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Pre-Billing Clients for Estimates

As a small ad agency, we sometimes require our clients to pay a percentage of the estimate prior to beginning the job. We do not want to pick the job up as revenue (i.e. bill it), though, as it is unearned revenue until we actually produce that percentage of the job. Does anyone pre-bill clients, and if so, how do you use Clients and Profits to accomplish it?

Angela Carter
Real Communications

Two options, depending on your version:

1> Use Advance Billings. These post as a liability rather than revenue. When you cut a final bill for the actual fees/expenses, you apply the advance to that bill to reduce it to the net amount due, & C&P records the full amount (pre-advance) as sales and reduces the liability account.

2> If you prefer to bill as an Estimate so that the details show (as they don't on an Advance -- I've put a wish list item to C&P on this), you'll need to create a reversing JE at the end of the month for those bills you still consider unearned. I haven't found this to be too onerous, because frequently the advance is actually earned during the month so there are a minimal number of bills to deal with. I just use a spreadsheet with the details by revenue account of the estimate billings. I carry it over from month to month, eliminating some items and adding new ones each month. Of course, if you use a lot of estimate bills this could become tedious, be I haven't found it to be for us.

General question to everyone (i.e. unofficial survey for C&P's benefit): How many people could use a bill which acts like an Advance bill (liability rather than revenue) but looks like an Estimate bill (details of billing show)?

Brent A. Byrd
Point Zero, Inc.

Yes. We frequently pre-bill our client for work that has yet to be initiated. And like you, we don't want to reflect that billing as income until the work is performed. C&P has a simple and elegant solution to this problem. ADVANCED BILLING.

When you generate an "advanced billing" it is for a single amount and is not task specific. The software automatically posts to specified AR and liability accounts. Later, when the work is actually complete, you generate an invoice for the project as you normally would. Then, before posting, you simply tell C&P to apply any advanced billing amounts to the new invoice. The applied amount automatically shows up on the new invoices and reduces the new total so your client can see they are not being double billed. Lastly, any advanced billing amount applied to an invoice automatically reduces your liability account and increases your income account.

It may sound a bit confusing, but it's easy and works great.

Robert Grusin
President
Creative Marketing

We use 4.07 version of clients and profits. In accounts receivable you can bill your client using "advance billing". When the costs come in, then do a regular accounts receivable invoice, apply the advance (or a portion of) before posting.

Example: advance billing $5,000.00. Regular invoice $5,000.00, invoice will be $0.00.

Example: advance billing $5,000.00. Regular invoice $6,000.00 balance due $1,000.00

The only problem I have with advance billing is that you cannot show sales tax until your final invoicing is done. Sometimes this creates an invoice for sales tax only when you final bill.

We do get around this by doing an invoice in accounts receivable, to get on the books, then do a manual invoice for the client showing billed dollars plus sales tax. The actual figures hit general ledger when you do your final invoicing as a sale.

When you advance bill, or use estimate billing before costs are in, you have to remember to go on the job after costs are in and do the following: "wip" icon, click on the green checkmark to apply billing dollars to costs, otherwise your reports will not be correct.

Hope this helps.

Deanna Cummins
Administrative Manager
David K. Burnap Agency

I also do deposit invoices. What i have been doing is creating a journal entry into a liability account - when you are doing the journal entry make sure to put in the project. I also keep a listing of all the unearned revenue. When i start to earn the revenue i reverse the entry.

Another option is if you do not invoice for the pre bill (possibly pay a deposit based on the estimate - we have that written in the estimate description field - some clients need an invoice which the above takes care of) you can just enter the cash as a retainer payment and apply the retainer balance against the invoice when you cut the invoice.

Bill Riendeau
Brown & Company

I track it manually. At the end of each month, we go through the invoices we generated during the month and decide if we need to mark (full amounts or certain percentage) as unearned revenue or accrue for costs that haven't come in yet and just do a journal entry.

Johnson Paul
Campbell Michener & Lee Inc

We post them to Client Prepayments, a liability account. At the end of each month I review these jobs to see how much work was completed during that month, then make a journal entry to record the revenue earned.

Shannon Ellis
Business Manager
Tackett Barbaria Design Group

We use C&P regularly for this by issuing "Advance" Invoices. The income is placed into an account called "unearned income". Then, as costs are received, we apply the advance billing amounts to the costs (usually once a month). There is a section in the user guide on this in the user guide (mine is section 5-38). I think you'll find this very helpful!

Tami Lester
Director of Operations
Wilson Chapman LLC