Adviser: Improving your work profitability

Before launching themselves into new projects and marketing campaigns, a great many practices would do well to consider the clients they already have and the ways in which they can improve the profitability of existing work – not through bumping up the fees, but through reducing billing write-offs.

Although many fees produce a satisfactory recovery, it is worth asking questions about the ones that don’t. The core work in an accountancy practice is compliance-based, time-phased and responsive to a ‘factory-processing’ approach in terms of organisation and budgeting.

These ingredients depend upon senior staff ensuring that they work – any falling away from high standards and recovery suffers.

To understand the reasons for write-offs you need to recognise where the problems lie, which clients are producing the under-recoveries and why they occur. Does it come down to poor planning, inadequate budgeting, the client failing to produce information on time, incomplete information or the wrong staff skills for the job? Maybe it is simply poor management of the work in progress.

Finding the right solution will be much more focused if partners target an improvement for each service. For example, on accounts preparation, to increase overall recoveries from the current level by 8%.

Look for the following problems:

Inadequate on-job control: Staff are not being properly supervised and jobs are taking longer than expected. More frequent site reviews and attendance by the job manager will improve job control.

Wrong level of staff: Senior staff should not be doing work that can be handled by those less qualified. Delegation is the key to success, coupled with better planning.

Too many errors requiring correction: If staff ability is not sufficient for the task, this could be a training or appraisal problem. Managers need to debrief the staff involved and take necessary action.

Failure by staff to report work outside the fee’s scope: Improving the level of communication from staff to partners and clients will ensure fee levels are adjusted accordingly.

Inaccurate time assessment: Failure to base fees on a review of last year’s actual time or insufficient job planning have resulted in a time overrun. A thorough post-job review will help to ensure more accurate assessments in future.

Underbilling: Sometimes the problem is simply lack of commerciality on the part of the partners. They must be prepared to discuss fees with the client and increase them where necessary.

Greater attention to detail and improved levels of efficiency will help to eliminate write-offs and lead to increased profitability without having to invest time and money marketing to new clients or building additional service lines.

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