How to Handle Customer Deposits in Water Restoration Accounting (Without Messing Up Your Revenue)
If you're collecting deposits before the work starts but counting them as income, your financials are lying to you.
At Kiwi Cash Flow, we see this mistake all the time when onboarding restoration companies: cash hits the bank and it’s booked as revenue—even though no work has been completed. The result? Inflated revenue, distorted profitability, and forecasts that fall apart by month-end.
Here’s why it matters—and how to fix it.
What’s the Real Problem with Deposits?
Customer deposits are not income—they’re a liability. You’re holding someone else’s money until you deliver the work.
When restoration companies record deposits as revenue too early, they get hit with problems like:
Overstated profitability — your P&L shows revenue with no expenses yet
Broken forecasts — revenue shows up in the wrong period
Cash flow confusion — you “made” money this month… until the materials and labor bills roll in next month
Tax issues — you pay tax on income you haven’t technically earned
In short, you're creating a financial picture that doesn’t reflect the real health of your business.
The Right Way to Handle Deposits
Here’s how we structure this at Kiwi Cash Flow for our clients:
When a Deposit Is Collected:
Debit: Bank
Credit: Unearned Revenue (a liability on your balance sheet)
When Work Is Completed or Invoiced:
Debit: Unearned Revenue
Credit: Revenue (now it hits your P&L)
This approach matches revenue to work performed—not just money received—giving you clearer financials, better forecasting, and a much more honest view of your cash position.
Why This Matters for CFO-Level Decisions
When we step in as your CFO, we’re not just organizing your books—we’re building a system that supports smart decisions.
Proper deposit handling:
Gives you more accurate margins by job and by month
Aligns revenue recognition with your budget and forecasts
Improves cash flow planning, especially when deposits are high but jobs are delayed
Strengthens financial reporting for lenders or investors
Prevents financial surprises during busy seasons
If your deposits are getting booked as income too early, it’s likely the rest of your forecasting isn’t reliable either.
You Need More Than a Bookkeeper
Most bookkeepers don’t know how to track Unearned Revenue. We do.
Kiwi Cash Flow gives you monthly reports, forecasts, and action items based on clean data. That includes tracking unearned revenue, WIP, and deferred income—so your financials actually reflect where your business stands.
📅 Ready to see what your numbers really say? Schedule a call and let’s take a look at your revenue timing together.