Professional Practices are very different from other businesses both in their operation and often their constitution. With these differences comes a unique set of demands in terms of financial management and reporting.
Having spent the majority of my working life in professional practice I have extensive experience of how such organisations operate. During my professional practice, I have also had the experience of advising and working with professional practices in many different disciplines in a variety of roles.
The stakeholders in professional practice are typically deeply involved in the “productive work “as well as the management of the business and are often the most valuable fee earners in the practice.
A practice where the partners / directors in the practice become too involved in the financial management of the business may find that revenue is adversely impacted, exacerbating the problems. Additionally, the distraction from the provision of the service the firm’s clients on the part of those senior partners / owners which can impact on the levels of service and client satisfaction.
Within the financial reporting of many professional practices lies the thorny issue of work in progress. The value of WIP has a significant impact on the accurate reporting of financial performance funders have become increasingly aware of this issue having experienced, on numerous occasions, situations where firms’ WIP was carried in the balance sheet at an unreasonably high level.
But beyond the potential for WIP to mislead in terms of profitability, it has a significant impact on cash flow. Practices, where lock up (the combination of WIP, debtors and unbilled disbursements) has grown over a sustained period, may suffer the double-whammy of rising tax liabilities due to increasing profits and at the same time increased cash pressure.
I have considerable experience assisting professional practices with their financial reporting and management as well as managing their cash flow and dealing with the issues referred to above. These skills, allied to my career-long experience of working with and in professional practices, provides a depth and breadth of support to such clients.
