Accruals & Deferrals
Some agencies run a cash based accounting while others use accrual accounting. This simply determines the timing of when revenue and costs are recognised. Cash based agencies simply use te booking date to recognise the income or cost. In accrual accounting the invoice date is not necessarily the date when the income is recognised.
Deferred income
By far the most common application for this is deferred income. A customer asks the agency to invoice them an amount of money at the end of their financial year, typically so they can use up their annual budget.
Over the course of the next months or year they then request different projects each time with payment settled via the money already charged in advance. This is usually referred to as prebilling, deferrals or deferred income.
Away with spreadsheets
So you issued a series of invoices for a number of customers. Now how do you keep track of how much income you’ve really earned so far? For most agencies, the obvious answer is… another spreadsheet.
wayahead has a special tool to let you track AND forecast earned income using the accruals and deferrals tool. Select an invoice from Streamtime and spread its value over multiple months. At each point in time, you can see how much you have invoiced in advance, how much of the income has already been earned and how much is still outstanding.
Forecast your earnings
The prebilings will also show up in wayahead’s new forecast report, which can be viewed in billing mode or revenue recognition mode. In revenue recognition mode you will automatically see the income based on the predefined accruals and deferrals.
These pills are distinguished by the dotted line they have around them. Drag and drop the forecasted earnings in a different month to automatically update your accruals and deferrals records.
(Image by Racool_studio on Freepik)