Key takeaways
What this article covers, in order:
- The chart of accounts for an IT services firm
- The 3 entries an IT services firm gets wrong
- What an IT services firm can claim
- The reports to run every month
- Frequently asked questions
- Where to go next
Managed-service contracts bill monthly in advance, projects bill on milestones, and licences you resell are mostly someone else's money. Blend them and you cannot tell whether recurring revenue is growing or whether a hardware resale month just flattered the numbers.
This is the bookkeeping side of that problem: the accounts to set up, the entries that go wrong, and what you can claim. If you are still choosing software, the round-up linked at the end compares the options.
The chart of accounts for an IT services firm
Start from these rather than the default template. The codes are illustrative; the separations are what matter, because each one answers a question you will be asked later.
1250 Work in progress on fixed-price projects
2300 Deferred managed-service income
2310 Prepaid support hours held
4000 Managed service revenue
4100 Project revenue
4200 Licence and hardware resale
5000 Cost of licences and hardware resold
5100 Engineer costsThe 3 entries an IT services firm gets wrong
A year of licences resold to a client
If you are an agent, net; if you carry the risk, gross with the cost alongside. Picking the flattering one makes revenue growth meaningless.
A block of 40 prepaid support hours
A liability drawn down as hours are used, not revenue on sale — otherwise the month you sell it looks great and the months you deliver look empty.
Out-of-hours engineer overtime
Cost it to the contract that caused it. In general payroll, an unprofitable 24/7 client stays invisible.
What an IT services firm can claim
Deductibility follows the rule in your own jurisdiction, so this is a checklist to take to your accountant rather than an answer. For an IT services firm the cost lines to review first, and the record each one needs, are:
| Cost line | The record to keep |
|---|---|
| Cost of licences and hardware resold | The invoice, and the business-use split where the cost is shared |
| Engineer costs | The invoice, and the business-use split where the cost is shared |
Whether each of those is deductible, and how much of it, is a rule your tax authority sets and changes. Keep the record either way; take the question to your accountant with the figures in front of you.
The reports to run every month
- Recurring contract revenue separated from project and resale revenue — review it monthly, not at year end.
- Licence and hardware resale shown at the right gross or net treatment — review it monthly, not at year end.
- Prepaid support blocks and hours drawn down against a liability — review it monthly, not at year end.
- Project milestones and work in progress on fixed-price work — review it monthly, not at year end.
Frequently asked questions
What is the best accounting software for IT services?
There is no single best one; there is a best one for a shape of business. For an IT services firm, work down the criteria in the section above and stop at the first option that clears all of them — that list is short, usually two or three.
The criteria that eliminate most options fastest are: Recurring contract revenue separated from project and resale revenue; Licence and hardware resale shown at the right gross or net treatment; Prepaid support blocks and hours drawn down against a liability.
Give me a list of accounting software for IT services that offer the best security?
Ask for evidence rather than adjectives. The things worth checking, in order: an independent audit you can see (SOC 2 Type II or ISO 27001, with the report date), encryption in transit and at rest, enforced multi-factor authentication, role-based permissions fine enough that a bookkeeper cannot export your whole ledger, an immutable audit trail of who changed what, where your data is hosted and under which country's law, and a stated backup and recovery position.
Then ask the question the brochure will not answer: can you see, after the fact, who changed a figure and what it was before? For an IT services firm that audit trail is worth more than any single feature on the security page. A vendor who will send the audit report under NDA is telling you something; one who answers with the words "bank-grade security" is telling you something too.
Is there free accounting software for IT services?
There are free tiers, and they are real — but the limit is what matters, not the price. Find the cap before you move your books: how many documents or transactions a month, how many bank accounts, how many users, and whether the free tier includes the one thing you came for. HelloBooks has a free plan; /pricing lists what it covers today.
How much does accounting software for IT services cost?
Published prices move, and the figure that matters is the one including the module you actually need — inventory, payroll or multi-currency are often a tier up, so the headline price is rarely the price you pay. Price each shortlisted option at the tier that carries what you actually need, on the vendor's own page, on the day you decide.
How do I switch accounting software without losing my history?
Migrate on a period boundary and bring three things: opening trial balance, open customer and supplier balances, and your chart of accounts. Transaction history can usually stay in the old system as a read-only archive — attempting to re-import years of detail is where most migrations lose a week and a reconciliation.
Where to go next
- HelloBooks for IT services
- The IT services accounting software round-up
- HelloBooks in the United States
- HelloBooks pricing and what each plan includes
This guide is written for businesses in the US, UK, Canada, Australia, New Zealand and Singapore. Tax treatment differs by country — check the rule for yours before you act on it.
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