THIS IS CRITICAL! TAKE IMMEDIATE ACTION!

Client fee pressure is a reality at this time. I recommend that firms take the initiative and discuss this matter with their clients rather than setting back and waiting for them to come to you. When you wait you are placed on the defensive which is a difficult position as their expected response to their fee reduction request is “yes” and the discussion is then “by how much” or even worse yet your competition has already been there and you have lost a client.

Meet with your clients now to discuss their fees and your relationship. In many cases you might be able to reduce the scope or the amount of work you do which results in a lower fee to your client without giving away the store. It also gives them an opportunity to discuss their business concerns with you which in many cases might result in more value added services for more fees.

I call this current economic downturn “prime time” for the accounting profession. Everyone is talking about money, expense control and profitability, the very essence of public accounting. Take advantage of this time by meeting with your clients, discussing their fees and how you can help them in their time of need. This is your opportunity to shine in “prime time”.

Please share any ideas you have to increase the value of accounting services and how to discuss the fee issue with clients.

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.

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.)

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.

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.