Revenue Leakage Calculator for Accountancy Practices

Fee income £2,400,000, of which 70% is on fixed-fee arrangements. Recovery rate 85%. Lock-up 105 days. Active clients 320.

Unbilled out-of-scope work. 1% to 3% of fixed-fee income. In Ignition's 2022 survey of UK accountants, 32% of clients were not billed for extra work, costing firms an average of £69,957 a year.

Under-recovery. Work done is fee income divided by the recovery rate, so at 85% the work behind £2,400,000 is £2,824,000. We then apply 2 to 5 points of improvement on that rate. The 95% figure is a ceiling on what any practice can realistically reach, not an assumption about yours: where you do not give a rate, we assume 85%.

Underpriced clients. 0.5% to 1.5% of fee income, covering clients whose fee has not kept up with their workload.

Client mix. Extra work goes unbilled per engagement rather than per pound, so two practices on the same fees leak different amounts if one carries three times the clients. Your average fee of £7,500 is compared against a £7,500 reference, and the first and third figures above are scaled by that ratio, bounded between 0.75x and 1.5x. Under-recovery is left alone, because it is a rate rather than a per-client effect.

Lock-up cash. 10% to 20% of your lock-up days, capped at 20 days and never taking you below 45 days, which is about as tight as billing and payment terms allow. Valued at fee income divided by 365. The UK median is 105 days (NatWest accountancy survey). This is cash released once, so it is never added to the annual total.