AGENCY, CONSULTANCY AND PROFESSIONAL SERVICES BOOKKEEPING · UK
Bookkeeping for agencies, consultants and professional services firms.
A services business runs on invoices, retainers, freelancers and costs passed on to clients. Wenzo keeps all of it recorded in the software you already use, every UK working day, so you always know who owes you, what each client is worth and what VAT is due.
How the books of a services business differ
Agencies, consultants, architects, designers and other professional firms rarely hold stock. Their biggest costs are people: staff, directors and freelancers. Their income often comes from a small number of clients on invoices with 30 days or more to pay.
One late payer can squeeze cash flow for a month. Costs paid for a client can slip off the invoice. Freelancer bills arrive in different formats. Daily bookkeeping catches these while they are still easy to fix.
Client invoices, retainers and getting paid
Whether invoices come from your accounting software, a project tool or a template, each one needs to be in the books and each payment matched to it.
- Monthly retainers. Recurring invoices are checked each month, so a missed or duplicated retainer shows up straight away.
- Project and milestone billing. Deposits, stage payments and final invoices are each recorded and matched as the money arrives.
- Part payments and short payments. When a client pays less than the invoice, we record what came in and note the gap, so the balance is not lost.
The result is an accurate list of unpaid invoices, so you can see which clients are late and by how much. Chasing your customers stays with you. Our guide on what cash flow means in business explains why this matters so much for firms paid in arrears.
Freelancers, subcontractors and software subscriptions
Many agencies bring in freelancers for each project. Some are VAT registered and some are not, so we check every bill rather than assume. Payments are matched to the bills, so your list of what you owe stays accurate.
Software subscriptions are often paid by card, with the invoice sitting in an online account or an email. With your permission, we monitor the finance inbox you agree with us, collect the invoices that arrive and follow up anything missing.
Some subscriptions come from suppliers based outside the UK. For services bought from abroad, a VAT-registered business may need to account for VAT under the reverse charge. HMRC's guidance says these purchases are shown in boxes 1, 4, 6 and 7 of the VAT return. We set these suppliers up so the treatment is applied the same way every month.
Recharged costs and disbursements
Agencies and consultants often pay costs that relate to a client, such as travel, printing or advertising spend. HMRC's guidance splits these into two kinds:
- Recharges. Costs your business incurs in providing its own service, such as travel, that you list on the client's invoice. These are part of your supply, so you charge VAT on them, whether or not you paid VAT on the original cost.
- Disbursements. Payments you make to a supplier as your client's agent, for something the client is responsible for and has agreed to. You pass on the exact amount, shown separately on your invoice. A disbursement is left out of your VAT calculation, and you cannot reclaim VAT on it.
HMRC sets several conditions for disbursement treatment, and if they are not all met the cost is a recharge. Which treatment applies to a cost is your decision or your accountant's. Once it is agreed, we record each one consistently and check that recharged costs actually make it onto a client invoice.
A made-up example. A hypothetical consultancy bills a client £2,000 for a day of work and also pays £150 for the consultant's train fare to the client's office. The fare is a cost of providing the consultancy's own service, so it is a recharge. The invoice shows £2,150 before VAT, and VAT at 20% is £430. This is an invented example, not a real business, and the figures are for illustration only.
Seeing profit by client and by project
Most accounting software can show which clients and projects make money if transactions are tagged as they go in, for example with tracking categories in Xero or classes and projects in QuickBooks.
If you use tags like these, we apply them to sales, freelancer bills and recharged costs every day, or we can agree a simple set with you. You can then spot a retainer that has quietly become unprofitable.
VAT points that matter for services firms
These are general rules from HMRC's guidance. Your VAT position is a matter for you or your accountant.
- Registration. You must register if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days.
- Cash accounting. Businesses with VAT taxable turnover of £1.35 million or less can join the Cash Accounting Scheme. VAT is then paid on sales when customers pay you, and reclaimed on purchases when you pay your supplier. That can help firms with slow-paying clients.
- Flat Rate Scheme. Many consultants spend very little on goods. A business counts as a limited cost business if its spending on goods is less than 2% of turnover, or more than 2% but less than £1,000 a year. It then uses a flat rate of 16.5%.
- Clients outside the UK. For most services to business customers, the place of supply is where the customer belongs. Where that is outside the UK, no UK VAT is charged, and HMRC expects you to keep commercial evidence that the customer is in business abroad.
- Records. VAT records must be kept for at least 6 years, and some must be kept digitally under Making Tax Digital.
Our guide to the different VAT schemes covers the options in more detail.
Making Tax Digital for sole-trader consultants
Many consultants work as sole traders. Making Tax Digital for Income Tax applies from 6 April 2026 to sole traders and landlords whose qualifying income for 2024/25 was over £50,000. The threshold is £30,000 (2025/26 income) from 6 April 2027 and £20,000 (2026/27 income) from 6 April 2028. Daily bookkeeping keeps the digital records it relies on up to date. Read more in our guide on what Making Tax Digital means for the self-employed.
What is included, and what is quoted separately
Every package covers the same daily work: bookkeeping every UK working day in your existing software, bank reconciliation and receipt matching, finance inbox monitoring, missing invoices and receipts followed up, and a monthly financial summary in plain English.
We work in Xero, QuickBooks, Sage, FreeAgent, Dext, VT Transaction+ and others. You keep your software and your subscription. See our pages on Xero bookkeeping, QuickBooks bookkeeping and FreeAgent bookkeeping.
Some work sits outside the monthly packages and is quoted separately: catch-up work on older records, tax returns, payroll, CIS returns, VAT return submission and statutory filings.