April 26, 2009

Trust Me on This One

For the past few years I have noticed that more and more firms have started using words like integrity, trust and ethics to describe how they do business. We serve as “trusted business advisors” to our clients. We have “integrity” and operate with the highest “ethical” standards. When I see these words used to describe professional services my first thought is why do they feel a need to say this to the public. Has there been a problem with trust and integrity in the past at this firm? It certainly tells me that they have some questions about it and feel the need to communicate with others.

I can’t imagine going to my doctor and having her tell me that she practices with integrity and high ethical standards that can be trusted. We have never had this type of conversation but she had better practice in that manner or she won’t be practicing for long! The same is true for the accounting profession. We don’t need to be “telling” our clients about trust and integrity, we need to be “practicing” with integrity and letting our clients judge our trustworthiness which immediately makes me think of core values.

Many of the firms I have visited over the years have wonderful core value statements that are not practiced. “We have the highest level of integrity” but yet they talk badly about clients and coworkers. Promises are made to clients but not kept. “I’ll have it to you tomorrow” and then deliver next week, “I’ll call you right back” and then fail to call, “The fee will be XXX” and then send a bill for more than the client was expecting. “We value our clients” and then discuss how to fire them or call them the “clients from hell” as described recently in one publication. The conversations and actions in many accounting firms simply don’t support their flowery core value statements. Their employees see this and so do their clients.

Over the years I have found we think as we speak. If you want to be the firm that practices with integrity and high ethical standards that is trusted by its clients all you have to do is clean up your language and do what you say you will do. Rather simple concepts that will be noticed by everyone in contact with your firm. Your values and your actions will be congruent. Employees will have a higher level of respect for the core values and practice accordingly and clients will share with others that the firm practices with the highest level of integrity and can be trusted as business advisors. Trust me on this one.

April 13, 2009

Little Things Make for Greater Profitability

I've had many managing partners tell me they run their practices are much like the cobbler that walked around with holes in his shoes ran his business. They know better and usually pretty much know what needs to be done. It's the execution that is the issue. How to herd the cats and get everyone marching in the same direction when everyone appears to have differing opinions on what needs to be done. I would hate to tell you how many times I have heard that "we tried to do that one time but I couldn't get everyone on board so I just gave up". Hopelessness creeps in and execution and accountability fly out the window. A very tough way to run a practice.


I find that success is the best motivator to change behavior so I recommend that partner groups start managing the "now" for success. Here are a few ideas:


Not getting charge time-Schedule weekly (see previous post) and monitor daily.


Partners won't bill-Pay a significant return on each partner's cash basis equity or if it still doesn't work only allow draws based upon cash basis equity (sorry partners this is a business, not a job)


Partners won't charge adequately for their work-Set minimum contribution rates per hour for each month of the year and schedule accordingly (contribution rates fluctuate based upon actual utilization each month. I'll have more on this in another post later this month.)




April 10, 2009

START PROCESS IMPROVEMENT EFFORTS NOW!

The first step in your process improvement efforts is to survey your employees to better understand their perceptions about their job responsibilities and daily tasks. Where is time being spent and what tasks add value to your clients and which tasks don’t add value? It is my firm belief that you will be surprised by the amount of non-value added time that is being spent by high cost professionals in the months May through December.

Some of the tasks that come to mind are making copies, watching the printer, e-mail management, the internet and data entry just to name a few. As you can see these tasks do not add value to the client and a CPA license is not required to get them accomplished. Clerical tasks need to be performed by clerical staff. Professionals need to be leveraged. Triage the tasks in your firm and I assure you that profitability will improve significantly. By the way be sure to charge for clerical tasks.

Be prepared for the arguments and barriers put up by your staff by preparing your responses in advance of your process improvement efforts. Here’s a few that come to mind:
  • It’s easier to do it myself.
  • I can’t find anyone to do it.
  • They don’t understand what I want.
  • I like doing the work.
  • The client wants me to do the work.
  • I need the billable hours.
Notice that most of these excuses are put forward to avoid management and leadership responsibilities which are a huge issue in the profession at this time. As you go down the path of process improvement your will find that not only profitability improvement but also improvement in the management and leadership skills of your experienced accountants.

Please share your thoughts and questions concerning profit improvement and process improvement in your firm.

April 7, 2009

STOP EXTENDING UNLIMITED CREDIT!

During these times every firm needs to be more prudent when extending credit to their clients because once the services have been rendered and the tax return or audit is complete your firm does not become a priority for payment for another year. Don't fall into this trap.

A life long friend and mentor who practiced law told me very early in my career to "Get your fee when they need services or risk not getting paid". Over the years this became some very sage advice as it played out several times during my career. In almost every case where I was not getting paid I could look back and see where I was not assertive in collecting my fee.

Many practioners tell me that the collection of fees is stressful as they don't want to upset their clients and risk losing their business. Go figure! This argument reminds me of the housing crisis mess and the number of mortgages that were given to people that couldn't afford the payments. Who is ultimately responsible? The one extending the credit of course.

I recommend that every firm adopt a firm wide credit policy to make sure every client is treated consistently. In this policy require payments in advance of the services being performed and if payments are not made the firm will stop work until the money is received. In addition make sure you have a "stop work" clause in your engagement letters to support this policy. Once adopted, publish it and furnish a copy to each of your clients. Do this now. Life will be less stressful and your firm will be much more profitable.

April 3, 2009

IT'S TIME TO "RIGHT SIZE" AND "RIGHT STRUCTURE"

I wish I had worked to change the framework, rather than to work within that framework”
Timothy Geithner looking back at his time with the New York Fed and how he addressed the banking crisis as quoted in The Washington Post, April 3, 2009

There are times in life when we just can’t get there from here. That was clearly the issue in the banking system and I assume the same could be said about many of our perceptions and traditional ways of doing business. Do we try to manage within our current framework or is it time to change the framework to address the challenges of our current reality? At this unprecedented time in our history I think accounting firms have reached this fork in the road. Is it business as usual or is it time for a new structure and framework for the practice of public accounting? Here’s my take the current situation:
  • Labor costs as a percentage of net revenues have continued to increase for the past 8-10 years now approaching 50 of net revenues in many firms.

  • Fees have not increased proportionately to compensate for this increase in labor costs.

  • Accountants consistently tell me that at least 50% of their work could be done by someone with less experience.

  • As the baby boomers retire there has been and will continue to be a loss expertise in our profession.

  • Many partners are more concerned than ever about the quality and timeliness of their services.

  • Utilization is a major concern in most firms.

  • Technology is not sufficiently leveraged in most practices. In many cases partners have become data entry specialists because they have the software on their desk.

I'm sure there are many more practice concerns that need some attention that I have not addressed but this list should give us a few ideas to begin the discussion. I want to help partners develop new efficient practice models and client service delivery systems that mitigate risk, provide for significantly improved client service and satisfaction as well as enhanced partner profitability.

Please share any thoughts you have about the current situation in your firm as well as any other observations about how this profession can be improved. It is only through public dialog and debate that we will find the solutions to these problems and allow you to achieve the professional life you desire and deserve. I look forward to taking the journey with all of you.

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