Work in Progress (WIP) is your inventory. Like any good cash management program you would advise your clients to ‘turn their inventory over’ more frequently to improve cashflow.
There is no difference with an Accounting firm. Your inventory should be invoiced every single month. If you are pricing up front (and I hope you are) then why not ask for some payment up front as well. That’ll help your WIP balance!
If you have done the work then send a bill. If the client is being difficult or the project is taking a long time then send an interim bill.
Your WIP balance at the end of each month should be less than 3% of your annual revenue – or 10 days of revenue.
I have written an extensive report on Accounting firm performance. You can download the full report here.
Enjoy video # 6.