Consulting fees, retainers and billed time in the ledger
How a consultancy's hourly and daily fees, fixed-fee milestones, workshops and retainers post to separate income accounts with the Consulting pack.
By Achekam · · 4 min read · For Consulting businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
A consultancy's income comes in different shapes. Some is time, billed by the hour or the day. Some is fixed fees, earned when a milestone is delivered. Some comes from workshops. And some is retainers, arriving every month or quarter whether or not much happened that month. Poured into a single income line, these tell the partners very little. Kept apart, they show how much of the firm rests on recurring retainers and how much depends on winning the next project.
Achekam's Consulting pack keeps them apart from the catalogue item all the way to the ledger.
Consulting fees and retainer fees on separate accounts
When the pack is switched on, its unpriced starter items join the business's catalogue:
- hourly consulting;
- daily consulting;
- fixed-fee milestones;
- workshops;
- monthly retainers;
- quarterly retainers.
At the same time, the pack adds its revenue accounts to the chart of accounts: Consulting fees (4420) and Retainer fees (4430). The catalogue posts to those two accounts, so project income and retainer income arrive in the ledger already separated.
Check your chart before switching on. If either code is already used for a different type of account, activation is refused and the clashing account is named. Your accountant can clear that up in advance far more easily than on the day you want to start quoting.
Billing time recorded against the work
Time recorded against the pack's work can be billed. For many small consultancies this is the link that has always run through a spreadsheet: consultants note their hours somewhere, and someone copies a total onto the invoice at month end, hoping nothing was missed.
For billed time to be right, it has to be recorded against the right client's work, and recorded promptly. Agree a simple rule, such as all time recorded by the end of each week, and make the engagement owner responsible for looking it over before anything is invoiced. Time recorded a month late is time half-remembered.
Accepted quotes become draft invoices
Where work is quoted, the client accepts the quotation on a link by typing their name and ticking a box. The client's IP address and browser are kept with the acceptance. Once sent, a quotation is frozen; changing it means sending a revision, so the version the client agreed to stays exactly as they saw it.
The acceptance drafts the invoice in receivables. A person at the firm then reviews and issues it. An invoice is issued at once on acceptance only where an administrator has given recorded authority for that. For most consultancies the review step is worth keeping: it is the moment to add a purchase order number the client's accounts team will insist on, or to correct a contact name before the invoice goes astray.
Each line knows its account
Every invoice line names the revenue account and the product it sells, and revenue is posted account by account. A single invoice that bills a month's retainer together with a workshop posts the retainer to Retainer fees (4430) and the workshop to Consulting fees (4420), in one journal. Where a line sells something with a cost, cost of sales is posted in that same journal.
The effect shows up in the management accounts at once. The income statement carries project fees and retainers as separate lines, and the partners can watch the mix change month by month. A rising retainer line means a firmer base; a project line that swings wildly means the pipeline deserves attention.
| Item | Account |
|---|---|
| Hourly and daily consulting | Consulting fees (4420) |
| Fixed-fee milestones | Consulting fees (4420) |
| Workshops | Consulting fees (4420) |
| Monthly and quarterly retainers | Retainer fees (4430) |
Pricing the items yourself
The starter items carry no prices. Before the first quotation goes out, decide:
- Hourly and daily rates: one rate for the firm, or rates by seniority.
- Fixed-fee milestones: priced per engagement, against the deliverable each milestone represents.
- Workshops: a standard price, or quoted each time.
- Retainers: the monthly and quarterly amounts, and exactly what each covers.
Write down what a retainer includes. A retainer without a defined scope tends to absorb project work that should have been billed as fees, and then the split between the two accounts stops meaning what it says. A one-paragraph scope, attached to every retainer quotation, keeps both the client and the ledger clear. Investopedia's explainer on the retainer fee covers how retainers paid to consultants and other advisers work, and the difference between earned and unearned retainer money.
What to check in the first month
The first month after switching on is the time to confirm that everything lands where it should. Ask your accountant to look at the ledger at month end with three questions in mind. Does every retainer invoice appear on Retainer fees (4430), and nothing else? Does Consulting fees (4420) hold the project, workshop and time billing, and only that? And does anything still appear on an income account you used before the pack, which would suggest an invoice was raised outside the catalogue? Any surprise in that first month is cheap to fix; the same surprise found at year end means re-sorting twelve months of invoices.
Before you switch the pack on
- Your accountant confirms that 4420 and 4430 are free in the chart.
- Rates and retainer amounts are agreed by the partners.
- A retainer scope paragraph is written.
- The rule for recording time is announced.
- Someone is named to review and issue invoices drafted from acceptances.
How the split appears in the monthly figures is covered in a monthly management pack for partners. If you are VAT-registered, the invoice itself must also meet the VAT rules where you operate.
Price the six starter items and write the retainer scope before you switch the pack on. From then on, the ledger keeps the split without anyone sorting it by hand.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
