Systems - Part One.

Budgeting and planning -why they matter.

It’s time for back to basics and the simple stuff which we often can overlook. If you don’t have proper budget and planning systems in place then you will be left feeling as if you’re pushing water uphill!

These essential processes underpin the operational success of any firm. This means they drive client service, gross margin and profitability as well as team morale and stress.

Budgets
Here’s what can happen…a partner wins a new client. The client says their records are excellent. The partner believes that (because we want to win the business and start a good relationship with that client) then quotes on the basis that ‘there is very little to do’ in preparing the year end accounts. The job then starts and the team member realises the ‘job is a nightmare’ but wants to get it done in order to keep the client (and partner) happy. No dialogue happens between partner and client and team member about the basis upon which the job was quoted and priced up. It isn’t until the client meeting the partner ‘tries to get a bit more fee’ from the client for the extra time spent. Strangely enough, the client isn’t very accommodating. Leaves bad taste in the mouth of client and partner- as doesn’t set the scene well for the following year.
Looks familiar to you?

I would suggest a budget is prepared on all jobs (new and existing clients) by someone other than a partner! Let the partner review it and agree with the client and agreed fee. Introduce a system that the team member knows who and how to communicate when the budget starts to ‘go wrong’ on the first morning of a job.

Budget over-runs are either a question of training and/or not the right fee in place for the job required. Deal with this at the earliest opportunity and the matter can be easily resolved. You are far more likely to get the full recovery and your team member will not become disillusioned and demotivated.

Remember to update budgets when a job is complete and review reasons for variances. This is your final opportunity to set the correct fee for the following year and to ensure your team are adequately trained and given feedback on the job.

Planning
So many firms fail to do this and think it is just for larger jobs and audits. This invaluable tool should be used on every single job- even if it means a 5 minute chat with a partner on a sole trader set of accounts. We are not talking about completing checklists and pages of paper for a file here. We are talking about ensuring partners shares their knowledge on a client before the jobs starts. Partners usually know what’s going on with their clients but don’t have the time to document it anywhere!
Three months prior to a client’s year end is the ideal time to do the planning on jobs. Planning meetings can be batched up for smaller jobs and book time out in the partner’s diary to make notes- including discussions about the budget and what to do if it looks like the budget isn’t correct.

Update your work planner so you can project your monthly billing and capacity for work.

There are widely available planning checklists available and I don’t propose to list specific planning points here. However, I would highlight the most common recurring failures. Partners and team members don’t look at the previous year to see what issues arose then (the same issues are likely to arise again so head them off at the planning stage). Ideally a ‘points forward’ schedule should be available at the planning stage. Be brave enough NOT to follow last year’s working papers! You will invariably come up with a better approach if you plan to complete the job without too much reference to the previous years’ approach and working papers. Preparing jobs by rote is dangerous and inefficient- we often miss the salient points and go overboard on areas that are not relevant. I have seen many files with no evidence or copy of Title Deeds when a property is the main Balance sheet asset- yet there are pages of petty cash analysis for immaterial amounts.

Conclusion
A very brief over view of the simple things we all know here! A timely reminder however that makes a significant difference to our profit margins when we get it wrong. As well as focusing on winning new business it is equally important to know your ‘housekeeping’ is in order first.

In Part two we will look at HR and People systems which we sometimes think is just for the large firms.

September 2016 Copyright - Finola McManus, Practice Perfect

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