Services for Cash Advance Businesses 

Are you in the business of providing services based on cash advances and are in need of bookkeeping services? If so, Torres & Associates CPAs can help you in bookkeeping, preparation of annual financial reports, and income tax preparation.

What does cash advances mean? It means when you receive cash for services that will be provided in the near future, in the accounting world, this is considered unearned revenue which is reported on the books as a liability instead of income.

When the services are performed at some point, then the “unearned revenue” is reclassified as revenue, therefore, the accounting books will report revenues.

The important aspect of this entire process is keeping track of the cash received for each client throughout the current year and the amount for services provided for each client throughout the current year, which will allow for the determination of “unearned revenue” by the end of the current year, 12/31/XX. It’s pretty simple because there are only two things to keep track of during the year, cash received and the amount for services provided throughout the year.

Which types of businesses operate under “cash advances”? Typical businesses that often operate on a "cash in advance" basis include: small online marketplaces, international trade businesses, particularly when dealing with new customers or high-risk markets, custom product manufacturers, businesses selling unique or high-demand items, and services where the customer may have concerns about quality or delivery until the service is completed; essentially, any situation where the seller wants to minimize their financial risk by receiving payment before providing the product or service.

Hope this gives you a better understanding of “unearned revenue” accounting and if you think you may need our assistance, please contact us and we will do our best to provide the services you need!