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Clients use all sorts of systems for keeping a tally on the money owing to them.  From a tax perspective, the figure at balance date needs to be accurate. 

Please note:

Assuming a 31 March balance date, all work done up to 31 March which is capable of being charged must be included as income. For income tax purposes holding some of your invoicing over until April does not necessarily mean you can ignore it. You don’t have to actually send out an invoice but you do have to add the amount into your accounts receivable figure for tax purposes. You won’t be taxed twice because once we have put in a figure for the amount owing to you, we then deduct it in the next year’s accounts. If work cannot be charged because it is not quite complete, it doesn’t get included in your accounts receivable.

Some businesses have work in progress, which is partly completed work.  They must value this on the basis of the amount of material which has gone into jobs in progress and the value of the wages they have paid to do that work.  Any other direct costs should also be included such as hire of equipment.

Cut off

Don’t deduct money received in April, until you have finalised the total owing to you at the end of March.

Professional services

Professionals, who have supplied partly completed work (not invoiced), do not need to include these services in their annual accounts unless there is a right to make progress claims.