Question 1

What is the best accounting software for a consulting or professional services firm?

Accepted Answer

Services firms need project accounting generic ledgers do not provide: revenue recognized over time as work is delivered, unbilled WIP accrued from time entries, and utilization, realization, and margin per engagement. The usual stack — a PSA or time tracker, an Excel percent-complete model, a billing tool, and NetSuite — means revenue and WIP get rebuilt by hand every close. Aleq is an AI accounting platform that is the books for services firms: it recognizes project revenue over time under ASC 606, carries unbilled WIP off approved time entries, handles T&M and fixed-fee engagements distinctly, and derives utilization, realization, and project margin from the same ledger. It connects to your PSA read-only and is live in 48 hours.

Question 2

How does percentage-of-completion revenue recognition work?

Accepted Answer

You recognize contract revenue in proportion to how complete the work is — most commonly cost-to-cost: costs incurred to date over total estimated cost. Example: a $2,100,000 fixed-fee engagement with a $1,300,000 cost budget and $806,000 incurred is 62% complete, so $1,302,000 is earned to date; with $1,092,000 recognized in prior periods, this period books $210,000 — debit unbilled WIP, credit project revenue. Aleq computes this from approved time entries and posts the entry, while the percent-complete judgment itself stays with the engagement lead: Aleq stages burn-versus-budget and milestone status, and the call is yours.

Question 3

What is unbilled WIP in professional services accounting?

Accepted Answer

Revenue you have earned by delivering work but have not yet invoiced — a contract asset on the balance sheet. It arises whenever recognition runs ahead of the billing schedule: hours logged mid-month, milestones billed quarterly, fixed fees invoiced on their own cycle. Firms that only book revenue when they invoice understate earned revenue and lose track of what is billable. Aleq accrues unbilled WIP from time entries as hours are logged and relieves it as invoices are raised, so earned-but-unbilled revenue is always visible by engagement — current to the last approved timesheet, not reconstructed at month-end.

Question 4

What is the difference between T&M and fixed-fee accounting?

Accepted Answer

Time-and-materials revenue follows the hours: recognized as delivered and billed at agreed rates, so revenue and billing track together. Fixed-fee revenue follows completion: recognized over time on a completion measure such as percentage-of-completion, independent of the invoice schedule, with budget-to-actual tracked against the estimate and unbilled WIP or deferred revenue absorbing the timing gap. Applying one treatment to the other misstates both revenue and WIP. Aleq handles them distinctly per engagement from the same PSA data — T&M as delivered, fixed-fee on the completion measure, and fixed retainers recognized on schedule with every entry logged and reversible.

Question 5

How do you calculate utilization and realization for a services firm?

Accepted Answer

Utilization is billable hours over capacity — how much of the team's time earns revenue. Realization is what you actually realize against standard rates — how much of that billable time turns into money, with write-downs and discounts pulling it below 100%. Most firms compute both in spreadsheets that drift from the books, so the operating metrics and the P&L disagree. Aleq derives them from the ledger itself: billable, non-billable, and realized hours are tracked against capacity in the same system that recognizes revenue, so utilization and realization always reconcile to the income statement they are supposed to explain.

Question 6

How do you track project profitability at a consulting firm?

Accepted Answer

Margin per engagement: recognized revenue minus labor cost and pass-through expenses, measured continuously rather than after the engagement ends — the classic failure is discovering a project lost money at the retrospective. Aleq rolls recognized revenue, labor cost, and pass-throughs into margin per project and per client, current to the last approved timesheet. Because revenue is recognized over time from the same time entries that drive cost, the margin you see mid-engagement is the margin the ledger will report. Scope changes are drafted and held for approval under ASC 606, so the budget baseline the margin is measured against stays honest.

Hours become revenue when they are approved, not when you invoice.

Time is logged, but revenue and WIP are a month-end reconstruction.

Hours are logged. Revenue recognized over time.

The books for professional services, run for you.

From the approved timesheet to project margin.

Unbilled WIP off time entries

T&M and fixed-fee, handled distinctly

Utilization & realization derived

Project margin by engagement

The invoices, the subcontractors, and the month behind the timesheet.

It speaks your accounting natively.

Questions, answered.

Unbilled WIP is current to the last approved timesheet.