Consultants and coaches: retainers and packages
A retainer arrives at the start of the month for work you have not done yet. Here is why that timing matters.
Consulting sells time and judgement, usually packaged: a monthly retainer, a fixed-price project, or a bundle of sessions paid upfront.
All three share a feature that catches people out. The money often arrives before the work does, and that gap is where both the cash-flow risk and the record-keeping question live.
Received is not the same as earned
A retainer paid on the first of the month covers work through the month. A package of ten sessions paid upfront covers sessions spread over the next quarter. A project deposit covers work that has barely started.
For your own management, that money is a commitment, not a windfall. Consultants who treat upfront payments as available cash end up doing the work later with the money already spent, which is fine until a client pays for six months in advance and then needs six months of your time during a lean quarter.
For records, there is a matching question: income received for work not yet performed sits differently from income for work completed, and treating a year's retainer as though it were all earned on day one distorts your figures.
The practical version for a small practice: know how much of your bank balance is unearned, at any moment. It is usually more than you think.
Scope is a financial question
Fixed-price work has one enemy, and it is not the tax office. It is scope.
A project quoted for six weeks that runs to sixteen is not a scheduling problem, it is a pay cut. Consultants who track hours against fixed-price projects, even loosely, learn quickly which kinds of work are priced correctly.
This is a business matter rather than a tax one, but it feeds directly into whether the numbers you are filing represent a viable practice or a slow drain.
Corporate clients deduct
Companies paying for professional services generally deduct an amount before paying and remit it in your name. Your invoice says one number and the payment is smaller.
That amount is an advance against your own tax, and you can claim it only if you hold the certificate proving it. Chase them per payment. Consultants working with several corporate clients accumulate a meaningful sum this way over a year, and losing track of it means effectively paying twice.
The costs of a practice
Consulting looks cost-light and is not, quite. There is software, professional development, travel to clients, a workspace, sometimes subcontracted specialists for parts of a project, and the equipment you work on.
Subcontractors deserve particular care. If you bring in another professional and pay them from your fee, that is a cost supported by documentation, and it may carry its own obligation to deduct before paying. Handing over cash with no paperwork leaves you with an unsupported cost.
Practical footing
Track what is unearned: money received for work still to be done.
Invoice properly and on a schedule, even for retainers, so both sides have a record.
Collect withholding certificates from corporate clients as you are paid.
Keep contracts that define scope, because scope decides whether the price was right.
Record subcontractor payments properly.
Running a consulting or coaching practice and unsure how to treat money received in advance? Ask AskOnward for a plain answer from the official BIR rules, so your figures reflect what you have actually earned.
This article is for general information and is not affiliated with the government. For official forms and the latest rules, see the Bureau of Internal Revenue at bir.gov.ph.