Money often arrives before the work is billed: a retainer up front, a deposit on account, or a credit left over from a previous invoice. Here is how to record it and apply it correctly.
Taking a retainer or deposit
When a client pays money up front, you have two clear routes depending on whether the funds are held in trust or applied to a bill straight away.
| Situation | What to do |
|---|---|
| Funds held in trust until earned | Take the deposit into the client's trust balance. It sits there as recorded trust money and is only moved to an invoice as you bill against it. |
| An advance against a specific invoice | Raise the invoice and record the client's payment against it. If they pay more than the balance, the extra becomes a credit you can use later. |
How trust funds become fees
Trust money is the client's until you have earned it. When you invoice for work done, you apply the trust balance to that invoice as a payment. The invoice is settled, the trust balance drops by the same amount, and every step is a recorded transaction, so the paper trail always shows where the money went.
A trust balance can never go below zero, and a payment larger than the balance is refused. You cannot accidentally spend money the client has not put on account.
Credits and credit notes
A credit is money owed back to the client, or an overpayment sitting on their account. You can create a credit note, for example when you reduce a bill after it was issued, and then apply that credit to a future invoice so the client pays only the difference.
- Create the credit note. List what is being credited and why, the same way you build an invoice.
- Apply it to an invoice. Open the invoice you want to reduce and apply the available credit to it.
- Watch the balance fall. The invoice's amount due drops by the credit applied, and the credit balance drops to match.
Keeping it tied to the matter
Whether it is a retainer, a deposit, or a credit, connect it to the right client and matter. That way the file shows what has been received, what has been applied, and what is still held, without anyone having to reconstruct it from separate records.
Keep unearned money in trust and move it to an invoice only as you bill. It protects the client, keeps you onside with trust rules, and leaves an audit trail you will be glad of later.