Bursaries: Revenue Recognition

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My company is a innovation consultancy that partners corporares with start ups and entrapreneurs.

For one project, a client wants to send a support bursary to a start up, through my company. We've billed them in Feb, they'll pay the invoice in March, and we'll pay the funds onto the start up immediately. So we're essentially a middle man in this arrangement.

I've recognised the invoice in fee revenue and accrued for the expense of sending the funds back out, so the P&L impact is nil in the month. However, as I report revenue figures back to management, I just want to make sure that I'm recording this transaction correctly!

Confirmation/advise would be appreciated. Thanks!

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By WhichTyler
07th Mar 2018 18:49

Should the money you receive be part of your turnover at all if you have not provided a service to the originator?

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By Brend201
07th Mar 2018 19:54

I'm fairly sure that this is not income. Your income, presumably, is the fee that your company charges to your client for providing services to it (the client)? When you say you billed the client, did you add VAT? Hopefully not.

I would have thought that, instead of an invoice, a letter requesting the agreed funding would be sent to your client. When received, it should be lodged to a client funds bank account (i.e. an escrow account) so that the money is not mixed in with your business's funds. When cleared, the money should then be paid out to the start-up.

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