Accounting for Agencies
UAE 2026

Agency creates the Project record. Billing method locked at creation (Fixed Cost / Project Hours / Task Hours / Staff Hours) — switching later breaks WIP. Per-role internal cost rates set here drive project cost = hours × rate, used for margin reporting under every engagement model.

Skrooge accountant creates the Bill with the Project field set on each line — that tag is what feeds per-project P&L. Direct project costs (subcontractors, freelancers, project software, media spend, DLD/Trakheesi fees, court filings) tagged; overhead (rent, central HR, firm-wide subs) not. Skrooge accountant creates the Bill against firm-level expense accounts. Without project tagging, costs hit firm P&L but per-client profitability is unavailable — fine for simple firms, lossy for project-heavy work. Cost-revenue matching: when direct costs land before the related revenue, the rigorous treatment is to post them to a Project WIP asset account — not a P&L expense — and release to COGS at the success event / milestone. Otherwise interim margins swing negative on cost, then artificially positive on revenue. T&M: when the bill is a pass-through (freelancer subcontract, courier, third-party software re-sold), tick “Billable” on the bill line and select the customer/project; the markup % set in Settings → Preferences → Expenses → Markup auto-applies (commonly 10–25%) and surfaces on the next client invoice.

Invoice raised on the success-event date. Revenue + 5% VAT recognised at issuance.

On each milestone sign-off in the PM tool, the agency raises a project invoice. If client paid an upfront retainer / deposit (raised earlier via the Retainer Invoice module → Unearned Revenue + VAT 5% at issuance): the milestone invoice applies retainer credit — Unearned Revenue → Revenue, no new VAT. If no retainer: standard invoice with VAT 5% and Revenue at issuance. Multi-currency: USD / EUR / GBP common; AED equivalent recorded at posting-date FX.

Upfront fee for the full service period (e.g. AED 240K for 12 months) raised via the Retainer Invoice module — not a regular invoice. Cash sits in Unearned Revenue; VAT 5% is due at issuance (earliest of invoice / payment / supply). Booking it as a regular invoice would post revenue immediately and break the deferral.

At retainer issuance, accountant sets up a Recurring Journal (Dr Unearned Revenue, Cr Revenue — e.g. AED 20K monthly × 12 cycles). Zoho auto-posts each period after that — no manual work month-to-month. No new invoice. No new VAT. P&L sees revenue spread evenly; the Unearned Revenue balance declines toward zero by period-end.

Periodic (typically monthly) invoice. Agency uses Convert Timesheet to Invoice — pulls approved billable hours × rate + billable expenses (with markup) into the client invoice. Revenue + 5% VAT at invoice date. Hours move from Unbilled to Billed on the project view; remaining unbilled = service WIP.

Pull the bank statement, acquirer payouts (Stripe, Network International) and corporate-card statements. Match lines that already have a record in Books — client receipts to Invoices, supplier payments to Bills (clearing Accounts Payable from Phase 1). Categorize everything else, because there’s no matching Bill in Books yet — employee card expenses, payroll & employee compensation, owner withdrawals, bank fees, FX revaluation gain/loss on foreign-currency invoices and bills. Catches anything missed elsewhere.

Before month-end close, accountant runs the “Bills with no Project” filter and chases ops to attribute each one (or confirm it’s overhead). Same sweep on billable timesheets without an invoice — lead decides invoice now / write off / roll forward. The single highest-leverage hour for project-P&L hygiene.

P&L: revenue, direct costs, gross margin by period. Balance Sheet: Accounts Receivable aging, Unearned Revenue balance, cash position. Cash Flow: the early-warning signal when your P&L says you’re profitable but the bank account says otherwise — collections vs payouts is the heart of it, especially for retainer-heavy or milestone-heavy work. Project Profitability: billed / billable / unbilled per client; logged hours × cost rate feed margin.

VAT (quarterly): 5% on UAE clients; reverse charge on foreign-billed services; exports zero-rated. Corporate Tax (annual): 9% on profits above AED 375K; QFZP 0% generally not available for typical agency services; Small Business Relief if revenue ≤ AED 3M.