Work in progress is not only a management number in Canada. Since the billed-basis election was repealed, it is a tax number too.
Key takeaways
You run a WIP review faster by removing assembly from the meeting. Everything that happens before the partners sit down — ageing by job, movement since last month, jobs past budget, jobs with no recent activity, jobs where the fee estimate has been exceeded — is mechanical and should arrive already built. What the meeting is for is the part that requires authority: deciding, job by job, what happens next.
AI adds two things to that pack. It clusters the exceptions so that forty flagged jobs become six patterns. And it drafts the commentary a partner would otherwise write afterwards, from the job’s own history. It does not decide a write-off, and it should never be described as doing so.
This is the part most practice-management advice, written elsewhere, gets wrong for a Canadian firm. Section 34 of the Income Tax Act — the billed-basis provision that let designated professionals elect to exclude work in progress from income — now appears in the consolidated Act as repealed, by 2017, c. 33, s. 7. The related provisions in subsections 10(14) and 10(14.1) were repealed at the same time.
What remains is the general machinery. Subsection 248(1) of the Act defines “property” to include “the work in progress of a business that is a profession”, and defines “inventory” as a description of property the cost or value of which is relevant in computing a taxpayer’s income from a business. Subsection 10(1) of the Act then requires property described in an inventory to be valued at the end of the year at the lower of the cost at which it was acquired and its fair market value, or in a prescribed manner.
The consequence for the monthly meeting is direct: the valuation judgments you make about WIP are not purely internal management opinion, and a firm that writes off in December what it should have valued in November is making a decision with tax consequences. Confirm the current treatment for your firm with your own tax adviser and against the provisions themselves, and check the engagement requirements against the standards set by the Auditing and Assurance Standards Board.
Ageing by job. WIP by job in buckets, oldest first. The buckets are the argument, because the older the unbilled time gets, the harder the conversation about billing it becomes and the more often it ends as a write-off.
Movement. What has been added since last month, and by whom. This is where scope creep shows up before the client sees a bill for it.
Budget breaches. Jobs past the agreed fee, with the size of the breach and the point in the job at which it happened.
Dormant jobs. Open jobs with WIP and no activity for a set period. These are almost always blocked on the client, which links this meeting straight back to the outstanding-items register.
Recovery by client and by job type. The single view that tells a firm which work it should stop selling.
Every job on the exception list leaves the meeting with exactly one outcome, recorded against the job. Bill it — the work is done and billable, and it goes on this month’s run. Write it off — with a reason code, because write-offs without reason codes teach a firm nothing. Chase it — the job is blocked on the client and the chase is a named person with a date. Re-scope it — the work has changed and the client needs a conversation before more time goes on it.
The discipline that makes the meeting short is the rule that no job may be deferred twice. A job carried unresolved for a second month is written off or escalated to the engagement partner, because in practice a twice-deferred job is a write-off that nobody wants to record.
A firm with four partners moves its WIP review from a two-hour session that begins with a manager distributing a freshly built spreadsheet, to a forty-minute session where the pack was circulated the previous afternoon. The exception list is clustered: instead of forty-one jobs, the pack shows six groups — three of them the same client, two of them the same job type, one of them the same reviewer.
The clustering is the AI contribution that changes the meeting, because it converts forty-one individual arguments into six decisions about how the firm works. The numbers to watch afterwards are the ones already in your system: WIP days, the proportion of jobs resolved at first appearance on the exception list, and the write-off rate by reason code.
WIP that is billed late becomes a receivable that is paid late, and the tail of that has legal edges. Whether you can add interest is answered in this note on charging interest on unpaid debt; the time limit for suing is set by the basic limitation period; and for the small balances that make up most professional write-offs, debt collection in Small Claims Court is the realistic forum. Knowing those three things changes how quickly a firm decides to bill.
Can AI recommend the write-off?
It can flag the jobs whose profile resembles past write-offs and draft the reasoning. A partner decides, and the decision is recorded as a partner’s.
Monthly or fortnightly?
Monthly for the full review, with a weekly automated exception alert for budget breaches. The alert is what stops a breach becoming a write-off before anyone notices it.
Does this apply to a firm that bills fixed fees?
Yes, and arguably more — on a fixed fee the unbilled work is your margin, and the same four decisions apply with “re-scope” doing most of the work. For the internal reporting of a single business rather than a practice, see the accounting automation page.
A 30-minute call is enough to tell you whether AI pays for itself here.
