In short

Accounting for consulting, legal, design and other professional firms measures profitability by client, project and person: utilisation and realisation rates, effective hourly rates on fixed-fee work, partner or owner compensation planning, work-in-progress and unbilled time, and cash forecasting around receivables, so owners can price work, plan hiring and decide which clients to grow. Reports are produced monthly and reviewed with the owners.

Service firms often grow by adding clients and staff without knowing which work is really profitable. Accounting for professional services uses time, billing and cost data together to show where the firm earns its margin.

Utilisation and realisation

Two measures matter most. Utilisation is the share of available hours spent on billable work. Realisation is how much of that billable time turns into invoiced and collected revenue after write-downs and discounts. We report both by person and by client, using data from your time system and the books.

Fixed-fee work

Fixed-fee projects can be very profitable or quietly loss-making. We compare the fee with the hours actually spent and the cost of those hours to give an effective hourly rate per project. Over time that becomes the basis for better pricing.

Unbilled work and cash timing

Work that is done but not invoiced is a hidden asset, and work invoiced but unpaid is a cash risk. We report unbilled time alongside receivables and build a cash forecast from your billing schedule and typical collection times.

Owner compensation and structure

How owners take money out depends on the entity type. The IRS explains how S corporations pass income through to shareholders, and its overview of business structures compares options. We model owner pay and distributions against cash and profit, and coordinate with your tax adviser on structure.

Hiring decisions

Before adding a team member, we model the effect on capacity, utilisation and margin using your current rates and pipeline, so the decision rests on numbers.

Typical deliverables

  • Monthly profit by client and service line
  • Utilisation and realisation report
  • Fixed-fee project review
  • Cash forecast from billing and collections
  • Owner compensation planning with your adviser

This builds on professional services bookkeeping. See all accounting services or book a consultation.