Work-In-Progress: Issues to Consider When Selling Your Practice

Published April 2025

Dealing with work-in-progress (WIP) is an important area to consider when selling your practice. From DMY’s experience we typically see two ways for dealing with WIP at settlement:

Option 1: Transfer the WIP

Any recoverable WIP at Settlement Date is transferred to the Purchaser who is responsible for completing the job, then invoicing and collecting the fees relating to this WIP. Once the fees have been received, the Purchaser will remit an equivalent amount back to the Vendor as consideration for this WIP. 

Option 2: Sell the WIP

Any recoverable WIP at Settlement Date is purchased by the Purchaser at an agreed rate.

Common Elements in Dealing with WIP 

There are common elements to both options:

1. Sellers receive value for their recoverable WIP, either upfront or as the work is completed.

2. Purchasers are willing to take on the WIP but only to the extent it is recoverable.

3. Sellers are endeavouring to bill WIP in the run up to Settlement to keep the WIP balance as low as possible. Practices will have varying degrees of success in achieving this. For those where interim billing is common, it will be far easier to achieve than in practices where interim billing is not and it may create an adverse client reaction if a bill appears unexpectedly.

So, which of the two options is most common?

From DMY’s recent experience, Option 1 is more common. It enables the seller to receive “full value” for their WIP but the buyer only has to fund this once they themselves have been paid. A potential downside though is that, if the WIP balances transferred across are high in volume and low in value, it can require a lot of effort to reconcile and administer, particularly if there are write-offs and write-ons to take into account.

Option 2, while not as common, can be much cleaner and simpler, and provides upfront certainty for both parties. A potential downside for the seller though is the degree to which the buyer will want to do due diligence on the WIP to confirm its recoverability and/or seek to acquire the WIP at a discounted rate to allow for a level of write offs.

In summary there is no one solution that works best for every sale. There are pros and cons to consider as well as the context of the seller and their level of WIP, and the buyer and their preferred approach.

If you are thinking about selling and want to discuss the options regarding your WIP, and all the other key issues relating to the successful and smooth sale of your practice, reach out to us below:

Mark Emney

Director

Mobile: 0434 079 530
Email: mark@dmyassoc.com.au

Daniel Jones

Director

Mobile: 0401 493 773
Email: daniel@dmyassoc.com.au