Safeguarding the future of your practice.

In February thoughts are now turning to how every practice can achieve its goals this year and maintain their position in an increasingly competitive marketplace. By definition this means you are looking to safeguard your business whilst securing, if not increasing, profit margins.

There are some simple steps you can take to ensure your practice continues to operate successfully into the future.

3 key things will safeguard the future of your business- client base, staff and cash flow.

Know your client base

Make sure your master database is kept up to date with the following information;

  • Client Grade
  • Annual GRF by client as well as regular additional work billed each year by client.
  • How was each client referred to you?
  • How many referrals does each client make to you in a year?
  • What is the recovery rate / write offs by client?
  • What is the gross margin by client and by product/service delivered?
  • 80/20. Which 20% of your clients generate 80% of your profit?
  • What is your ideal client profile?
  • What clients are on the ‘potential sacking list?’
  • Breakdown annual fee by client and individual services they buy from you.

Knowing the above and keeping it up to date in real time means you can track and focus on the type of work and client which makes your firm most successful. Your marketing and business development plan will focus on winning more of those clients to secure your future.

Staff- your main cost and key resource

Without staff you can’t service clients. Without clients you don’t need staff. They are co-dependent and key underlying success drivers in your business.

Finding the right staff takes time and money. Losing great staff to competitor firms is disruptive and expensive- it also impacts morale hugely and can have a domino effect where other staff look to leave too. Ignore this at your peril.

Make sure you have systems in place to train, develop and nurture your staff. Work on communication systems and making them feel involved in the business. What do you offer as an employer to make them want to stay with your firm in the years ahead? What makes you an exceptional employer?

The more progressive and successful firms often offer staff the following as standard practice;

  • Structured interview and induction systems for new joiners.
  • Flexible working hours
  • Tailored individual career development plans
  • Bi annual career reviews- documented with action plans
  • Staff surveys firm wide
  • Measuring how happy staff are and follow up (single most important thing to retain good people)
  • Feedback by job
  • Bonus and award schemes tailored to the individuals’ preferences
  • Weekly team meetings
  • Regular firm wide briefings on business plan and future of the practice- so everyone can see their role in the future.
  • Finish early Fridays
  • Team takeaway lunch events
  • Extra day holiday before Christmas for shopping.
  • Don’t work the day of their birthday

Even the smallest of practices are offering the above. The above systems don’t cost most in terms of time or money and give a significant return on investment to safeguard the future of any business.

Cash flow- practice management

Without cash your practice can’t survive or grow. You also want to be able to draw the rewards of your labours and not end up with a capital/loan account of undrawn profits which will be difficult to realise in the future and hinder succession plans.

Make sure your practice management sees the following as priority;

  • Fixed Fees- including systems for ‘capturing’ additional work completed outside the scope of fixed fees
  • Extra work to be agreed in advance and billed out every month
    Standing Order/Direct Debits arrangements in place with clients to pay in advance
  • Debtors’ days kept to a minimum- never more than 30 days.
  • No carry of work in progress over 30 days. Bill it out or write it off – don’t delude yourself about recoverability!
  • Rigid billing and cash collection systems in place
  • No bad or doubtful debts.
  • Monitor write off of time on jobs- this could be time spent being billed out and converted to cash.

Conclusion
The above three key areas will go a long way to safeguard the future of your business and maintain a strong position in the marketplace. All of these systems can be applied to any size firm and should be seen as ‘basic housekeeping’ for any accountancy practice.

February 2016 Copyright - Finola McManus, Practice Perfect

Helping accountancy firms to make their clients successful
www.practice-perfect.net

 

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