Accounting practice finance: buying fee bases, carrying WIP and hiring

Accounting and bookkeeping practices are among the most stable small businesses in the country. Clients need tax returns, BAS and financial statements every year, and many stay with the same practice for decades. Lenders value that recurring income highly. The questions they ask centre on how that income holds up — especially when a practice is buying another.

What do practices usually borrow for?

• Buying a fee base or practice. Acquiring clients from a retiring accountant.
• Carrying WIP. Funding staff time on work not yet billed.
• Hiring ahead of tax season. Extra accountants and bookkeepers for peak months.
• Cloud systems and cyber security. Practice management, document management and security.
• Office fit-outs. Meeting rooms and workspace for a growing team.

How do lenders look at an accounting practice?

Recurring fees. Annual compliance work — tax returns, BAS, financial statements — is steady. Advisory work adds value but varies.

Client retention. How long clients stay, and how many leave each year. After a purchase, retention is the key risk.

Fee concentration. A handful of large clients creates exposure if one leaves.

WIP and debtors. Work in progress that sits unbilled, and invoices that sit unpaid, tie up cash.

Registration. Tax agents and BAS agents must be registered with the Tax Practitioners Board, which regulates practitioners to ensure they meet professional and ethical standards. Lenders expect it to be current.

Buying a fee base or growing your team? Check what your practice could access — no credit check to enquire.

A closer look: buying a fee base

Fee base purchases are the most common large borrowing for accountants. The price is often a multiple of recurring fees, and sale agreements frequently include a retention adjustment: if clients leave within a set period, the price reduces. business.gov.au’s guide to buying an existing business covers the general steps.

Lenders look at the clients being acquired — types, fees, how long they’ve been with the vendor — and at your capacity to service them. A vendor who stays on for a transition period and personally introduces clients reduces the retention risk considerably.

Because purchase prices often exceed what a practice’s cash flow can support unsecured, property security is common. A clear transition plan, the vendor’s fee records and a sensible retention clause make the lending conversation much easier.

One more practical point: lenders like to see the purchase priced on recurring fees rather than one-off advisory income, because that is the part most likely to stay. If the fee base includes a lot of project work, say so up front.

Documents that help

Document	Why it matters
Business bank statements	Fees received and costs
Fee register or client list	Recurring income and concentration
TPB registration	Confirms you can practise
Financial statements	Margins and trends
WIP and debtor reports	Cash tied up

Red flags for practice loans

• Client attrition after a purchase.
• WIP not converting to invoices.
• Key-person dependence on one principal.
• Seasonal cash gaps without a facility.
• Fee concentration in a few large clients.

Questions a lender will ask

• What share of fees is recurring compliance work?
• How many clients leave each year?
• What’s your WIP and debtor position?
• For purchases: how will clients be transitioned?
• What will the funds let you do?

How to strengthen a practice application

Prepare a fee register showing recurring fees by client group. Summarise retention over three years. Provide WIP and debtor reports. For purchases, include the sale contract, retention clause and transition plan.

When should a practice apply?

Before signing a purchase contract, and ahead of tax season for seasonal hiring.

What does a sensible practice facility look like?

Most practices benefit from matching the facility to the need. A fee base purchase suits a term loan repaid over several years from the acquired clients’ fees, often with property security. Seasonal staffing and WIP suit a line of credit that’s drawn in the busy months and cleared as fees are collected. Technology and fit-outs sit somewhere in between.

Practices sometimes make the mistake of funding a purchase from working capital, leaving nothing for the tax-season crunch. Separating the two keeps the practice comfortable through the year.

It’s also worth modelling the worst case on a purchase: what if more clients leave than expected? Knowing the retention clause, and how repayments look if fees fall, helps you choose a structure you’ll be comfortable with. Lenders appreciate buyers who have thought this through, and it tends to show in the terms offered.

Illustrative scenarios

Illustrative: buying a retiring accountant’s fees. A practice buys a retiring accountant’s fee base for $250k. Property security funds the purchase while clients transition over twelve months.

Illustrative: tax-season staffing. A bookkeeping practice needs a $40k facility to cover extra staff over the busy months, repaid as fees are collected. Banked income supports an unsecured line.

Secured or unsecured for a practice?

Purchases lean towards property-secured loans from $20k to $5m. Unsecured lines of $5k to $500k suit working capital. See the law firm guide for another people-based practice, and our guide to ATO benchmarks — a topic your clients may ask about.

Could your practice qualify?

A 60-second enquiry is all it takes to start. There’s no credit check when you first enquire, and your details aren’t passed around a crowd of lenders. A real person who understands practices and fee bases will call you. Please be accurate about turnover, the amount and any property so we can find the right option straight away.

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