Accrued Revenue in Australia: 2025 Guide for Businesses

Accrued revenue is more than just an accounting term—it’s a critical concept that shapes how Australian businesses report earnings, manage cash flow, and make strategic decisions. With changes in 2025 tax policy and evolving business practices, understanding accrued revenue has never been more important for business owners and finance teams.

What Is Accrued Revenue and Why Does It Matter?

Accrued revenue refers to income that a business has earned by delivering goods or services, but hasn’t yet received payment for. It sits on the balance sheet as an asset until the cash comes in. This is common in industries where work is billed after the fact, such as professional services, construction, and SaaS (Software as a Service) providers.

• Example: An IT consultancy completes a project in June 2025 but won’t invoice the client until July. The value of the work is recognised as accrued revenue in June’s accounts.

This approach aligns with the accrual method of accounting, which is standard for most Australian businesses above the $10 million turnover threshold, as per ATO guidelines.

Accrued Revenue and 2025 Tax Policy Updates

Australian businesses must be vigilant about how accrued revenue is reported, especially with 2025’s updated ATO compliance focus. The ATO has increased scrutiny on revenue recognition practices, particularly in industries prone to delayed billing or complex contracts.

• ATO Guidance: The ATO’s 2025 compliance program highlights the need for accurate timing in revenue recognition to prevent misstated income and potential audit triggers.
• GST Implications: For GST-registered businesses, GST is generally payable on the invoice date, not when the service is performed. However, errors in accrued revenue recognition can create confusion and affect GST reporting accuracy.
• Temporary Full Expensing (TFE) Sunset: The end of TFE in June 2024 means businesses are paying closer attention to cash flow and earnings recognition, making precise accrued revenue tracking even more crucial.

Inaccurate recording can lead to over- or under-reporting of income, impacting tax liabilities, financial statements, and even business valuations.

Practical Impacts: Cash Flow, Financing, and Growth Decisions

Managing accrued revenue is not just about compliance—it directly affects day-to-day business health and future planning:

• Cash Flow Management: High levels of accrued revenue can signal that while business is booming, cash isn’t arriving as quickly. This can strain liquidity, especially for SMEs without large cash reserves.
• Bank Lending: Lenders often scrutinise accounts receivable and accrued revenue when assessing loan applications. A spike in accrued revenue might raise questions about collectability and risk.
• Growth Planning: Businesses planning to expand or seek investors need transparent financials. Accrued revenue, if not managed well, can distort profitability and mislead stakeholders.

For example, a Melbourne-based marketing agency saw its accrued revenue jump by 30% after signing several long-term retainers in early 2025. While this reflected strong sales, it also meant cash inflows lagged behind reported profits—forcing the agency to tap an overdraft facility to meet payroll.

How to Stay on Top of Accrued Revenue in 2025

Best practices for Australian businesses include:

• Automate invoicing as soon as work is delivered to minimise the lag between earning and receiving cash.
• Regularly review accrued revenue accounts to ensure they reflect genuine, collectable amounts—not just optimistic estimates.
• Coordinate with your accountant or finance team on the latest ATO guidance to avoid compliance missteps.
• Monitor overdue accrued revenue to spot collection risks early and take action.

With cloud accounting software and stronger internal controls, businesses can keep accrued revenue from becoming a black hole on the balance sheet.

Conclusion

Accrued revenue isn’t just an accounting line—it’s a real-world indicator of business health, compliance, and future growth potential. With the ATO’s 2025 focus on transparency and accurate reporting, now’s the time for Australian businesses to tighten up their revenue recognition practices. Staying proactive ensures smoother cash flow, better financing opportunities, and fewer tax-time surprises.