Hourly Billing (Legal / Consulting)
Recording revenue for billable hours worked on a client project during the month.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable | Asset (+) | 3,000.00 | - |
| Professional Fee Revenue | Revenue (+) | - | 3,000.00 |
💡 Accountant's Note
For service firms, revenue is recognized as the work is performed. If 20 hours were worked at $150/hr, $3,000 in revenue is recognized, regardless of when the client pays the invoice.
Practitioner & Systems Framework
💻 ERP Architecture
Hourly billing flows from the timesheet → WIP → invoice → receivable pipeline. When the invoice is raised, the WIP contract asset is reclassified to a trade receivable (see the WIP-to-receivable reclassification entry). The billing rate applied must match the engagement letter's agreed rate schedule — rate cards in the practice management system should be locked per engagement to prevent unauthorized rate changes. For engagements with tiered billing rates by seniority (partner, senior associate, junior associate), the system must track hours by fee earner level, not just total hours.
⚠️ Audit Flags
(1) Rate reconciliation — auditors sample-test invoices against the agreed engagement letter rate schedule to confirm the correct rates are being applied. Rate uplift without client agreement is an IFRS 15 violation. (2) Timesheet approval chain — are hours recorded and approved by the engagement manager before they are invoiced? Uninvoiced unapproved hours in WIP may not represent a valid performance obligation completed. (3) Billing above the agreed estimate — for engagements with a fee cap or budget estimate, billing above the cap without a formal change order creates a variable consideration constraint issue.
📄 Required Documentation
Engagement letter (billing rates, fee cap if any), approved timesheets by fee earner, billing rate schedule, invoice issued to client, and client purchase order or approval where required.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.