Income

[lindsay.butler]

hi

with regards to income, should I:

1) include in the month I raise my invoice
or

2) include in the month its paid

or

3) include in the month the invoice the care is covered by?

thanks

[bunyip]

In the strict old-fashioned, double-entry book-keeping sense, income should be entered for the time the work is done. This can be fiddly. You have to break it down to a day, especially around the end of your financial/tax year-end date. Then you have to muck around with any unpaid invoices and decide if they amount to a bad debt to offset against taxable income. It also means your accounts for tax purposes differs from your records for your own purposes (as in: "how much money do I actually have to spend on wine this month?" )

IIUC you can account for income at the time it is paid, so long as you declare your accounts to be calculated on a "cash basis".

This may not be the most efficient in terms of minimising your final tax bill, but shouldn't amount to a whole hill of beans and should average out over time. Many self-employed people find this easier and quicker than other methods and the time saved can more than offset any potential extra cost. Think of paying yourself your hourly income for the time spent on accounting calculations and this begins to make sense.

[Chatterbox Childcare]

I do an invoice in November for December so the payments come into December. The actual month

[Simona]

hi

with regards to income, should I:

1) include in the month I raise my invoice
or

2) include in the month its paid

or

3) include in the month the invoice the care is covered by?

thanks

If you do your accounts on a yearly basis ...then you should have 12 months calculated in that financial year

Be careful not to call it 'income' though...as self employed you have an annual 'turnover' from which you take away your expenses and are left with your profit on which you pay taxes

[AliceK]

I do an invoice in November for December so the payments come into December. The actual month

I do the same. I enter it on the date I actually get the money not the date I invoice for the money.

xx

[moggy]

I record it for the month it is for- I get paid monthly in advance.

So Decembers money is recorded on December accounts page, whether they actually paid me in Nov (and some do pay early!) or on the 1st Dec or a week late! It is all 'December' money in my accounts.

As long as you are consistent I don't think it matters.

[natlou82]

I do exactly the same as Moggy :-)

[alex__17]

I just did my tax return today for the first time, and selected cash basis.

I get paid monthly in advance so invoice for dec around 24th November, but rarely get paid before 1st dec so would count all that money in December, even though its invoiced n nov its for dec and paid in dec.
It was the only way I could get my head around it!

[Simona]

Yes...an invoice is usually sent in advance to allow payment to reach us by the agreed date...it should also have a reference number or such like...so a December invoice sent in November for December fees could quote '12/2014' for easy reference and inclusion in our accounts...what matters we have 12 payments in against the c/vouchers also received for that month

Not sure what a cash basis option is on the tax return...our annual turnover can be in cash, cheque, BAC, Standing Order or even Direct Debit the same way we can pay our expenses

[hectors house]

When I did VAT records and accounts for a small business - it was always worked out on the date you did the invoice for regardless of when people bothered to pay, so this is what I have always done with my accounts.

[Simona]

When I did VAT records and accounts for a small business - it was always worked out on the date you did the invoice for regardless of when people bothered to pay, so this is what I have always done with my accounts.

yes...so if you invoice the parents in November to give them time to pay in December the invoice will say December...you just give them a little notice to pay but the reference would be Dec/2014

Any unpaid invoices by the due date will be 'payment pending'