I run a live wedding / events band - it's made up of professional musicians (all sole traders) and each booking could have different personnel on the gig (just depends who is available).
Invoice is issued at the time of booking but the date of service is often anything between 6-18 months away from the date of invoice. We have a three-payment system in place of 25% at time of booking, a further 40% 4 months before the date of event and the final 35% balance 1 month before the date of event. This is to tie in with our cancellation policy.
We are VAT registered and we pay the full amount of VAT on the entire invoice in the period that the date of invoice sits (as we have received a 25% deposit, this covers this).
In Quickbooks Online, I have accounted for this by creating an invoice and dating it at the time of booking with a payment due date of 1 month before the date of event. Then I have added a 'Payment received' for each of the three payments. Quickbooks keeps track of the payments and keeps the invoice 'open' whilst there are still payments pending. Once the balance is cleared it switches to 'Closed'.
As our bands are made up of specific instrumentation, the fee is set already it's just a case of booking each musician (drummer, bassist etc). At the time of invoice I also prepare a 'Bill' in quickbooks for each specific instrument of the band dated on the 'Tax Point' with a due date of the date of event. This is to ensure the balance sheet reads the correct figures for creditors.
I am now concerned that this is the incorrect way to account - mainly after reading up on the 'Accruals and deferred income' section of the corporation tax return / companies house return. I have seen suggestions where an 'estimate' for the full product amount should be produced then separate invoices for each of the payments adding 'delayed credit' for when payments are made then doing a final invoice marking the credits as payments on this. However, I cannot see how VAT can be accounted for properly with this.
I'd very much appreciate some clarification if possible
Thanks
Replies (5)
Please login or register to join the discussion.
Your first five paragraphs are about your book-keeping. What you refer to having read in your last paragraph is about the preparation of your accounts, which is something different.
Most businesses leave the preparation of their accounts to an accountant. How does your business do it?
I really did not want to have to spend anywhere between £500-1000 for an accountant when, from what I can see, the exercise is simply filling in the form on the HMRC website. Although I do appreciate that that is not only what you're paying for!
Filling in the forms is less than 5% of the work involved. The other 95% is compiling the figures to go in the accounts. The figures in the books you have kept are of course the starting point but the work in between your figures and the end result is called accountancy.
Again you are mixing up book-keeping and accountancy.
Quickbooks is NOT accountancy software. It is bookkeeping software. If it could do the same job for their users that an accountant could, and thereby make it unnecessary for their users to employ an accountant, why do they have a "Find an Accountant" section on their website, on which it actually says: "75% of QuickBooks Online users say working with an accountant makes their businesses run better"?