Guides
Translation agency bookkeeping: four records to keep and the monthly cash flow check
The four records a translation agency needs: subcontractor payables, project cost tracking, work in progress and deferred revenue, plus a monthly cash routine.
What to take away
- The books of a language services firm have one unusual feature: you pay a lot of people who do not work for you, and you pay them before the client pays you.
- Set up four things properly at the starta subcontractor payables view, project-level cost tracking, a work-in-progress record, and a deferred revenue line for anything paid in advance.
- Cash and profit diverge in this trade more than in most. Watch both, separately, monthly.
- Multi-currency payments introduce a difference between what you agreed and what arrives. Decide who carries it before the first invoice.
- Anything about tax treatment, entity structure, or how subcontractor payments must be documented is a question for an accountant in your jurisdiction.
Four structures to set up first
1. Subcontractor payables, visible by due date. You will have more suppliers than employees. Knowing what is due in the next two weeks, per linguist, is the most useful view in the business. Paying linguists on time is what keeps the bench.
Four structures to set up first
- Subcontractor payables visible by due date
- Project-level cost tracking
- Work in progress
- Deferred revenue
2. Project-level cost tracking. Every subcontractor invoice, and every internal hour, posted against a project. Without it you cannot tell which work earns, and every pricing decision is a guess.
3. Work in progress. Projects started and not delivered represent cost incurred with no invoice raised. If your books do not show it, a busy month looks like a bad month and a quiet month looks fine.
4. Deferred revenue. Retainers, prepaid packages, and deposits are cash received for work not yet done. Treating them as earned revenue produces a month that looks excellent and a quarter that does not.
The cash cycle, plainly
Money leaves before it arrives. Three timings decide how much working capital you need:
The cash cycle, plainly
- Linguist invoices you and expects terms
- You invoice client on delivery or acceptance
- Client pays on their terms plus approval
Write those three down per client. A client with long terms and a slow internal approval is a financing decision, not just an account, and it should be priced that way.
Two habits reduce the strain without harming anyone. Invoice on the day of delivery rather than at month end, because a week of delay costs nothing to remove. And agree milestone billing on long projects, so a three-month program does not become a three-month loan.
Currency, where it applies
If you pay linguists in one currency and bill clients in another, the amount that arrives is not the amount agreed. Decide who carries that difference and say so in both agreements. Also decide who pays intermediary bank charges, because that is a small recurring annoyance that silently reduces what your linguists receive and eventually gets raised with you.
What the records have to support
Keep the quote, the analysis, the scope note, change orders, subcontractor invoices, and payment records together per project. That is what lets you defend a price, settle a dispute, and produce a cost figure that means something. The general expectation that business records support the transactions behind them is described in the IRS guidance on records a business should keep.
Two things this page will not tell you: how payments to subcontractors must be reported where you operate, and how your entity should be structured for tax. Both depend on your jurisdiction and on how the working relationships are classified, and both are worth an accountant's time early rather than a correction later.
Your books hold sensitive material too
Financial records for this trade carry client names, project titles, and sometimes the existence of unannounced products or active litigation. Treat access to the accounting system the way you treat access to content: who can reach it, from where, and what happens when someone leaves.
The NIST small business quick-start guides give a practical starting point for a small organization, and the CISA material for small and medium businesses covers similar ground operationally. Neither is a statement of what a specific client's contract requires of you.
A monthly routine that takes an hour
A monthly routine
- Post every subcontractor invoice to its project.
- Post internal hours to projects.
- Review payables due in the next two weeks, and confirm every linguist will be paid on time.
- Review receivables by age, and act on anything past terms rather than logging it again.
- Move completed projects out of work in progress and recognize deferred revenue that has now been earned.
- Compare cash movement with profit for the month, and explain any large gap in one sentence.
Step six is the one to insist on. In this trade the gap is usually timing, and knowing which timing is what stops a profitable month from becoming a payroll problem.
Monthly routine, one hour
- Post subcontractor invoices to projects
- Post internal hours to projects
- Review payables due in two weeks
- Review receivables by age and act
- Move completed projects out of work in progress
- Compare cash movement with profit
Where this connects
The cost data these books produce makes pricing decisions defensible; the reporting and measurement side sits in the software and measurement guide. Paying linguists on time is a bench decision described in the hiring and training guide.
Milestone billing and acceptance timing come from the process in onboarding and delivery, and how you present terms to a buyer belongs with the marketing and growth guide.
Common questions
Do I need accounting software from the start?
You need the four structures. Most small agencies get there with modest software plus a disciplined project cost sheet, and outgrow that arrangement at a point that is obvious when it arrives.
Should I pay linguists before the client pays me?
Yes, on the terms you agreed. Financing your business from your suppliers costs you the bench, and the bench is the business.
How do I handle a client who consistently pays late?
Raise it once as a terms conversation, with the effect stated plainly. If nothing changes, price the delay in or require a deposit. Silent tolerance turns into a permanent subsidy.
When should I involve an accountant?
Before the first subcontractor payment and before choosing a structure. Both are cheaper to set up correctly than to unwind.
