Writing off billable time

What is the best way to handle billable time that needs to be written off? For example, I currently have a time-and-expenses project that was capped at 7 hours. I wound up spending 8 hours on the project, but I can bill my client only 7 hours per our agreement. On the other hand, I want to record my time accurately, both for record-keeping purposes and also to make it clear on the invoice so the client knows that I put in more work than I could bill for.

Should I record my actual 8 hours under Billable Time and then put in an additional Billable Time entry for negative 1 hour (I’ve verified that the form will indeed accept a negative time entry) with the notation “excess time, written off”? Or should I record a Billable Time entry for 7 hours and then a separate Billable Time entry for 1 hour and choose “written off” from the Status drop-down for the latter? (If I do that, I think the entry never actually appears on the invoice.) Or do I bill the full 8 hours and then discount my fee by one-eighth? Or is there a better way to handle this in Manager?

And from an accounting perspective, does the extra hour just never get included in my revenue, or should the extra hour be credited normally to the Billable time - invoiced revenue account and then debited against an Expense account called something like Billable time - written off? In other words, does the non-income-producing hour create an hour of revenue and an hour of expense, or does it just never create any revenue to begin with?

The first question is - do I want (need) to disclose it to the client or not.

If the quotation/contract was for capped 7 hrs - is it relevant to the client if you exceeded that - if relevant then show the actual 8 hrs and then the 1 hr credit - using a notation like “adjustment for hours over the agreed cap”. I wouldn’t be using the terminology like “written off”.

Or only charge the 7 hrs and put a comment in the notes panel : “Actual hours spent 8 but only charged the agreed cap”

By inputting it as two entries would keep the tracking of the actual hours but generate (print) the invoice for the 7 hrs first - leaving the 1 hour un-invoiced and available for subsequent write off.

This mathematically wouldn’t work if the capped 7 hours were also at a known agreed rate.
say 7 x 50 = 350 - as there isn’t any variable to discount.

Yes, as soon as you enter an hour of billable time - it automatically generates an hour of revenue regardless of being invoiced or not (its not stored as work in progress) and the hour written off would generate a matching expense

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You should record 8 hours in billable time even if you are going to charge only for 7 hours.

When you create an invoice, just decrease the amount on invoice. Manager will figure out automatically that you are invoicing less than billable time amount and will automatically make the adjusting entry.

Thanks, @Lubos. By “decrease the amount on invoice,” do you mean that I should decrease the Qty field on the invoice form by 1, or do you mean I should add a line item to the invoice for -1 hours, or do you mean I should decrease the dollar amount?

Decrease the quantity from 8 to 7 on the original line. An added line with a negative number will not be associated with the billable time entry, so no automatic adjustment can occur.

Just to clarify, the automatic adjustment will occur if account selected is Billable time - invoiced.

So both methods are supported. He can decrease quantity or add new line with negative quantity. It’s up to personal preference.

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Ah, yes. I overlooked the possibility of allocating a negative entry directly to the Billable time-invoiced account. Thanks for the clarification, @lubos.

Yeah, and I think if I just decrease the quantity on the line that’s already there, the extra hour won’t appear on the invoice. As I wrote above, I want my client to know that I did an extra hour of work, even if she’s not paying for it.

@Lubos’s suggestion, of adding an additional line to the invoice assigned to Billable time - invoiced for -1 hours does exactly what I need: It creates an automatic write-off entry for the value of the hour. Perfect! (And I notice that it does indeed decrease my revenue in the Billable time - uninvoiced account by the amount of the wrote-off. It’s treated as a contra-revenue, not an expense. Cool.)

Then - show the actual 8 hrs and then the 1 hr credit - using a notation like “adjustment for hours taken over the agreed cap”.