Contrary to popular belief, efficiency will not just lead to an improved bottom line—it can absolutely increase your revenue too. Improving your workflow management processes and focusing on the output of your team is the solution.
Focus on your output
There is a growing trend toward output based interactions—the majority of your clients now expect to know exactly what you are delivering. And even more than this, they want to know about the outcomes—the value your outputs will give to them. Measuring what you are delivering is relevant whether you price based on value, or not.
Firstly, if your team tracks their time and you charge by the hour, you can look at your utilization and realization to determine your output. Utilization refers to the amount of time that is being spent bringing in revenue to your practice. It can apply to a staff member, your team or firm as a whole, or even a system. Your realization rate is the percentage of standard billing rates that you actually collect—taking into account discounts on your standard rates, fee reductions and write-offs. You can multiply these two figures together to determine your output—top line revenue.
If on the other hand, you price based on fixed fees or on a value pricing model, you are already driven purely by output—you deliver something, and you get paid a certain amount for it. The key is to maximize the value for you and your client by ensuring you provide at least the value they expect, while spending as few resources and time to create that value (more on this later).
We do fixed pricing for every single engagement. We don't keep track of time and we don't have mandatory hours.
Whatever your pricing model is, to grow your top line you need to be looking at boosting your output. And despite common assumptions otherwise, you can do this without increasing the size of your team. Instead, you should focus on process refinement. Improving the method your team delivers output will lead to big gains in efficiency—you’ll be able to produce more with less people and in less time.
I know with absolute certainty that almost every accounting firm is working far too hard for too little money. The real cause of all our challenges is that we’re too cheap.
Standardization comes first
You can’t improve a process if work is being performed inconsistently across your team. If all of your staff are taking care of the same tasks with different methods—no matter how small the difference in those methods is—you are running an unwinnable race. This is why standardizing your processes is so important—when the optimum way for every task to be completed is documented, you have a baseline to track and measure performance against.
One of the most important tools I use to thrive is a model week. As a high school teacher taught me a long time ago, ‘Plan your work. And work your plan.’ That's what my model week is all about.
Success is 80% planning and 20% execution, so wherever it makes sense (all compliance work, for instance) you need to deconstruct and outline how a specific process should be executed. Create a culture of documenting everything in templates so it can easily be replicated across your team. No matter who performs the task, who the client is, or what time of year it is, it should be obvious what steps need to be implemented each time.
The only person who knew the business from start to finish was me, and I knew this wasn't a scalable model. I knew I needed to transfer my knowledge, or nothing would change. I had to replace myself by standardizing our processes.
While some processes will sometimes need slight adjustments to accommodate variations between clients and their own needs, a standard, documented way that most work should be performed is essential. This is the only way you will know with confidence if a staff member is taking too long to complete common tasks or if you are reinventing the wheel each time.
The worst excuse for losing track of a job is not even having a standard process to begin with.
You can then communicate to your team how long you expect most tasks to take, such as these targets used by Australian firm, Growthwise:
30 min per BAS
3 hours to draft financial statements
1 hour to finalize financial statements
1 hour to complete month end accounting
Or you can accurately formulate estimates to help you budget, allocate workload across your team, and forecast your profitability by staff member or client. These are some of the estimates US firm, HPC CPA use for this exact purpose:
1 hour per month for monthly support clients
2-3 hours per month for small bookkeeping clients
4-6 hours per year for relatively simple business tax clients (includes planning and compliance)
8-10 hours per year for Global Small Businesses for business tax compliance and planning (includes basic foreign filing disclosures and forms)
Karbon's integration with TSheets allows your firm to track time against you common processes, jobs and clients, to measure performance and efficiency. To learn more, attend this 10-minute demo.
This article is an excerpt from Efficiency for growth: the smarter way to fuel your accounting firm's top line. You can download the complete report for free here.