Discussion:How should longer projects hit my balance sheet

I run a small custom software development company and do my accounts myself. I'm currently compiling a new list of KPI's for me including my current ratio. This number looks quite differently for me depending on how I account for projects for which a contract has been signed. A lot of such projects take 3 month to complete. I can come up with two ways to account for these projects in Trade debtors:

- Every time I raise an invoice. This would usually be at the beginning, in the middle and at the end.

- At the beginning of the project. According to my contract the client has to pay the complete project unless I do not deliver. I have plenty of opportunity to remedy problems and have always delivered on every project. Even if the client stalls, I can terminate the project after a time and they have to pay in full.

Obviously my balance sheet looks much better if I accounted for the complete balance once they signed the contract, but I don't want to trick myself.

A similar problem is with web hosting that I offer, which is often on a yearly contract. Also, does it matter if the contract spans an accounting year end (here 31 March)

Thanks for any pointers,

Jochen

I did find some discussion topics on here about "deferred payment" that suggest that it should be accounted for as Work in Progress proceeds, which would be fairly close to how my invoices are generated.

Any other suggestions?

Regards, Jochen

Here's a suggestion: find a competent tax/accounting professional in your area that specializes in this type of work and consult with them. I am sure they would be more than happy to assist you with this and come to a fee arrangement that is acceptable both you and them.

Tom

ROTFLMBO!!!!!!!!!!!!

Tom