Professional services firms, including consultants, agencies, designers, developers and other knowledge businesses, sell time and expertise. They usually have few physical assets and modest inventory, but they live and die by invoicing, collections and utilization. The bookkeeping priorities follow from that.

Invoicing and receivables

Cash flow in a service firm depends on sending invoices promptly and following up on them. We keep accounts receivable current, so your aging report shows exactly who owes what and for how long. A clean receivables list is often the fastest way for a service firm to improve cash flow without winning a single new client.

Retainers and deposits

Many firms collect retainers or deposits before work begins. Until the work is performed, that money may need to be tracked separately from earned income, depending on your accounting method. We record retainers in a way that shows what has been earned and what is still owed in work.

Contractors and freelancers

Service firms often rely on contractors. The IRS explains on its page about independent contractors or employees that classification depends on the degree of control and independence in the relationship. Contractors should complete Form W-9 before they are paid. We track contractor costs by client or project, so you can see real project margins, and keep the records needed for year-end reporting. Our guide to employee vs. independent contractor covers the basics.

Profitability by client

When income and direct costs are tracked by client or project, you can see which engagements are worth repeating and which need repricing. We can set up classes or projects in your accounting software to make those reports routine.

Owner pay

How owners pay themselves depends on how the business is structured. Sole proprietors and partners usually take draws, while S corporation owners who work in the business are generally paid wages through payroll. Mixing owner pay with business expenses distorts your profit. Our guide to business structure tax considerations explains how structure affects this.

What our professional services support covers

  • Invoicing support and receivables tracking
  • Retainer and deposit tracking
  • Contractor cost tracking by client or project
  • Owner pay and distribution recording
  • Monthly financial statements

See our bookkeeping services and accounting services.