Seeing fee income by service line
How a consultancy sees fee income by service line when every invoice posts to one revenue account, using its own accounts and a monthly journal.
By Achekam · · 4 min read · For Consulting businesses in South Africa, Nigeria, Kenya
Most consultancies sell more than one thing. A firm might run strategy projects, deliver training courses, place interim managers and do the odd piece of HR advisory work. The partners know, roughly, that training keeps the lights on and strategy brings the margin. Roughly is the problem: when the time comes to decide where to hire or what to stop doing, a gut feeling is a weak basis.
Seeing income by service line should be the easy part. In Achekam today it takes a small monthly step, because every invoice lands in the same revenue account. This article explains why, and how to set up the accounts and the journal that give partners a clean split.
Why all invoice income lands in one account today
When a consultancy issues a customer invoice in Achekam, the revenue goes to one account: Professional Services Revenue (4100). That is true whatever the invoice lines say, and a line cannot name another sales account.
For a single-line consultancy that is fine. For a firm with several service lines, it means the income statement shows one fee income figure, and the split by service line is buried in the invoice descriptions.
Revenue accounts per service line
Start with the chart of accounts. Each business has a standard chart created when its books first open, and accounts can be added, renamed or switched off. Add one revenue account for each service line you want to see, for example:
- Strategy and advisory fees;
- Training and facilitation fees;
- Interim and placement fees;
- HR advisory fees;
- Other fee income.
Keep the number of lines small. Four or five service lines that partners actually manage are far more useful than a dozen that nobody owns.
Account 4100 stays where it is. Think of it as the landing account: invoices arrive there, and the monthly journal moves the income out to the service lines.
A monthly reclassification journal
At month end, list the month's issued invoices by service line, and post one manual journal that moves each line's total out of 4100 and into its own revenue account. Achekam refuses a journal that does not balance, so the debits to 4100 must equal the credits to the service-line accounts.
A worked example in words: in October the firm issues invoices for a strategy project, two training courses and an interim placement. The month-end journal debits 4100 with the total of all of them, and credits the strategy account with the project fee, the training account with the two course fees, and the placement account with the placement fee. After posting, 4100 is back to nothing for the month, and each service line shows its own income.
To make the list easy to draw up, start every invoice line description with a short service-line code, such as STR, TRN or INT, so the month's invoices can be sorted by line in a spreadsheet.
Timing matters. A closed month refuses postings from every source, so the reclassification must be posted before the month is closed. And a posted journal is corrected only by a reversal, so if you get the split wrong, reverse the journal and post a new one rather than trying to edit it.
Budgets per service line
Once each service line has its own account, you can budget it. A business can set a budget per account and period and compare it with actual figures from its ledger. Set the partners' targets for each service line month by month, and the comparison will show quickly which line is ahead and which is behind.
Management accounts then show an income statement for a chosen period beside the period before, and a balance sheet at period end, both exportable as PDF or CSV. With the service-line accounts in place, the income statement itself carries the split, without a separate spreadsheet. AccountingTools describes management accounting as the internal reporting that tracks revenues, expenses, variances and other measures to help managers act, which is exactly what this split is for.
Keeping the split consistent month to month
The value of the split comes from comparing months, so the rules must not drift. Write them down:
- Mixed invoices. If one invoice covers two service lines, split it by line, not by guesswork about the main purpose.
- Credit notes. A credit note is issued from the invoice it corrects and posts back through the same revenue account, so include credit notes in the month's list and reclassify them to the same service line as the original invoice.
- Write-offs and discounts. Decide whether they reduce the service line or sit in a separate account, and stick to it.
- New service lines. Add the account at the start of a month, never midway.
- Who posts it. One named person prepares the journal; another checks the list behind it before the month is closed.
A habit, not a project
The first month takes an hour; after that, it is a quarter of an hour with the invoice list open. Add the accounts this week, start coding invoice lines from the first of next month, and post the first reclassification before that month closes. Partners can then read the split in their monthly pack, as described in a monthly management pack for partners. If some work is done but not yet invoiced at month end, the split will understate that line until the invoice goes out; work done but not yet invoiced explains how to correct for that. Workshops face the same single-account limit with parts and labour, as seeing parts margin apart from labour shows.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
