What do aged work-in-progress balances tell me about an accounting practice’s billing habits?

Work in progress is time spent but not yet invoiced. When it sits for a long time, ask why. It might be slow completion, or the owner may hesitate to bill certain clients. Neither is fatal, but both tell you how the practice really runs, and a buyer inherits those habits. Ask what the seller does when a client is slow to approve a bill.

Ask for the aging report and look at the oldest items first. Which clients are they tied to? Are the same names appearing again and again? Ask how often balances are later reduced or written off, and whether the seller discounts fees to keep the peace. Compare billed amounts with what the time records suggest the work should bring in.

Then ask how the balance will be treated at closing. Who collects on the old items, and who absorbs any loss? That belongs in the written terms, so involve your lawyer and your accountant. Ask what the seller will change about billing before you take over, and whether clients expect those habits to continue. A practice that bills steadily and explains its invoices usually has clients who understand the fees, which is easier to carry forward.

Key takeaways

• Review the aging report and question the oldest unbilled items by client.
• Watch for repeated names, frequent write-offs and quiet fee discounts.
• Settle in writing who collects or absorbs old balances at closing.