Last Updated: December 2025 | Last Verified: December 2025
Key 2025-26 Updates
Engineering and technical consulting firms face bookkeeping challenges that revolve around project-based revenue, complex work in progress calculations, multiple fee arrangements, and the professional compliance requirements that come with providing expert services. Unlike product businesses with clear revenue timing, consulting firms must track partially completed projects, allocate labour across multiple engagements, and recognise revenue appropriately under accounting standards.
Engineers Australia reports that financial management challenges contribute significantly to consulting firm failures, with underbilling, poor project costing, and cash flow timing cited as primary factors. A firm may be technically excellent while losing money because projects are quoted incorrectly, WIP is not tracked, or invoicing lags behind work performed.
This comprehensive guide explains how to manage bookkeeping for engineering and technical consulting firms in Australia, covering project-based accounting, WIP valuation, fee structures, and the specific requirements that separate professional services accounting from general business bookkeeping.
Engineering firms require a chart of accounts that tracks revenue and costs by project, separates different service types, and supports analysis of utilisation and realisation rates.
Engineering revenue should be categorised by service type and billing arrangement:
Professional Fees:
Fee Arrangements:
Other Revenue:
Direct costs attributable to specific projects include:
Costs supporting the business but not directly attributable to projects:
Engineering firms must track financial performance at the project level to understand profitability and make informed pricing decisions.
Project Won / Contract Signed↓Project Setup (code, budget, team assigned)↓Time Recording (daily by team members)↓WIP Calculation (monthly)↓Progress Invoicing (per contract terms)↓WIP Adjustment (reduce by amounts invoiced)↓Project Completion and Final Invoice↓Profitability Analysis
Each project should have a unique code or identifier with the following tracked:
Accurate time recording is fundamental to engineering bookkeeping. Every hour worked must be allocated to a project or internal code.
Example: A structural engineer working 40 hours in a week might record:
At $180 recoverable rate, this generates $5,760 in billable time against $6,840 potential (85% utilisation).
To calculate project profitability, allocate actual labour cost (not just billable value) to projects.
Example: Senior engineer earns $150,000 salary plus $18,000 superannuation (12% from 1 July 2025) plus approximately $15,000 in leave provisions and other on-costs = $183,000 total cost. Based on 1,760 available hours (allowing for leave), loaded cost is $104 per hour.
This analysis reveals whether billing rates adequately cover labour costs and contribute to overheads.
Work in progress represents the value of work completed but not yet invoiced to clients. For engineering firms billing monthly in arrears or on fixed-price milestones, WIP is a critical balance sheet item.
WIP = Hours worked x Recoverable rate (less any amounts already invoiced)
Example: In March, 120 hours are worked on a time-based project at $200/hour. No invoice has been raised yet.
WIP at 31 March: 120 x $200 = $24,000
For fixed-price projects, WIP is calculated using percentage of completion:
WIP = (Hours incurred / Total estimated hours) x Contract value - Amounts invoiced
Example: Fixed-price contract for $80,000. Estimated hours: 400. Hours completed: 180. Invoiced to date: $30,000.
WIP must be reviewed regularly. Write-offs occur when:
A healthy engineering firm should aim for less than 5% WIP write-off. Higher rates indicate quoting, scope management, or quality issues.
Revenue is recognised as time is worked. The simplest arrangement for bookkeeping.
Example: Contract at $220/hour. In April, 85 hours worked.
Revenue: 85 x $220 = $18,700 (recognised in April regardless of when invoiced or paid)
Revenue is recognised using percentage of completion method based on hours or milestones.
Example: $120,000 fixed-price project.
If actual hours exceed estimate, you still recognise only the contract value. The loss is absorbed through reduced margin.
Some engineering disciplines charge based on a percentage of construction cost, with fees scaling with project value.
Example: Structural engineering at 1.2% of construction cost for a $15 million building.
Fee: $15,000,000 x 1.2% = $180,000
Revenue recognition follows percentage of completion of the engineering services, not construction completion.
Fixed monthly fee for ongoing availability or services.
Example: $5,500 monthly retainer for engineering support.
Revenue: Recognise $5,500 each month as service is provided.
Engineering firms benefit from integrated project management and accounting systems:
Project Management Software: WorkflowMax, Deltek, Harvest, or monday.com for time tracking and project management.
Accounting Integration: Most project management platforms integrate with Xero or MYOB. Key integrations include:
Recommended Stack: WorkflowMax (now BlueRock) or Harvest connected to Xero with automated time-to-invoice workflows.
Engineering services provided to Australian clients are taxable at 10% GST.
All engineering consulting services to Australian clients include GST.
Example: Engineering fee $25,000 plus GST $2,500 = $27,500 total invoice.
Engineering services provided to overseas clients may be GST-free if the client is outside Australia when services are performed.
Example: Australian firm provides structural design for a building in Singapore for a Singapore-based client.
Fee: $45,000 (GST-free export)
The firm can still claim input tax credits on expenses related to export services.
Engineering firms must maintain professional indemnity insurance, with premiums varying based on:
Typical premiums range from 1.5% to 4% of fee revenue. A firm with $2 million revenue might pay $40,000 to $80,000 annually.
Engineers must maintain registration with relevant state boards (where applicable) and professional bodies. Costs include:
Not Tracking WIP
Incorrect Percentage of Completion
Not Allocating Overheads
Poor Time Recording
Missing Subconsultant GST
What is work in progress (WIP) and why is it important?
Work in progress represents the value of work completed but not yet invoiced to clients. For time-based projects, WIP is hours worked multiplied by the recoverable rate less amounts already invoiced. For fixed-price projects, WIP is calculated using percentage of completion. WIP is a current asset on the balance sheet and is critical for accurate profit reporting. Firms not tracking WIP will show volatile profits that do not reflect actual performance.
How should fixed-price engineering projects recognise revenue?
Fixed-price projects should recognise revenue using the percentage of completion method based on effort (hours incurred versus total estimated hours). As work progresses, revenue is recognised proportionally. If a $100,000 project is 60% complete based on hours, $60,000 of revenue should be recognised regardless of amounts invoiced. This matches revenue to the period work is performed.
What billing rates should engineering consultants charge?
Billing rates must cover direct labour costs (salary, super, on-costs), contribute to overhead recovery, and generate profit margin. A common formula is: Billing rate = Labour cost x 3. An engineer costing $100 per hour fully loaded would bill at $300 per hour. Market rates vary significantly by discipline and location. Senior structural engineers in capital cities might bill $280 to $380 per hour while graduate engineers bill $120 to $180 per hour.
Are engineering services subject to GST?
Engineering services provided to Australian clients are taxable at 10% GST. Services exported to overseas clients may be GST-free if the client is located outside Australia when services are performed. Engineering firms can claim input tax credits on business expenses regardless of whether services are domestic or exported.
How should engineering firms track project profitability?
Track all time by project using timesheet software. Calculate direct labour cost using loaded rates (salary plus super plus on-costs divided by available hours). Allocate overhead costs using an overhead recovery rate (total overheads divided by total direct labour cost). Project profit equals revenue less direct costs less allocated overheads. Review profitability by project type and client to inform pricing and business development.
Scale Suite provides specialised bookkeeping and finance services for Australian engineering and technical consulting firms. Our team manages project-based accounting, WIP calculations and monthly revenue recognition, and job costing analysis.
Contact Scale Suite for a free project profitability review or WIP analysis tailored to your consulting firm.
Disclaimer: This guide provides general information only and does not constitute financial, legal, tax, or professional advice. Scale Suite is a registered BAS agent, not a registered tax agent. For tax advice specific to your circumstances, consult a registered tax agent. Project accounting requirements and professional obligations vary based on firm structure and services provided.
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