--- title: "Consultant Bookkeeping: Retainers & Reimbursables | MCC" description: "Record retainers as deferred revenue, bill reimbursable expenses and watch receivables. Worked example." url: "https://mcc-solutionsnj.com/bookkeeping/guides/bookkeeping-for-consultants" --- Bookkeeping guide · Updated October 12, 2026 # Bookkeeping for Consultants and Service Businesses Consultants have few expenses, so the books look easy. The tricky parts are retainers, expenses billed through to clients, slow payers and the irregular tax planning that comes with variable income. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** A consultant's advance payment is not income until it is earned. Record it as unearned revenue and recognize it as you deliver hours or milestones, which avoids a month of apparent riches followed by a month of apparent losses. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [NJ 1099 contractor rule (ABC test)](/bookkeeping/guides/nj-independent-contractor-rule-abc-test-2026) · [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) **Free tools:** [Credit card fee calculator](/bookkeeping/credit-card-fee-calculator) · [How many sales do I need to break even?](/bookkeeping/break-even-calculator) [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Retainers and advance payments If a client pays you in advance for work to come, the money is not income until you earn it. Record it as unearned revenue, then recognize it as you deliver hours or milestones. This gives a more honest picture, and it prevents a month of apparent riches followed by a month of apparent losses. Your engagement letter should state whether the retainer is refundable. ## Reimbursable expenses When you travel for a client and bill the cost, handle it consistently. One method is to record the expense, then invoice it on a separate line mapped to a reimbursement account so income and cost offset. Another is to record the pass-through as income and the cost as an expense. Choose one and keep the receipts attached. Be sure your contracts say what you may bill and any markup. ## Collecting and watching receivables Run an accounts receivable aging report weekly. Anything over thirty days deserves a polite reminder, and anything over sixty a phone call. Set payment terms on each invoice and consider late-payment language in your contract. A consultant who bills on the first of the month but never follows up often waits far longer than agreed. ## Contractors, tools and home office If you hire other consultants, treat the relationship carefully, collect a W-9 and issue a 1099-NEC where required. Software, subscriptions, professional development, insurance, and licenses are normal expenses. A home office deduction has specific rules around regular and exclusive use, so ask a tax professional before claiming it. Keep a mileage log when you drive to client sites. ## Plan for taxes and slow months With no employer withholding, estimate taxes quarterly and move a fixed share of each payment to a tax savings account. Review your profit and loss each month, then adjust. Keep a cash reserve covering a few months of fixed costs, since project gaps happen. If your income grows, ask a CPA whether another entity structure makes sense, since that depends on your situation and state. ## Bookkeeping habits that save time Create invoice templates for each type of engagement, with the terms and payment instructions already included. Turn on payment links so clients can pay by card or bank transfer, and record the processing fee as an expense instead of netting it. Send invoices the day work is approved rather than waiting for month end. Every quarter, compare actual income to your forecast, and note which clients are producing the most profit per hour, not just the most revenue. A client who needs constant revision may not be worth their invoice. Having a clean set of books makes that conversation easier and gives you support if you apply for a loan or lease. Write down what is included and what is billed as an extra. When the client asks for something new, record the change in an email and bill it as a separate line. Unrecorded scope creep is the most common reason a good engagement ends with a poor hourly return. ## Worked example with numbers A client pays a $6,000 retainer in January for six months of work. Record debit cash $6,000, credit deferred revenue $6,000. Each month move $1,000 to consulting revenue. After March, revenue recognized is $3,000 and $3,000 remains as a liability. Reimbursable expenses work similarly: you pay $240 for client travel, bill the client $240, and the net effect on profit is zero. Track them in a separate account so they do not inflate revenue or hide cost. ## Mistakes that cost money Booking a retainer as income the day it arrives, which overstates early months and understates later ones. Not billing reimbursable expenses, so you pay them yourself. Invoicing late, which stretches your cash cycle. Mixing personal and client travel. ## Check your work Each month, reconcile deferred revenue to a schedule by client, and run an aging report to chase invoices over 30 days. ## Common questions **Should I invoice at the start or end of a project?** That depends on your contract. Many consultants invoice a deposit upfront and then on milestones, which improves cash flow. **Do I charge sales tax on consulting?** It depends on the state and the type of service. Ask the state revenue office or your CPA before assuming either way. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### FreshBooks Bookkeeping, invoice clean-up and reconciliation in FreshBooks for New Jersey freelancers and service businesses. FreshBooks →](/bookkeeping/software/freshbooks) More guides - [Bookkeeping for Medical Practices and Clinics](/bookkeeping/guides/bookkeeping-for-medical-practices) - [Bookkeeping for Dental Practices](/bookkeeping/guides/bookkeeping-for-dental-practices) - [Bookkeeping for Salons, Barbers and Spas](/bookkeeping/guides/bookkeeping-for-hair-salons) - [Bookkeeping for Owner-Operators and Trucking](/bookkeeping/guides/bookkeeping-for-trucking-companies) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Freelancer Launch Bundle Track income, keep leads moving, put the terms in writing and write down how you work. [See what's inside ($89)](/toolkits/freelancer-launch-bundle)14-day full refund Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)