The Problem
Great Client Service, Fading Margins
Fixed-fee engagements drift when unseen rework, partner-heavy delivery, and scope creep stack up. Discounts and write-offs become "the cost of keeping the client," and realization % slides a few points each cycle—until the P&L notices. The cure is a simple guardrail system that flags variance early and guides both delivery and commercial corrections.
The Framework
Risk Conditions (Act Early)
Treat these as leading indicators your realization is about to slip:
- Realization % (rolling 4 weeks) trending toward < 85%
- Partner/Senior utilization > 85% on work scoped for mid/associate levels
- Turnaround time ↑ 15%+ vs last cycle for similar deliverables
- Rework ratio > 10% (hours tagged as corrections/redo)
- New asks delivered without a Change Request (CR)
Action: Rebalance roles, stop unpriced work, and instrument quick visibility (mini engagement P&L).
Issue Conditions (Already in the Red)
If these are true, you're taking the hit now:
- Realization % < 80–85% for current cycle
- Write-offs/discounts > 5% of billed value
- Deadline risk due to unplanned scope or senior bottlenecks
Action: Freeze add-ons, raise a CR, and run a fast recovery plan.
Common Diagnostics
Use these quick checks to choose the right corrective path:
- Role-to-task fit: Which tasks should move from Partner/Senior → Mid/Associate with a QA step?
- Scope hygiene: Are deliverables and acceptance criteria explicit in the engagement letter/SOW?
- Rework drivers: Ambiguous requests, late client inputs, or changing compliance interpretations?
- Process friction: Approvals, data pulls, or tools creating long waits and duplicate effort?
- Commercial hygiene: Are we logging add-ons as CRs with budget/timeline impact?
Step-by-Step Guide
Guardrails & Visibility
Actions:
- Weekly mini P&L per engagement: planned vs actual hours, realization %, write-offs, role mix
- Traffic-light targets: Realization ≥ 90% (green), 85–90% (amber), < 85% (red)
- Auto-alerts when partner time on associate-level tasks exceeds a threshold (e.g., > 6 hours/week)
Expected Impact: Earlier detection, cleaner handoffs, fewer "surprise" write-offs.
Rebalance & Standardize
Actions:
- Right work, right level: move repeatable tasks to Mid/Associate; keep Partner for review/advisory
- Playbooks & templates: standardized workpapers, checklists, and QA gates for recurring deliverables
- Client inputs SLA: define formats/deadlines; use intake checklists to avoid rework
Expected Impact: Realization ↑ 5–10pp; partner utilization healthy; cycle time ↓.
Commercial Corrections
Actions:
- Change Requests (CRs): convert new asks/complexity changes into priced CRs
- Re-tier fixed fees by complexity (entity count, consolidation, regulatory scope)
- Milestone renegotiation: adjust sequence/dates to protect quality and realization
- Discount discipline: if discounting, tie it to a remediation plan (future scope, process changes)
Expected Impact: Margin stabilizes while preserving client trust.
Prevent Recurrence
Actions:
- Engagement letter upgrades: explicit deliverables, assumptions, acceptance criteria, and CR triggers
- Rate card hygiene: specialist rates (IFRS changes, transaction advisory, complex tax) clearly defined
- Onboarding checklist: data readiness, access, and calendar coordination before work begins
- Library of exemplars: store best workpapers and memos; reuse on similar clients
Expected Impact: Steadier realization, predictable staffing, fewer uncomfortable closings.
KPIs to Track
| Metric | Target |
|---|---|
| Realization % | ≥ 90% (amber 85–90%) |
| Write-offs/discounts | ≤ 2% |
| Partner utilization (delivery) | ≤ 75–80%; keep room for review/advisory |
| Turnaround time per deliverable | Flat/down vs prior cycle |
| CR velocity (raise → approve) | ≤ 7 days |
Warning Signals
Real Scenarios
Tax Season Realization Drift
Context
Realization at 78% midway through busy season. Partners doing associate-level data entry due to staff shortage.
Steps
- 1.Identify tasks consuming partner time (data pulls, workpaper prep)
- 2.Reassign to available associates or bring in temp staff
- 3.Create standardized workpaper templates for common returns
- 4.Set up weekly mini P&L review for all engagements
- 5.Target realization recovery to 88% by season end
Scope Creep on Audit Engagement
Context
Client added two new entities mid-engagement. Team absorbed work without CR. Realization at 72%.
Steps
- 1.Document additional scope and hours consumed
- 2.Prepare CR for additional entities with pricing
- 3.Present to client with impact on timeline and deliverables
- 4.Negotiate CR approval or scope reduction
- 5.Update engagement letter template with entity triggers
Quick Wins
Start with these immediate actions:
- Create a weekly mini P&L report for top 10 engagements by revenue
- Identify engagements with Partner utilization > 85%
- Review last quarter's write-offs for pattern analysis
- Set up traffic-light alerts for realization thresholds
Related Playbooks
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