What really fills your day
A consulting firm has no stock and no production. Its accounting comes down to three flows: fees invoiced, expenses incurred on engagements, and partner pay. The trap is not complexity, it is the sheer volume of small documents.
VAT on fees
For a supply of services, VAT becomes due on payment, not on invoicing — unless you opt to pay VAT on invoices issued. That makes a huge cash-flow difference when a client pays at sixty days.
- Without the option: you pay the VAT over when the client pays you.
- With the option on invoices issued: you pay it over as soon as the invoice goes out.
- The option must be stated explicitly on your invoices.
Engagement expenses
Train, hotel, meals, tolls: dozens of receipts a month, often on paper, often lost. VAT on accommodation cannot be reclaimed, VAT on meals can, and so can VAT on tolls.
Subcontracting to fellow consultants
Bringing a freelancer onto an engagement is common. Check their status and VAT number: a badly framed subcontracting invoice ends up reclassified, along with the social contributions that go with it.
The number that matters
Revenue tells you nothing about a consulting firm. The effective average day rate — revenue divided by the days actually billed — tells you everything: it factors in discounts, unsold days and the overruns you gave away.