I sent the final design files on a Friday, shut the laptop and went to buy wrapping paper. The client had approved everything. The invoice was in their payment queue.
In January, the money arrived. I nearly put the whole amount into the new year's sales because that was where my bank export placed it.
I am Malik, a freelance designer. My bookkeeping problem was ordinary enough: the work and the payment had crossed a year-end in different directions.
Earned and received are different dates
Most self-employed businesses must use accrual accounting for income tax. Income belongs in the fiscal period when earned, even if payment arrives later; expenses generally follow when incurred. Farmers, fishers and self-employed commission agents have particular options. CRA's accounting-method guidance.
Assume I completed and earned a $1,200 fee in December, with no sales tax included in this calculation. At year-end I would record the income and a $1,200 receivable. January's payment clears that receivable. It is not another $1,200 of sales.
The invoice date alone doesn't settle every situation either. Deposits, work in progress and uncompleted obligations deserve their own review.
Keep the trail through January
I saved the agreed scope, the client's approval, the invoice and the later payment together. Then I marked the invoice paid in the same system where I had recorded it as outstanding.
If payment never arrives, writing off a bad debt is a separate decision. It generally requires that the amount was previously included in income and that the debt became bad in the year claimed; "a little late" isn't the same thing. CRA's business-expense guidance.
I left myself one note for next December: print the unpaid-invoice list before importing the bank file. The wrapping paper could wait another ten minutes.
Canadian rules checked October 20, 2026. The example assumes a December 31 year-end and an earned, unconditional fee.
