Limited company guide
Why cash received up front is not profit, how deferred income schedules work, and what it means for tax, runway and reported growth.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityAn annual plan paid in January by a company with a December year end is eleven months of unearned obligation. Recognising the whole amount in January overstates profit, overstates corporation tax and hides the real growth rate.
Cash is not revenue
Building the schedule
The runway consequence
Cut-off at the year end
An annual plan paid in January by a company with a December year end is eleven months of unearned obligation. Recognising the whole amount in January overstates profit, overstates corporation tax and hides the real growth rate.
Deferred income is the accounting record of a promise you still owe. Investors read a healthy deferred balance as contracted future revenue already collected, it is a strength when it is presented correctly.
For each contract: start date, end date, total value, monthly release and cumulative recognised amount. Sum the remaining balances and that is your deferred income liability at period end.
Automate what you can from billing data, but review the exceptions monthly: mid-term upgrades, cancellations with partial refunds, contracts paused, and anything invoiced before the service started.
Prepaid cash funds delivery you have not yet performed. A company burning through annual prepayments can look comfortable on the bank balance and be structurally short if churn rises.
Good runway models show cash alongside the deferred obligation, so the board can see how much of the balance is genuinely free.
Cut-off is where most small-company accounts go wrong. Invoices raised just before year end for January delivery, credit notes issued after year end for December problems, and usage consumed but not billed all need adjusting.
Fix cut-off once, write the process down, and the year-end close stops being an argument every year.
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We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Generally good, it means customers have committed and paid. It becomes a risk only if you have spent the cash and cannot afford to deliver.
VAT follows the tax point, usually the invoice or payment date, not the recognition date. So VAT is often payable before the revenue is recognised, a real cash timing difference to model.
Any refund reduces revenue and the remaining deferred balance is released or repaid depending on your terms. Contract wording drives the accounting.
Always, alongside the movement in the period. Without it, a monthly P&L for a subscription business is close to meaningless.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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Pick a time that suits you and a qualified accountant will call you about your company, deadlines and fees.
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