Accounting for firms that sell time, not stock
A services business has no inventory and a completely different set of problems: work billed before it is done, work done before it is billed, and a TDS deduction on almost every receipt that has to be tracked until the credit appears.
| Element | Amount |
|---|---|
| Invoice value | 2,36,000.00 |
| Less: TDS @ 10% | -20,000.00 |
| Received in bank | 2,16,000.00 |
| TDS receivable | 20,000.00 |
What service firms use it for
TDS tracked, not lost
A receipt short by the TDS deduction settles the invoice in full and books the deduction as receivable, so it can be matched against Form 26AS later.
Retainers and advances
Money received before work is done sits as an advance against the client and is adjusted as invoices are raised, rather than inflating revenue early.
Milestone billing
A project billed in stages, with what has been billed and what remains visible against the engagement.
SAC codes on services
Services carry SAC rather than HSN, at the right rate, with place-of-supply rules that differ from goods.
Project profitability
Costs tagged to an engagement — subcontracted work, travel, salaries apportioned — so you know which clients are worth keeping.
Recurring invoices
Monthly retainers raised on schedule instead of remembered on the fourth.
How a services firm sets it up
- Set up services with SAC codes. And the rate for each. Services are not goods and the codes are a different list.
- Create a cost centre per engagement. For anything you want profitability on.
- Bill on retainer or milestone. Recurring invoices for retainers, staged invoices for projects.
- Settle with TDS. Record the receipt at the amount banked; tBiz books the deduction as receivable and closes the invoice.
Professional services questions
How does tBiz handle TDS deducted by my clients?
You record the receipt at the amount actually banked; the shortfall is booked as TDS receivable and the invoice is settled in full. The balance in that account is what you should be able to match against your Form 26AS.
Can I bill a retainer automatically each month?
Yes, as a recurring invoice on a schedule, which removes the most common cause of a month’s revenue going out late — somebody forgetting.
Do I need the inventory module?
No. A services firm can run on invoicing, vouchers, receivables and reporting alone, and the stock screens stay out of the way.
Can I see profit per client or per project?
Yes, using cost centres per engagement, with subcontracted work, travel and apportioned salaries tagged to them. That report is usually the most uncomfortable and most useful one a services firm runs.
Related
Track what your clients really pay
Start free, raise a retainer invoice, and see the TDS land where it should.