does mean we need to consider where a client is when they first join us, and sometimes have an additional up front fee. Similarly when they leave, it's not that rare they'll stop paying (legitimately) yet we'll have a handful more bits and pieces of work to do.
Ditto
Get the impression we're in the minority, with most accounts who do this invoicing annually and it just being the payments that are monthly.
However, we invoice monthly, with each invoice being standalone. Sure, with some tasks being done annually there may be some months where we do more work than others...but in practice because we hold our clients hand throughout the year and check in regularly on their books, the year end accounts production is typically a straight forward affair.
Does mean we need to consider where a client is when they first join us, and sometimes have an additional up front fee. Similarly when they leave, it's not that rare they'll stop paying (legitimately) yet we'll have a handful more bits and pieces of work to do.
Standing order for the majority, GoCardless for a few who can't be trusted!
I issue a note of the full charge and a list of expected dates - some are monthly but a few pay quarterly when dealing with VAT and preparing year end accounts based on the bookkeeping work done at that point. When receipts arrive I declare the VAT. More and more of my clients are moving to a regular payment schedules rather than annual payment as it does help cashflow.
Our invoicing is very much like that of maslins especially for Ltd clients. SA pay annually and others depending on time spent on the job.
Subscription
Our are based on a monthly subscription. They are subscribing to accountancy and taxation services for the month in question. An invoice is raised on the 1st of each month and paid in that month. We still have a few annual billed clients but most are monthly.
Those who pay annually pay slightly more than the monthly ones for the same reason as Maslins, but we don't generally offer it as an option now.
All monthly billing is done for the current yea end being worked on so it is fully paid by the year end.
This one
Our are based on a monthly subscription. They are subscribing to accountancy and taxation services for the month in question. An invoice is raised on the 1st of each month and paid in that month. We still have a few annual billed clients but most are monthly.
Those who pay annually pay slightly more than the monthly ones for the same reason as Maslins, but we don't generally offer it as an option now.
All monthly billing is done for the current yea end being worked on so it is fully paid by the year end.
Pretty much the same as Morgani, but only 50% is invoiced monthly. The balance is 50% on commencement, 50% on completion and we won't submit a tax return or comany accounts unless it's paid. So, income and VAT is recognised as invoices are raised.
Monthly up front
I set-up just a couple of years ago and the following has helped:
I explain to client's that prices are for the annual work paid in-line with their year-end but paid monthly up front.
All limited companies pay on the 1st monthly and partnerships / sole-traders on 6th.
I'm not VAT registered but I considered the implications at the time of setting up the system. As such monthly invoices are issued automatically by email on the same day that payment is due.
Let's say I take on a client now with a 31 March year-end: Then I'd quote for Accounts & Tax work for 2014/15 as a one-off fee payable upon completion but I'd ask that in the meantime they pay £FEE x 6 months (Apr - Sep) and then monthly s/o from 1st Oct. This way even before I've done much work I'm receiving fees and I immediately feel more comfortable about the client.
I carry lots of deferred income. I'm not sure an accountant would be keen to agree to my payment plans but, and I have been surprised, only a hand full dislike the cash-flow implications and choose annual billing (which I do offer but only as a back-up plan). 90% are on monthly payments.
I do mention and follow through on the issue that if they leave they may well be due a refund of fees paid up front.
Invoicing
It appears that you all invoice monthly.
Does anyone use VTT+ to invoice and is it possible to set up an automation or send in batches?
I use Freshbooks for invoicing and Xero for accounts. Monthly invoicing is beautifully automated and it sends out chaser emails if someone hasn't paid. When I signed up, both services were free for accountants.
FreeAgent
It appears that you all invoice monthly.
Does anyone use VTT+ to invoice and is it possible to set up an automation or send in batches?
FreeAgent for us...and yes, automated recurring invoice profiles are easy to set up.