Industry: consulting & advisory
Accounting for consultancies and advisory firms: most of your value is not on an invoice yet.
In an advisory firm the accounts are usually the last place the business shows up. Work is delivered weeks before it is billed, principals take money out on a pattern unrelated to when profit was earned, and clients pay when an approver is back at their desk rather than when terms fall due. A set of books built only on issued invoices and bank movements describes almost none of that.
Running the finance side properly comes down to three disciplines: a live record of work delivered and not yet invoiced, a cost attached to principal and associate time so engagement margin means something, and receivables managed against the client’s approval calendar rather than against your payment terms.
Three states of work. Only one of them is on an invoice.
The defining feature of advisory work is the delay between doing it and billing it. A phase runs for six weeks before a milestone falls due. A retainer month is half consumed. A scoping exercise is complete but the engagement letter for the main piece is still being signed. All of that is real, chargeable work, and none of it exists in a set of books built on invoices.
| State of the work | What genuinely exists | What an invoice-only view shows |
|---|---|---|
| Delivered, not yet invoiced | Chargeable days spent, a milestone approaching, a retainer month partly consumed. | Nothing. The month reads as quiet, and the following month reads as unusually strong. |
| Invoiced, not yet delivered | A retainer or advance billed ahead of the work. | Revenue. The obligation to deliver against it appears nowhere. |
| Delivered and invoiced | Work done, billed, awaiting payment. | Revenue and a receivable — the only state most small firms track at all. |
Holding the first state properly is what work in progress means. It requires three habits and no sophisticated system: time or delivery recorded against the engagement close to when it happened, a monthly view of what is billable and not yet billed, and a decision on every open engagement each month — bill it, hold it, or write it down.
That last option deserves emphasis, because it is the one that gets taken by accident. Writing down unbilled work is a real commercial decision with a profit consequence, and it should be made deliberately by whoever holds commercial authority in the firm. In most firms it is instead made by forgetting: the work ages, the client’s memory of the value fades faster than the firm’s, and at some point nobody is willing to raise the invoice.
Drawings, associates, and a profit figure that means nothing.
The second structural distortion is the cost of the people who own the firm. Depending on how the firm is constituted, what a principal takes out may be a salary through payroll, a distribution of profit already earned, or a mix of the two — and only one of those is a cost of running the business. In practice the mix is rarely deliberate, and the amounts are drawn when cash allows rather than when work is done.
Whatever the legal treatment, the management question is separate and unavoidable: what would it cost to replace the principal’s delivery time? If that number is absent from engagement economics, two things follow, and both are expensive.
The first is systematic mispricing. An engagement delivered mostly by a principal, whose time carries no cost, looks extraordinarily profitable. The firm prices the next one from that experience. Then it hires, the same work is delivered by someone whose salary is visible, and margins appear to collapse — not because the new person is less capable, but because their cost was always there and the founder’s never was.
The second is a profit line that measures effort rather than performance. A year in which the principals were on client work almost every week is not comparable with one in which they spent half their time selling and building — yet without a cost for their time, the first year simply looks better. Growth then reads as decline, at exactly the point when the firm most needs a clear view.
Associates and contracted specialists add a timing problem on top. They are engaged for a phase, priced by the day, and often paid after the client has been invoiced. Their cost belongs to the engagement they served, not to the month the payment cleared — and it must be recorded against that engagement while it is still obvious which one it was.
Utilisation belongs in this section rather than in a dashboard. The ratio of client-chargeable time to available time is genuinely useful in one way only: as a direction of travel within your own firm, prompting a question when it moves. Comparing it to a published benchmark is meaningless when definitions of chargeable, available and billable differ between firms — and maximising it is actively harmful, since a firm running at the top of its capacity has no room left to sell, write, recruit or think. It is also worthless unless non-chargeable time is recorded with the same discipline as chargeable time, which is the part most firms skip.
Recharged costs, and clients who pay on a committee’s calendar.
Two operational problems sit at the end of the advisory cycle, and they compound each other. The first is expenses incurred on a client’s behalf. The second is that professional clients pay on a governance calendar rather than on your payment terms.
Recharged costs. Travel, accommodation, subsistence, data and reports bought for an engagement, and subcontracted specialists. Whether a recharge is a disbursement passed on or part of your fee changes how it is treated, and it should be settled in the engagement letter rather than assumed. The operational rules are simpler than the treatment:
- Agreed in advance — what is recoverable, up to what limit, and whose approval is needed before it is incurred. An expense argued about afterwards is usually conceded.
- Recorded against the engagement as it happens, with the receipt attached at the point of spending rather than reconstructed from a card statement.
- Billed in the same cycle as the fees. Saving up three months of travel and rebilling it in one line is the fastest way to trigger a query on an otherwise clean invoice.
- Visible in engagement margin. A recharge that was absorbed is a cost of the engagement, and should show up as one.
Getting paid. A professional client rarely disputes a good invoice. It simply routes it through a process the supplier cannot see. The person who bought the work approves it, finance validates it, and it joins a payment run — and in some organisations, professional fees above a threshold wait for a committee, a board meeting, or a departmental budget holder returning from leave. Your thirty-day terms are, in practice, a request that their calendar will honour approximately.
- Establish at engagement start who approves the invoice, what they need on it, and when their payment run happens. That is a scoping question, not a credit-control question.
- Submit before their approval cut-off rather than before your terms date. The two are different dates and only one of them affects when you are paid.
- Confirm the invoice was received and approved. Delivered is not the same as accepted, and the gap between them is where most professional-services ageing quietly accumulates.
- Treat an approver leaving, moving role or going on extended leave as a receivables event, because the invoice stops moving and nothing announces it.
- Record what was said and by whom, so the next conversation starts from a fact rather than a fresh apology.
Concentration deserves its own line here, because in advisory firms it is measured wrongly. The exposure to a single client is not the receivable balance. It is the receivable plus the work already delivered and not yet billed — and that combined figure is usually the largest amount the firm ever has at risk with one counterparty. It is worth knowing without asking for it. The general discipline of running follow-up as a process is set out in accounts receivable outsourcing.
Where At Par fits — and the limits.
At Par runs the finance operation for owner-led consultancies and advisory firms. Books kept current with associate and recharged costs held against the engagements that caused them, unbilled work visible each month rather than discovered at year end, the period closed on a date, receivables tracked against the client’s approval cycle, and management reporting that separates fee income, delivery cost and principal time instead of presenting one profit total. A qualified accountant (ACCA) is accountable for the work.
In scope alongside that: bookkeeping and month-end close, receivables and invoice follow-up, and payroll. How your records and evidence are protected is documented separately.
Where a different answer is better. A single-principal firm issuing a handful of invoices a month usually needs an annual accountant and a disciplined spreadsheet, not a finance operation — the overhead would exceed the problem. A firm that already employs a practice manager owning billing and collections needs help with reporting and close, not with execution. And a business whose main output is not human-delivered professional work — retail, hospitality, manufacturing, or trading that holds inventory — sits outside what At Par takes on.
If the real question is whether to hand any of this outside at all, the comparison is written up separately: outsourced bookkeeping versus an in-house accountant.
Asked by principals running advisory firms.
What is work in progress in a consulting firm? +
Chargeable work that has been delivered but not yet invoiced — days spent before a milestone falls due, a retainer month partly consumed, a phase completed while the paperwork for the next one is signed. It is genuine value the firm has produced and it is invisible in books built on issued invoices. Tracking it needs delivery recorded against each engagement close to when it happened, and a monthly decision on every open engagement: bill, hold, or write down.
How should partner or principal drawings be treated in the accounts? +
That depends on how the firm is legally constituted. Money taken out may be salary through payroll, a distribution of profit already earned, or a combination, and only some of it is a cost of running the business. The treatment should be confirmed with a qualified accountant rather than assumed. Separately, and regardless of treatment, engagement economics need a cost for principal delivery time — otherwise work done by owners looks free and the firm prices from a false picture.
Why does a consulting firm look profitable and still run short of cash? +
Usually because three timing gaps stack. Work is delivered weeks before it is invoiced. The invoice then waits on the client’s approval and payment-run calendar rather than on stated terms. Associates and recharged costs are often paid before the client settles. Profit measured on invoices raised can therefore be genuine while cash sits behind two queues, one internal and one on the client side.
How should expenses recharged to clients be handled? +
Agree what is recoverable and up to what limit before it is incurred, record each cost against the engagement with the receipt attached at the time, and bill recharges in the same cycle as the fees. Whether a recharge counts as a disbursement passed on or as part of the fee affects treatment and should be set out in the engagement letter. Recharges saved up and billed months later are the most commonly queried lines on a professional invoice.
Is utilisation a useful measure for a small advisory firm? +
As a direction of travel within one firm, yes — a change in the ratio of chargeable to available time is a useful prompt to ask why. As a target it is harmful, because a firm running at the top of its capacity has no room to sell, recruit or develop, and because definitions of chargeable and available vary so much between firms that external comparison means little. It is also unreliable unless non-chargeable time is recorded as carefully as chargeable time.
Why do professional clients pay late even when they are satisfied with the work? +
Because payment follows a governance process rather than a decision. The buyer approves, finance validates, and the invoice joins a scheduled payment run — and in larger organisations, fees above a threshold may wait for a committee or a budget holder to return. Almost none of that is visible to the supplier. Establishing at engagement start who approves, what the invoice must carry and when the run happens prevents most of the delay that gets mistaken for reluctance.
How can an advisory firm tell whether an engagement actually made money? +
By comparing the fees billed against every cost the engagement consumed: employed time, associate and subcontractor invoices coded to that engagement, recharged expenses that were absorbed rather than recovered, and a cost for principal delivery time. Unbilled work still open at the end belongs in the picture too, since an engagement is not finished until it is billed or written down. A monthly profit total across the whole firm cannot answer this and is often read as though it can.
Show us your open engagements. We’ll show you what is unbilled.
Bring your live engagement list, what has been invoiced against each, and your associate costs. We will put the two together and show you the work you have delivered and not yet billed.
Prefer to reach us directly? Tell us a little and we'll come back with a time.
Review our open workWe use your details only to prepare for and hold this call. No spam, ever.
Reviewed by an ACCA on the At Par team · Last updated 29 July 2026 · This page describes finance operations for professional-services firms in general terms. It is not tax advice, and the treatment of drawings depends on how a firm is constituted. See what we actually do.