Debtor days and WIP in an accountancy practice: measure, recover, collect

Author: Adam Khalid, Founder and CEO, Intel Made Simple. Sources last checked 28 October 2026.

Accountancy practices bill for time, for fixed fees and for a mix of both, often on a monthly or annual cycle that is tied to filing dates. That rhythm hides leakage. A job finishes in March, the bill goes out in April, the client pays in June, and the partners see a healthy order book while the bank balance tells a different story. This guide gives a practice three numbers to track, a worked example, and the collection routes that apply when the client is a limited company and when the client is a sole trader.

It builds on our general guides to lock-up days and unbilled WIP, and uses ICAEW's practice management guidance for the accountancy-specific arithmetic. It is general information, not legal, tax or regulatory advice.

What are WIP days, debtor days and recovery rate?

Three ratios cover the cycle. WIP days is unbilled work in progress divided by average daily fee income. Debtor days is unpaid billed fees divided by the same daily figure. Recovery rate is fees raised divided by the value of the work at full charge-out rates. The first two are our working convention, built on the lock-up definition from the ILFM (opens in a new tab), which defines lock-up as the time it takes to convert work undertaken into cash received. The third is the measure ICAEW uses in its guidance on fees and charge-out rates (opens in a new tab).

How do you calculate them? A worked example

Our arithmetic, with invented figures. A practice raises £800,000 of fees a year, so daily fee income is £2,192 (£800,000 divided by 365, rounded). Unbilled WIP is £96,000, which is 43.8 days. Unpaid billed fees are £132,000, which is 60.2 days. Lock-up is 104.0 days. Cutting 10 days releases about £21,900 of cash. The debtor half is larger, so a chasing routine would release more than a faster billing run.

Use the same basis for both balances. If debtors include VAT and WIP does not, the debtor figure will read worse than it is. Pick net or gross and keep it every month.

Why does recovery rate belong next to WIP?

ICAEW's point is that recovery rates are usually a percentage, so practitioners overlook the true cost of under-recovery, and that cost does not show in the profit and loss account. Its example: a practice with £400,000 of fees and an 85% recovery rate has, grossed up, done £470,000 of work and written off £70,000. Moving recovery to 90% can either create £26,000 of capacity or lift fees billed to £423,000.

WIP is where under-recovery hides before it is written off. A job that sits in WIP for four months and is then billed at a discount shows up as a late bill and a low recovery rate at once. Track the two together by job type, so you can see which work has the worst combination.

How does extra work end up unbilled?

ICAEW describes a common pattern. A firm agrees a fee on the basis that the client will do certain tasks. The assignment starts and the client has not done them, and staff shrug and do the work themselves. Nobody discussed the fee when that happened, so the practice ends up with the same fixed fee for more work. ICAEW's fix is to quantify the cost of any additional work when the fee is agreed, and to tell the client when the promised input has not arrived so they can choose between doing it and paying for it.

ICAEW's other suggestions are plain and effective. Review jobs with poor recovery and look at what went wrong across all future jobs, not only the one in front of you. Look at jobs with excellent recovery and copy what worked. Shorten the time from starting an assignment to finishing it, because a shorter period generally gives a better recovery rate. Avoid starting a job without all the information to complete it. Give staff a time budget for their part. Avoid rounding fees down.

What should the engagement letter say?

ICAEW says fee disputes can often be avoided by a clear and detailed letter of engagement before work starts, and that lack of understanding of the basis of fees regularly contributes to complaints to ICAEW. It also quotes the Code of Ethics: a professional accountant in public practice should provide, in the fee account or on request and without further charge, such details as are reasonable to enable a client to understand the basis on which the fee account has been prepared.

From a leakage point of view, we add four items to the letter: the scope in tasks, the client inputs the fee assumes, the price for each extra task if those inputs do not arrive, and the payment term in days. The term matters because GOV.UK explains (opens in a new tab) that where a date is agreed it must usually be within 60 days for business transactions, and that where none is agreed the payment is late 30 days after the invoice or the service, whichever is later.

How do you collect from limited-company and sole-trader clients?

The route depends on who owes the money. For a limited-company client, the statutory interest of 8% plus base rate and the fixed sum of £40, £70 or £100 apply, as set out in our late payment guide, and the general Practice Direction on Pre-Action Conduct sets the steps before a claim.

For a sole-trader client the position differs. The Pre-Action Protocol for Debt Claims (opens in a new tab) applies to a business claiming payment of a debt from an individual, including a sole trader, and paragraph 1.1 says it does not apply to business-to-business debts unless the debtor is a sole trader. A Letter of Claim should enclose a statement of account, an Information Sheet and Reply Form, and a Financial Statement form. If the debtor does not reply within 30 days of the date on the letter, the creditor may start court proceedings, subject to other obligations. If the debtor says they are seeking debt advice, the creditor must allow a reasonable period.

Tag every client in the practice system as company, sole trader or other when you onboard them. The tag decides which letter goes out and saves rewriting a file that started on the wrong footing.

What does a chasing routine look like in a practice?

Our suggested ladder, which is a working method and not a legal requirement: a friendly reminder a few days before the due date; a second message on the day after it; a phone call within a week of the due date; and a firm email that restates the amount, the due date and the statutory interest position at around thirty days late. Write down each contact on the client record, because the pre-action steps in the protocols turn on what was sent and when.

Give one person ownership of the ladder. In a small practice that is often the practice manager, with the partner who owns the client stepping in at the phone call stage. The ladder works because it is dull and predictable. Clients who always pay late learn that a reminder will arrive, and the practice stops relying on goodwill and memory.

Can you reclaim VAT on unpaid fees?

HMRC's VAT guide (Notice 700) (opens in a new tab) says that if you make taxable supplies to a customer who does not pay, you may be able to reclaim relief from VAT on the bad debt, and points to VAT Notice 700/18 for the detail. Ask the practice's own tax adviser whether a long-overdue balance qualifies before writing it off in full.

What does a month-end practice pack contain?

1. WIP days, debtor days and lock-up days on one basis, with the trailing twelve-month line.
2. Recovery rate by job type: accounts, tax returns, payroll, advisory.
3. The ten largest aged WIP balances with owner and next billing date.
4. The ten largest aged debtors with the last contact, the promise made and the next step.
5. Clients tagged company or sole trader on every debtor line.
6. Jobs where extra work was done outside the quoted fee, and whether the extra was billed.

If the pack takes more than an hour to produce each month, the data is in too many places. Our AI workflow automation service builds the export and the aged lists, and the page for accountancy firms shows how we apply the method to the sector. The free Leak Scan is the cheapest first look, and our pricing page lists the fixed fees.

How do you calculate debtor days in an accountancy practice?

On our working convention, divide unpaid billed fees by average daily fee income, where daily fee income is annual fees divided by 365. In our invented example, £132,000 of debtors on £800,000 of fees is 60.2 days.

What is a recovery rate?

In ICAEW's guidance it is the share of work at full charge-out rates that the practice actually bills. A practice with £400,000 of fees and an 85% recovery rate did £470,000 of work and wrote off £70,000.

Do the late payment rules apply to sole-trader clients?

The statutory interest and fixed sum rules apply to late business payments. For the steps before a court claim against a sole trader, the Pre-Action Protocol for Debt Claims applies, with a 30-day reply period from the date on the Letter of Claim.

How do you stop fixed fees leaking?

ICAEW suggests quantifying the cost of additional work when the fee is agreed, for example a quote of £3,000 plus £200 and £150 for tasks the client may not complete, and telling the client when the promised input has not arrived.

Can an accountancy practice reclaim VAT on a client's unpaid invoice?

HMRC's VAT Notice 700 says you may be able to reclaim relief from VAT on a bad debt. Ask your tax adviser whether a specific balance qualifies.