Over the years I have attended many conferences on accounting firm practice management. Many of these stopped abruptly with the onset of Covid but resumed in 2022 although these were often either online or hybrid. Meeting with some partners at 2022 Conferences they shared how relieved and encouraged they were to meet face to face with so many other firm owners. Their stories were varied. Some had sailed through the issues arising from Covid – others struggled. Some were forced to say goodbye to clients they had served for decades others gained new clients who were emerging as a consequence of Covid restrictions.
WORKING FROM HOME
At the beginning of 2023 most firm owners I know reflected back on 2022 as being another tough, very tough year. But, maybe apart from the challenge of working from home (WHF); which most now seem to accept and found their workforce generally settled into the new post-Covid ‘office order.’
Although some still would like all their staff to be office based – 100% of the time. Talking to business owners outside of the accountancy profession there is widespread acceptance of the WFH situation. So much so that a good number of companies I know have or are currently seeking to sublet their office space. In the case of one UK top 20 accounting firm client, they gave notice on their lease and have moved their 200 London staff into an office with half the square footage.
Improvement on the agenda?
I recently watched my football team lose 1-0 to Manchester United. The game was one of the first after the 2022 World Cup. In previous seasons Wolves had mostly drawn against United whether home or away. But not on New Years Eve December 2022. While United only won by a single goal brilliantly fashioned by Marcus Rashford, this was a far better team than we have seen for many many years.
So, here is my question, “How can your team improve its functioning, cohesiveness and success in 2023? What are your targets for the year? Time on? Recovery rates up? Charge rates up (by inflation + 5%). Lock up down? Is this possible with the world seemingly headed for a global recession? How to replace lost revenues? How to increase your Revenue Per Client? These are perhaps some of the questions that you might have pondered and sought to resolve.
But if you are going to achieve the step change that Manchester United seem to have done then something has to change. No, I am not suggesting a new manager or buying in new staff – those are remedies employed by sports teams.
The purpose of this season
William Wordsworth wrote a poem which included this line: “Surely the purpose of winter is to look forward to spring?” In the northern hemisphere we are currently enduring all that winter brings; but the gardens are now full of the green shoots of spring
So, taking the above principle let us do a little looking back and see how this informs us of how we could plan to do things differently. Where can we effect evolution or incremental improvement in our firm’s performance?
In a series of three articles I would like to share some of the lessons I have learnt from attending Managing Partner Conferences. Yes, we have seen change like never before. But, the lessons and wisdom from yesterday still have application. But that, of course is for you to decide. I trust you find some value in this first article…
IMPORTANT LESSON FROM PREVIOUS RECESSIONS
I think that during my time as the managing partner of my accountancy business I navigated two major recessions. I know from experience how tough that is. Losing clients that had been hard won. Seeing clients in despair.
When I look back I recall that we suffered larger write downs as well as bad debts. What did I learn? Always do all you can to bill promptly – that is why so many firms today have a monthly payment approach. But beyond that I realised when reflecting on what I could do differently that I should have created a client support budget.
KEY TARGET: To keep your WIP down to 10% or less
Let me delve deeper. We recognised the importance of helping clients in challenging times. Here is what I wished I had done. I wished I had set a monthly budget for spending time supporting clients. I would distinguish between clients who had been with us for 5 or more years – those with stable businesses.
I found when analysing time written off that 70% of it was with clients who had only been in business for two years or less. I could go further but I think I have conveyed the essence of the strategy. We do not have endless resources to help clients. That is just a fact of life. But, you may feel that in having a monthly budget this can provide you with an approach to having a conversation with a client who seeks service as a result of tough times.
KEY STRATEGY: Plan to intentionally and strategically support clients during tough times
Back to what I going to call “Lessons From Management Conferences”
Some conference speaker are illuminating and have added to my own knowledge of practice management. Probably, like you, I make notes of points during each presentation I regard as salient and impactful. This article sets out some of the understanding and enlightenment I have gained over 30 years of attending conferences. Some of these building blocks noted down. I have often been told that conference attendees look for one or two take aways from a workshop or conference so here are some of mine that I think are still relevant today.
GREAT ATTITUDES – A FEW OBSERVATIONS
- It is important for every partner to have a piece of their mind focussed on business development. I was once coaching a partner who was not interested in marketing at all. In fact I am sure he did not wish the coaching session to continue. But, as I looked over his shoulder I saw a plant on his shelf. It had evidently not been watered for months as it was, well, dead! I mused somewhat as I thought how maybe the flower represented the attitude of the partner who would surely wither on the vine if the responsibility to build his client base was ignored.
- Someone might be busy with enough work for themselves but that doesn’t necessarily help to grow the other departments or the firm.
- Watch out for ‘toxic partners’ they are usually the ones who seek to poison what you do. Also, another category to look out for those who now have the job title ‘partner’ but are in fact employee-partners.
- Partners need to be able to have superior thinking while maintaining unmatched integrity.
BETTER BILLING AND COLLECTIONS
We need to ensure our partners are more aware and better trained to be able to explain value: “This is why we are worth what we charge.” If we don’t do this better we will possibly fail to earn what we are worth and end up doing more low-balling.
KEY POINT: We have to stop giving work away for free.
The very best firms are increasingly becoming a part of their client’s business and in so doing it is important to ensure that this relationship is well-rewarded. Covid provided many firms with the opportunity to be more closely involved in problem solving with clients. Finding ways to be relevant and valuable to clients is an essential component of growing an increasingly successful and profitable firm?
KEY QUESTIONS: How can you better serve your clients? Client accounting services? Wealth management? Technology advice?
Here is a billing policy adopted by a number of successful firms:
“Have every biller bill 80 per cent of WIP every month”
“When it comes to billing we must do all we can to move clients on from where they seem to think this is an invitation to debate the fee.”
Some refer to these as Client Caused Extras. It is vital to develop a firm-wide standardised change order process especially in the following five key areas:
- Starting and stopping work
- Failure to prepare records
- Failure to balance accounts
- Errors in records
- Records not ready at the agreed time.
CHARGE RATE(S) – MORE THAN ONE?
Oat one of my recent practice management lectures one of the participants was a partner from a top ten firm. In answer to the question “How many of you have more than one charge rate?” this partner responded to confirm she had only one rate. “So all your work has equal value?” I asked…
I suggest that some of your time does have greater value. Consider, if you are talking to a client about their financial statements or other compliance matters, does that time have the same value as time spent discussing solving management problems, wills and estate planning, or succession planning and so on? My point is that it is important to have a higher rate for higher value work and then see how much of this type of higher value work I could target to deliver.
Not convinced? Remember it is an accepted principle that if you pay more you will receive more. That is true of clothes, cars and houses; so why not professional services? The fact is that not all hours are equal and I believe your charge rate structure should reflect this.
CODE OF CONDUCT
Do you have a firm’s code of conduct? This should include details of those things that are deemed critical. Here is a sample code – still used today but crafted by Neil E. Clifton, the founder of Clifton Gunderson LLP, USA (now CLA) way back in 1960.
Clifton Gunderson LLP was built on a strong foundation that is based on their Code of Conduct. Their Code was written by Neil Clifton (one of our founding partners) when the firm was established in 1960. Neil put it like this, “We have lived by these priorities from the very beginning. This empowers us to give outstanding quality service to our clients, because we serve our clients as the CG team, confident in one another’s skills, trust and commitment.
Clifton Gunderson’s Code of Conduct
- We will serve our clients and the public at large with absolute integrity and objectivity, and with the highest degree of professional competence.
- We will serve our clients in confidence and with a professional sense of duty.
- We do not flatter ourselves to think that we can be all things to all people, but in those areas in which we choose to serve, we will strive to make the highest level of professional service available to our clients.
- Should the interest of our client run counter to the best interests of the public, the interests of the public must come first?
- We expect each partner and employee to continually strive for self-improvement, and work for the continual improvement of the ability and efficiency of the firm.
- It is our belief that each partner and employee must obtain from this profession a profitable return for time, money, and self, and the happiness and self-satisfaction which come from creativeness and competence.
How relevant is that today? That is for you to decide?
COST REDUCTION STRATEGIES
- Join or form an accounting firm roundtable to share experiences
- Can you form a buying group with other companies for office supplies?
- Order office supplies in economic quantities
- Identify training needs within the firm and see to what extent these can be accessed through webinars
- Establish guidelines for when staff are allowed to work overtime and how this is approved
- Do you have a firm administrator? If not, add up the retail value of all time charged to admin. – maybe a firm administrator would free up valuable client time and remove some of the more routine work from partners.
- Introduce a suggestion box with meaningful rewards for good ideas
- Create a fair flex-time policy that is of advantage to both the employer and employee.
KEY QUESTION: What can you do to have a ton of fun in the firm?
Coming Up Next time: A wide range of ideas that will help you identify key changes that will have a positive impact on your firm, the team and those who you call clients.