We are an advertising agency and track both time as well as costs. There are many times when we track time…and possibly 6 to 8 months later…or even more…we decide that we cannot charge this time to our client. We then “kill” time, making it “unbillable” and not changing any dates. What happens to the time that was killed? Where does time go as well as “killed” time go on our financial statements?
We do not use time as an inventory item.
As an accountant, I run into this same problem…I do one of two things depending on the situation.
The first thing that you do is when you give the client their final bill for a job you need to apply all the time related to that particular job/client to their invoice. Then:
1. Manually mark down the amount to what you can reasonably charge the client.
2. Create a new discount item called “Professional Discount” or something similar…you’re the marketing wiz. Have it go into your sales discounts account or into one of your income accounts. Set the discount to the amount of billable time you are charging off. Then when the client gets the bill they will see how generous you are.
The time you “killed” doesn’t go anywhere in the first scenario and will have no impact on your financial statements. If you go the second route, your sales will be higher and sales discounts will also be higher to offset your income.