What is write-down?

A write-down reduces the value of unbilled work in process before invoicing the client, typically when billed time exceeds a reasonable value for the deliverable, or when inefficiencies occurred that should not be passed to the client. Write-downs differ from write-offs, which happen after invoicing. For professional service firm owners, tracking write-downs reveals pricing problems, scope issues, or efficiency gaps.

Key characteristics

• Reduces WIP before billing

• Done before invoicing

• Different from write-off

• Affects the realization rate

• Should be tracked

• Indicates underlying issues

Why it matters for professional service firms

Write-downs feel like lost money. Sometimes they are. But charging a client $10,000 for work worth $6,000 destroys relationships. The real question is why write-downs happen. Poor estimates? Scope creep, you accepted? Inefficient staff? Track the reasons to fix root causes.

Real-world example

Brian completed a project with 50 hours logged at $200/hour ($10,000). But the fixed fee was $7,500. He wrote down $2,500 before invoicing. Review revealed: 12 hours of learning curve on new software that future projects would not need, 6 hours of rework from misunderstanding requirements. He improved the onboarding process for new tools and requirements gathering—next similar project: no write-down needed.