How do I handle client deposits for a video production company?
When a client pays a deposit for a video project, that money is not revenue yet. It goes on your balance sheet as a liability, typically called “unearned revenue” or “deferred revenue.” This might feel counterintuitive because the cash is sitting in your bank account, but you haven’t earned it until you deliver the work.
Here is how it works in practice. Say a client pays you $5,000 upfront for a $10,000 video project. You record that $5,000 as a debit to your bank account and a credit to an unearned revenue liability account. Your income statement stays untouched at this point. No revenue shows up, because none has been earned.
As you complete the project or hit agreed-upon milestones, you move money from that unearned revenue account into actual revenue. If you deliver the final video and invoice the remaining $5,000, the full $10,000 now shows as earned revenue and the liability account goes back to zero. For longer projects with defined phases like scripting, filming, and editing, you can recognize revenue at each milestone instead of waiting until the very end.
Getting this wrong creates real problems. If you record deposits as revenue the moment they hit your bank account, your income statement will overstate how much you’ve actually earned. That inflated number affects everything from your tax liability to how you evaluate whether you can afford new gear or another hire. You could also end up paying taxes on money tied to work you haven’t done yet, and if a project falls through and you have to refund the deposit, unwinding that gets messy.
In QuickBooks, set up a liability account specifically for client deposits or unearned revenue. When a deposit comes in, record it there. When you complete the work and send the final invoice, apply the deposit and the software moves it into revenue for you. It takes a few extra steps compared to just dumping everything into income, but the payoff is accurate books that reflect reality.
Creative service businesses like video production studios deal with this constantly because project-based work almost always involves upfront payments. The deposit structure protects both you and your client, but only if the accounting matches the actual flow of work.
If your books currently show deposits as income and you’re not sure how far off things are, a Dodge County bookkeeper familiar with project-based businesses can help you restructure your chart of accounts and clean up past transactions so your financials tell the true story going forward.
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