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Industry

Professional Service Firms

Turn Professional Expertise Into a Stronger Business

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Professional service firms generate value primarily through the knowledge, expertise, and time of their people.

That creates unique financial questions involving utilization, billing, receivables, compensation, staffing, partner economics, and profitability.

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Accounting for Professional Firms

We help firms track:

  • Revenue
  • Accounts receivable
  • WIP when applicable
  • Payroll
  • Partner/shareholder compensation
  • Operating expenses
  • Client profitability
  • Project profitability
  • Financial statements
  • Cash flow
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Revenue, WIP & Receivables

Revenue alone does not tell the complete story.

Firms may perform significant work before invoicing a client, while slow collections can create cash flow problems even when the income statement appears profitable.

Monitoring WIP, billing, receivables, and collection periods can help management identify issues earlier.

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Owner & Partner Compensation

Compensation depends heavily on entity structure.

For S corporations, reasonable compensation may be important.

For partnerships, payments may involve:

  • Guaranteed payments
  • Distributive share of income
  • Partner draws
  • Capital accounts
  • Basis considerations

We help owners understand the tax consequences of these different payment methods.

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Tax Planning

Planning may include:

  • Entity selection
  • Reasonable compensation
  • Partnership allocations
  • Guaranteed payments
  • Estimated taxes
  • PTET elections
  • Retirement contributions
  • Section 199A/QBI considerations
  • Multi-state taxation
  • Timing of income and expenses
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Business Advisory

We help firms evaluate:

  • Revenue per professional
  • Utilization
  • Realization
  • Billing
  • Collections
  • Staffing costs
  • Client profitability
  • Partner compensation
  • Cash flow
  • Succession

What We Help You Manage

  • Billing
  • WIP
  • Receivables
  • Compensation
  • Profitability
  • Cash Flow
  • Business Taxes
  • Entity Structure

Frequently Asked Questions

Should my professional firm be an S corporation or partnership?
It depends on ownership, profitability, compensation, benefits, state professional-entity rules, and future ownership plans.
What are guaranteed payments?
Guaranteed payments are generally payments made by a partnership to a partner without regard to partnership income and receive different tax treatment from ordinary distributions.
What is utilization?
Utilization generally measures the proportion of available professional time spent on billable or productive client work.
Why should we measure profitability by client?
Firm-wide profitability can hide clients or engagements requiring significantly more resources than their fees justify.
Does the QBI deduction apply to professional services?
Potentially. Certain professional businesses are classified as specified service trades or businesses, which can affect the availability of the Section 199A deduction based on applicable rules and taxable income.
Why are receivables so important for professional firms?
A profitable engagement does not generate usable cash until the firm bills and collects the amount owed.

Services

How we work with professional service firms clients

The service lines our clients in this sector call on most.

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