When was the last time you assessed the health of your accounting firm?
While accountants are often busy performing business health checks for clients, examining their own practice seems less urgent.
Yet, when you consider current industry trends: shrinking margins, industry consolidation, rising wage costs and technological disruption, it’s clear that looking inwards is vital.1 Knowing your business inside out – how it’s performing financially and operationally – allows you to leverage strengths, improve weaknesses, and prepare for likely headwinds.
Here are five areas to focus on when examining your practice:
1. Are you managing seasonality?
Although tax and audit work are both seasonal in nature, it is possible – and beneficial – to spread out other services over a longer period.
Start by analysing your workflows to identify tasks that can be performed outside of the busy season. Some examples include touching base with clients to find out about significant business developments, and evaluating their potential impact on financial reporting and tax preparation. Ensure that before client work begins you have agreed timetables, fees and terms of engagements.
If you allocate roles and responsibilities early on, you can balance client schedules and staff holidays, thus reducing the need (and cost) of outsourcing to contractors.
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2. Are you serving beyond compliance?
Of course, engaging your clients beyond traditional services also reduces seasonality. Indeed, the Benchmarking Group considers diversifying offerings critical to remaining competitive.2
According to NAB’s survey, SME clients value assistance around business strategy, growth strategy and detailed analytics.3 Similarly, IBISWorld also considers data analytics a key value-add area, as businesses try to harness the power of real-time data to understand their operations and the market they’re in.1
But investing in services that are relevant requires understanding the specific needs of your clients. In addition to the areas NAB’s survey identified, SMEs often benefit from help with cash flow monitoring and forecasting, budgeting, preparing financial projections and writing up business plans.
3. Who is more profitable?
Another invaluable exercise is to study your client list to identify profitable clients and the factors driving their profitability. Cloud-based reporting tools such as Data Hub Accountant Edition makes this easy, as you can compare key stats and metrics for all engagements.
Similarly, ask yourself who your favourite clients are, and why. The idea is to cross-pollinate tools and strategies that work well, so “difficult” clients can become more pleasurable and profitable to work with.
Also, pay regular attention to the diversity of your clientele, as working with multiple industries strengthens your ability to withstand volatility of different markets.1
4. How is time spent?
Clearly, a firm needs to serve clients well with the right products, but it must be cost-efficient as well.
Wages have been rising – now at almost 40 percent of income for the average firm – because practices are trying to attract people with specialised skills in areas like technology and data analytics.1
But even with star recruits on your team, you’ve got to leverage their skills to drive profits. That’s why it’s important to take a closer look at how staff across the firm spends their time. This can offer insight into processes or functions that need to be streamlined to raise productivity; it can give you an idea of whether people understand their roles and responsibilities; and it may even help with pricing decisions.
5. What do clients think?
Finally, it’s been well documented that accountants do not fully understand or respond to what their clients really want.3 Despite increasing opportunities to offer a broader range of services, some accountants often fail to reach out to clients regularly. Worryingly, one in four businesses also say their accountants never seek feedback.3
So how are you doing when it comes to client communication and feedback?
To be more proactive about understanding your clients’ changing business needs, and to ensure satisfaction, create goals around client communications and evaluations, then monitor them consistently.
With over half of SMEs calling accountants their most trusted adviser, the future for the profession is undoubtedly bright.3 However, there’s still much to gain from looking inwards to improve the ways you do business. Are you leveraging cloud computing technology enough to lower costs? Are you providing a broad range of value added services? These remain key to sustaining profits and building a thriving practice.
1 “Accounting Services in Australia – Market Research Report“, IBISWorld, 2019
2 “The silent disruption of the accounting industry“, The Benchmarking Group, 2019
3 “Key Insights into the Australian Accounting Industry“, NAB Professional Services, 2018