Accounting for service based businesses, where people are the product.
Consultancies, law and engineering firms, and other professional practices live or die on utilization and realisation. When the books only track revenue and payroll in aggregate, there's no way to see which work is worth doing more of — or whether the partner draws are sustainable.
The four problems we see most in professional & service businesses
Utilization invisible in the books
Billable versus non-billable time never reaches the financials, so effective rate is unknown.
Scope creep eating margin
Fixed-fee work that quietly runs long, with no reporting to show it until the year closes.
Owner draws done by feel
Distributions taken on gut instinct rather than against a real cash forecast and tax reserve.
WIP and unbilled time
Work delivered but not yet invoiced, sitting nowhere on the balance sheet.
What we do about it
- Connect time and billing data to the financial statements
- Report realisation and effective rate by service line
- Track WIP and unbilled work properly
- Set a sustainable owner-compensation and reserve policy
- Build the cash forecast partner distributions should be measured against
What this means when you go for financing
Professional firms borrow to buy out a partner, acquire a book of business, or fund an office move. Each requires a lender to believe the earnings are durable — which means clean, well-presented financials and a credible forecast.
The services behind the work
Most engagements start with a cleanup, then move into ongoing accounting and a loan-ready package.