Selling time already spent
Revenue recognised before it is billed, work in progress that may never be recovered, and drawings that bear little relation to profit earned. The sector's problems are all the same problem.
A professional services firm sells time it has already spent by the time it invoices. That single fact creates the sector's characteristic accounting problems: revenue recognised before it is billed, work in progress that may never be recoverable, and a partner group whose drawings bear little relationship to the profit actually earned.
The numbers that run a firm
- Work in progress — time recorded but unbilled, recognised as a contract asset only to the extent it is genuinely recoverable.
- Recoverability — the proportion of recorded time actually billed and collected, by client and by matter. This is the number that distinguishes busy firms from profitable ones.
- Utilisation — chargeable hours against available hours, by fee earner, which drives capacity decisions.
- Lock-up — the days between doing the work and banking the cash, combining WIP days and debtor days. In professional services this is the primary cash constraint.
- Disbursements — costs incurred as agent for the client kept out of revenue, which is both an accounting and a VAT distinction.
- Fixed-fee and retainer engagements — revenue recognised as the performance obligation is satisfied, not when the retainer is invoiced.
A firm with strong margins and ninety days of lock-up is financing its clients out of its own working capital. Reducing lock-up by ten days is usually easier, faster and more valuable than winning proportionate additional revenue — and it is invisible to a firm that only measures billings.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Professional services — frequently asked questions
Where the firm's performance creates an asset the client controls as it is created, or the firm has an enforceable right to payment for work performed to date, revenue is recognised over time and unbilled work sits as a contract asset. Critically, it is recognised at the amount the firm expects to be entitled to — so time that will be written off on billing should not be carried at full rate. Carrying WIP at recorded value when historic recoverability is materially lower systematically overstates both assets and profit.
The distinction is whether the firm incurs the cost as agent for the client or as principal in providing its own service. True disbursements incurred as agent — where the supply is to the client, the client is responsible for it, and the firm merely recovers the exact amount — are excluded from the firm's revenue and passed on without VAT being charged on the recovery. Costs the firm incurs as principal are its own expenses, and recharging them forms part of the consideration for its taxable supply. The two are treated very differently and are frequently conflated.
Lock-up is the total time between performing work and receiving cash — unbilled WIP days plus debtor days. It matters because a firm can be highly profitable and still run out of money: every day of lock-up is working capital the firm has lent its clients. For most professional firms, reducing lock-up produces cash faster and more reliably than growing revenue, and unlike margin it is almost entirely within the firm's own control.
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