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3 min 41 sec
0:00
Maya wins a job
0:23
A quote is a promise
0:49
When revenue is earned
1:07
Quote, invoice, payment
1:33
Billing in stages
2:07
Quotes as your pipeline
2:19
Quotes in Beeswax
2:55
Recap and quiz
Accounting 101
·
Winning work
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Episode 6
A Quote Is Not Revenue
(However much it feels like it.)
Fern and Fold accept Maya's quote the same afternoon, but it isn't revenue yet. The quote, the invoice and the payment are three different moments, and only two go in the books.
quotes
revenue recognition
invoices
pipeline
Transcript
0:00
April. A new client, Fern and Fold, wants a brand refresh. Maya sends a quote for eight thousand. They say yes the same afternoon.
0:09
She tells her mum. She tells the cat. She very nearly buys a nicer chair.
0:14
And in her books, absolutely nothing happens. Today, we find out why.
0:23
A quote is a promise. It says: if you'd like this, it'll cost that. Useful. Important, even. But accounting doesn't record promises. It records things that have actually happened.
0:36
No work has been done. No money has moved. Nobody owes anybody anything, yet. So there's no debit, no credit, and no entry. The ledger simply doesn't care about your good news.
0:49
Revenue gets recorded when it's earned. For a service business, that means when you've done the work. Or at least, the part you're billing for.
0:57
The rule has a grand official name, and several hundred pages of standards behind it. But the idea fits on a napkin. No work, no revenue.
1:07
So here's the life of a job, in three documents.
1:10
The quote. We'd charge you this. No entry at all.
1:15
The invoice. You now owe us this. Debit trade debtors, credit services income. That's the moment revenue arrives.
1:23
The payment. Thank you. Debit bank, credit trade debtors. The money turns up, but the revenue was already counted at the invoice.
1:33
Maya and Fern and Fold agree to split it. Half when the designs are approved, half at launch.
1:39
In May, the designs are signed off. She invoices four thousand. That's four thousand of revenue, in May.
1:47
In June, they launch. Another four thousand, in June. Same quote. Two invoices. Two months of revenue. Each one lands when it's earned.
1:57
And if a client ever pays you before you've done the work? That's a whole other story. Episode eleven. It involves a liability. Brace yourself.
2:07
So why bother with quotes at all? Because they're how you plan. Accepted quotes are your pipeline. They tell you what's coming, and when. Just don't spend it yet. Chair included.
2:19
In Beeswax, quotes live on the project. Build one line by line, send it, and tick approved when the client says yes.
2:27
Approving a quote doesn't touch the ledger. Quotes never do. Which is also why you can simply delete one, whereas an invoice has to be voided, properly, with a paper trail.
2:39
When it's time to bill, convert the quote into an invoice. The lines copy across, so you're not typing it all again. And that invoice is what hits the books.
2:49
And if your clients prefer the word estimate, Beeswax will call them estimates. We're flexible like that.
2:55
So. A quote is a promise. An invoice is revenue. A payment is cash. Three different moments, and only two of them go in the books.
3:05
Quick one. On the thirtieth of April, a client accepts Maya's eight thousand quote. The work starts in May. How much revenue does Maya have in April?
3:15
Have a think.
3:19
None. Zero. Not a penny. The work hasn't started. Revenue arrives when it's earned, not when someone says yes.
3:28
Sorry about the chair.
3:30
Next time: time. Specifically, how a service business turns hours into money, and how to tell if you're charging enough. Spoiler. You're probably not.