Accounting for Professional Service Businesses
We help our clients reduce surprises, avoid costly mistakes, and identify savings opportunities before deadlines arrive.
At Zastenchik & Co. CPAs, tax planning isn’t a seasonal task—it’s a year-round process. We design tailored tax strategies that reflect your current goals and your future plans. Whether you’re navigating a major investment, planning for retirement, or trying to reduce your quarterly burden, we’re here to help you stay in control of the numbers.
Expertise for Service-Oriented Companies
Professional services firms sell expertise and time, not physical products. Whether you run a marketing agency, design studio, IT consultancy, or engineering firm, your business lives on billable hours, project scopes, and strong client relationships. That creates unique financial challenges: project-based billing, high labor costs, complex contractor arrangements, and sometimes even sales tax on services depending on the state.
Sagacity Tax & Accounting understands these realities. As a small firm CPA Minnesota businesses can rely on, we help professional service companies build financial systems that match how they actually operate—so you can see profitability by project, manage cash flow between retainers and milestones, and plan for taxes before year-end, not after. Our Twin Cities CPA team serves clients locally and in 25+ states through a virtual service model, giving you specialized professional services accounting without geographic limits.
Our Bookkeeping Services
Project-Based Bookkeeping
For service firms, the question isn’t just “Are we profitable?” — it’s “Which projects and clients are most profitable?” Sagacity Tax sets up project-based bookkeeping so you can track revenues, expenses, and work-in-progress billing by engagement. We help you see which services, retainers, or campaigns are carrying the load and which ones need to be repriced or re-scoped.
With accurate project-level data, you can:
- Compare actual vs. budgeted costs for each project.
- Identify underpriced retainers or scope creep early.
- Make better decisions about staffing, pricing, and which work to pursue.
Tax Compliance & Planning
Service businesses often operate across states, serve clients in multiple jurisdictions, and may be subject to sales tax on certain services depending on local rules. Sagacity Tax helps you determine where you have nexus, which services are taxable, and how to stay compliant with state income and sales tax requirements.
On the income tax side, we plan around:
- Pass-through taxation and the QBI 20% deduction where eligible.
- Multi-owner compensation structures and profit distributions.
- Quarterly estimated taxes based on project pipeline and billing cycles.
Growth Advisory
As your professional services firm grows—adding employees, contractors, or partners—the financial questions get more complex. Sagacity Tax acts as a strategic advisor, helping you:
Budget for new hires and salary structures.
- Evaluate when to bring work in-house vs. using contractors.
- Set up retirement plans or other benefits with tax implications (SEP, SIMPLE, 401(k), etc.).
- Understand how changes in pricing, utilization, and overhead affect long-term profitability.
Our goal is to keep your financial processes as professional, polished, and scalable as the services you deliver.
Dedicated Advisor Access
Unlimited communication, year-round.
Your CPA is never more than a call, email, or text away. We don’t bill for questions—and we prioritize client response times.
Support Includes:
• Real-time advice via email, phone, or text
• IRS/NYS notice assistance
• Referral to legal counsel if audit escalates
Why Professional Services Need a Pro Accountant
Even though professional services firms don’t manage inventory or retail storefronts, their financial management is anything but simple. You’re juggling:
- Contractor vs. employee classifications and related payroll/tax rules.
- Business mileage and travel, often tied to client work and billable projects.
- Complex expense allocations between internal overhead, client billables, and marketing.
- Potential eligibility for the QBI 20% passthrough deduction and other incentives.
Sagacity Tax’s professional services accounting experience helps you:
- Keep overhead under control without starving growth.
- Maintain clean, audit-ready records that support your deductions.
- Make sense of your financial reports so you can act on them, not just file them away.
Sample Industries Covered
Sagacity Tax works with a wide range of professional service firms, including:
- Law firms
- Real estate agents
- Marketing and advertising agencies
- IT service providers and software consultants
- Architects and engineering firms
- Design and creative studios
- Other B2B service providers that sell expertise and time rather than physical products
If your business looks anything like these—project-based, knowledge-driven, service-focused—there’s a very good chance our experience applies directly to you.
Professional Services FAQ
We’re a small agency—do we really need a CPA?
Even small teams benefit from a CPA who understands professional services. A CPA ensures you’re tax-compliant, helps you set up project-based bookkeeping, and can highlight which services or clients drive your margins. For many agencies, the insight from accurate financial reports and tax planning leads directly to better pricing and more profitable work.
Can you help with project costing and profitability?
Yes. When your books are structured to capture revenue and expenses by project or client, we can generate reports that show which engagements are most profitable. That allows you to refine scopes, adjust pricing, or rethink which services you promote—all based on real numbers instead of gut feel.
My business operates in multiple states—do service businesses need to file in each state?
It depends on where you have nexus (a sufficient connection for tax purposes) in each state. Sagacity Tax evaluates your footprint—clients, employees, contractors, and presence—and then handles required state income or sales tax filings so you stay compliant everywhere you operate.
Do you assist with setting up payroll or benefits for a growing firm?
While we don’t process payroll in-house, we partner with trusted payroll providers and ensure payroll entries are correctly reflected in your books. We also advise on retirement plan options (SEP, SIMPLE, 401(k), etc.) and collaborate with your financial advisor to implement them in a tax-efficient way.
Elevate Your Business Finances
You’ve worked hard to build a professional service business that delivers excellent work for clients. Your finances deserve the same level of professionalism. Sagacity Tax & Accounting helps you move beyond basic bookkeeping and once-a-year tax filing to a more strategic, informed approach—one where you understand your numbers, plan for taxes, and see clearly how today’s projects shape tomorrow’s growth.
If you’re ready to bring your financial systems up to the level of your services, let’s talk. We’ll review your current setup, identify quick wins and longer-term improvements, and propose a clear plan tailored to your firm.
A Simple, Structured Approach
651-829-9776
Call Us Today.
- Review & Diagnose
We start with your past returns, current income, and entity structure.
- Plan Strategically
We outline year-round strategies that optimize timing, deductions, and compensation.
- Update & Adjust
Life and business change—so we review and adapt your plan throughout the year.
