Professional Services Firms
You track billable hours. But do you know which clients actually make money after the unbilled prep work and revisions get counted?
The Industry
A marketing agency finishes a brand strategy project. Billed $18,000. Took about 60 hours according to the project tracker. Looks like a solid $300 per hour. Except the project required four rounds of revisions that weren’t scoped, two internal brainstorms with senior partners who never logged their time, and a month of back-and-forth that pushed other work aside. The real effective rate was closer to $150 an hour. They priced the next similar project the same way, thinking they had healthy margins.
Professional services firms sell expertise and time. Whether you bill hourly, by project, or on monthly retainer, the fundamental economics are the same. Your time has a cost. The gap between that cost and what you actually collect determines your margins. Most firms track hours carefully but never connect those hours to true profitability. They know how much they billed but not how much unbilled work supported it.
Who This Covers
Who This Covers
Law firms, consulting practices, marketing and creative agencies, architecture firms, engineering companies. Any professional services business in the Merrimack Valley or Greater Boston that bills clients for expertise rather than products.
What Makes It Complex
What Makes It Complex
Multiple billing models sometimes with the same client. Retainers, project fees, and hourly work all need different treatment. Collections that lag invoices by 30 to 90 days. Overhead that needs allocation to understand true cost of delivery. Partner or owner compensation structures that create tax complexity.
What We Handle
Professional services accounting requires tracking revenue and expenses at the client level. Which clients are actually profitable? Which project types consistently run over budget? Are your retainer clients paying enough to cover the work they generate month after month? These questions don’t get answered by basic bookkeeping that just categorizes expenses into generic buckets.
We configure QuickBooks to track profitability by client and project. Time gets connected to revenue so you can see what work actually cost versus what you billed. Accounts receivable gets monitored so you know who owes what and for how long. Tax planning takes into account how professional service owners typically get paid and how to structure things for the best outcome.
Client and Project Profitability
Client and Project Profitability
Revenue and expenses tracked by client. Costs connected to specific projects, matters, or engagements. Reports showing which clients generate healthy margins and which consume more resources than they pay for. Historical data that makes pricing future work accurate instead of hopeful.
Receivables and Tax Planning
Receivables and Tax Planning
Accounts receivable monitoring that identifies slow-paying clients early. Aging reports that drive timely follow-up before invoices go stale. Tax planning for firm owners including reasonable compensation, quarterly estimates based on actual cash flow patterns, and structure optimization as the firm grows.
Common Problems
Professional services firms often have no idea which clients actually make them money. They know total revenue and total expenses, but client-level profitability is invisible. That big retainer account that feels stable might actually be losing money when you account for scope creep, revision cycles, and the senior partner time it consumes. Without that visibility, you keep serving unprofitable clients while hesitating to take on work that would actually generate returns.
Cash flow creates its own problems. You can have a $100,000 month on paper and $35,000 in the bank. Larger clients take their time paying. Your work is done, your team has been paid, but the invoice sits unpaid for 60 days. Quarterly tax estimates don’t account for this timing disconnect. You end up either short on cash when estimates are due or overpaying because you planned around revenue that hasn’t arrived yet.
No Client-Level Visibility
No Client-Level Visibility
Total revenue looks healthy but you can’t identify profitability by client. One major account might be subsidizing losses on several others. Pricing decisions get based on gut feel instead of data. You don’t know which clients to grow, which to maintain, and which relationships are quietly draining your resources.
Collections Lag Creates Cash Crunches
Collections Lag Creates Cash Crunches
Invoices go out on time but payments trickle in slowly. Accounts receivable ages without systematic follow-up. Nobody notices an invoice is 45 days old until payroll is due. Cash flow doesn’t match the profitable quarter you thought you had. You make partner draws assuming money that hasn’t arrived.
What Changes
Client profitability becomes visible. You know which accounts generate healthy margins and which ones consume more time than they pay for. Pricing conversations shift from what you think you can charge to what the work actually costs plus the margin you need to sustain the business. You stop saying yes to work that looks good on paper but loses money in practice.
Cash flow gets the attention it deserves. Aging accounts receivable gets reviewed regularly. Collection follow-up happens before invoices hit 60 days. You know what cash is coming in over the next 30 days with reasonable accuracy. Tax planning accounts for the timing of when work gets done versus when money actually hits the account. Business decisions are based on real numbers instead of assumptions about what the bank balance might look like next month.
Pricing and Client Decisions Based on Data
Pricing and Client Decisions Based on Data
Historical profitability by client and project type informs how you price new work. You know which engagements consistently hit target margins and which types of projects always run over. Better decisions about which clients deserve your best people and which relationships to let go when capacity gets tight.
Predictable Cash and Cleaner Taxes
Predictable Cash and Cleaner Taxes
Active accounts receivable management that prevents invoices from going stale. Cash flow visibility that accounts for payment timing patterns. Quarterly estimates matched to when revenue actually arrives. Year-end tax prep that captures every deduction for professional development, software, insurance, and home office without scrambling in April.
The Merrimack Valley's Trusted Accounting Partner
The Next Step:
A 15-Minute Call
Tell us about your business and what you're dealing with. We'll listen, ask a few questions, and give you a straightforward quote.