June 2, 2023

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Maximizing Your Firm’s Profitability in 2022

For you and your clients to continue to provide accounting services and/or other products and offerings; you must make a profit. And profitability is a good thing that you can make happen.

There are so many books, programs, and methods that you can learn about and use. I didn’t try to gather them for this article. However, some simple ideas seem to be a part of these various methods:

  • Offer services that clients need and must have – this is the basis of the compliance services of our practices.
  • Offer services that clients want and will receive benefit directly – this forms our Advisory, Client Accounting Services (CAS), and consulting portions of the practice.
  • Do what makes you and others happy – if I need to explain that to you, this article won’t help much.
  • Value pricing will generally produce more profitability than hourly billing – you can certainly bill by the hour, but take the time to learn to price services correctly.
  • Work smarter, not harder – optimize your workflows to make your firm both efficient and effective.
  • Communicate clearly – to your clients, team, partners, friends, and family.
  • Be ethical in all that you do – this is more common in the accounting profession because of most professionals’ integrity, intelligence, and independence. But this translates into always doing the right thing.

Improve Many Simple Things

There are simple diagnostics that you can do in your firm if you are not achieving your realization and utilization goals. First, critically analyze where your team spends their time.

When I perform technology assessments for CPA firms, I frequently look for places to save five minutes per person per day (evolutionary change) and places where people can save hours (revolutionary change).

Admin, staff, and seniors often do steps unnecessarily because they think you want them to do things in a certain way. Watch for the small- and big-time wasters while you optimize your processes.

The Gartner Group has suggested that the more communication options you offer, the less profitable your firm will be. Gartner says that each additional channel you offer costs you more than $8 per interaction.

If you check email, then text messages, after that voice mail, sort through physical mail, and finally check with others in the office, you get a sense of the time wasted. I don’t get aggravated easily, but wasting time looking for something that should have been readily available certainly doesn’t make my day better.

If you’ve ever had to look across multiple communication venues for a message or cut and paste files across platforms, you know what Gartner means. Most firms spend up to 40 percent of all staff’s time just gathering documents.

The inefficient gathering process happens because data is in silos. No one knows everything. If a client just had a conversation with a manager because you weren’t available about a merger or acquisition; a building sale or purchase; or a lawsuit and that didn’t get translated into a note to file, how do you discover that? Further, that conversation can quickly lose something in the thick of busy season or a hectic day.

When data is in silos, no one can move fast because the risk is too high. If you make recommendations to a client without knowing about a significant business event because “the firm had already been told,” how does that look? How accurate is your recommendation?

When I consider how much and how little my CPA firm of 40+ years knows about my business and personal financial affairs, how much is on me, and how much is on them? Working on client experience improves many items with the most impact on communication.

Communication within the firm and with clients outside the firm improves. Improving client experience from the old way to a new, improved communication model (Google “Client Experience 2.0” to learn more). CX 2.0 removes all these barriers, and because clients send their information quickly, and there are no data silos, everyone can get more done.

Most firms are experiencing issues finding qualified team members. Further, the available ones are expecting and demanding higher compensation. As a result, few firms have ample spare time on their hands.

However, soft hours lost are recovered when more is done effectively and faster because of CX 2.0. During my 40+ years of CPA firm consulting, all firms I have visited have soft hours wasted. I estimate that the soft hours available are between 7 and 15 percent in most firms. What if you could get 7-15 percent more hours available from your existing team? How would you use that time?

Would you convert this to personal time with more time off and more time with the family, or would you work on projects of importance to you and the firm expanding your practice? 

When capacity is opened up, higher-value advisory work can replace lower-value admin work like requesting documents from clients and tracking the status of each request. In addition, which is more interesting, helping clients directly or chasing needed information?

Tech That Helps

Client Experience 2.0 is a big deal. Unfortunately, many firms provide a client experience that is awful. Traditionally, our technology hasn’t helped much either with tools that were inaccessible to clients and final work products that were much like sausage or hot dogs.

You really don’t want to see how they are made. The technology available to our firms wasn’t created to provide an end-to-end experience. Most of it was designed to get compliance work out accurately on a deadline.

But that isn’t what new generation business owners and team members want today. They want an easy experience. We must consider how documentation and information will arrive for our compliance services of tax and audit. It is best to use the same tools to gather everything needed for CAS, advisory, and any other area of your practice.

That’s where a tool like Liscio comes in. Consolidating all client communication into a single, collaborative channel with a great client experience will improve your firm’s profitability. When you make requests to and from your clients in Liscio, you optimize your workflows while improving your communications.

Making all PBC (Prepared by Client) requests via Liscio instead of email, portal, AND text on a mobile device gives your team one place to send and receive client documents. Liscio eliminates silos of information.

If you intend to make every client interaction a great experience, you may want to look at Relay. Relay makes it simple to sell, activate and service business technology products at scale. The platform helps you deliver simple, predictive, and personalized customer experiences.

Work on integrating your tools with a practice management tool like Karbon and a document storage solution like SmartVault to control your practice and your documents. You can have an efficient, effective operating platform for your firm.

But you may want to spend extra time developing your Advisory and CAS services, too. There are platforms like the Complete Advisory Solution that organize and enable Advisory services across your entire team.

We also recommend CAS technology stacks where you choose your integrated delivery platform for your clients. For example, suppose you use QuickBooks Online for accounting. In that case, you can augment the system with Bill.com or Corpay One for AP, OnPay, Payroll Relief or Rippling for payroll, LivePlan for cash flow management and business planning, and Fathom, Helix Reports, or Reach Reporting for simplified reporting. Alternatively you can choose the Accounting Power, Sage Intacct, or Xero platforms.

Finally, you’ll want to integrate your solution into Microsoft 365, Google Workspace, or Zoho One. Again, taking the time to analyze and thoughtfully select your technology platforms will provide both a short-term opportunity and long-term profitability.

Excellent Client Service = Profitability

Nothing is sadder to me than a good business that fails from poor management or bad decisions. Accountants can prevent this from happening with proactive CAS and Advisory services. However, that may not be what motivates you every day.

You may be excited about the complexities of the tax code and the chance to save your clients money by leveraging the latest opportunity. While you may know every twist and turn in the tax code, a tool like Corvee may help you explain the possibilities to your clients.

The year ahead presents a wonderful opportunity to help clients. Most firms provide great client service, but with the Client Experience 2.0 model, the right platforms, and the right approach, we would like your firm to provide excellent client service. And we’re pretty sure that what goes around will come around. If you help your client achieve their maximum profitability, we are sure your firm will, too!