Your great clients don’t need it, while your not so great clients will readily take advantage of the credit, often leading to slow payment or no payment.
Remember for every dollar of accounts receivable written off, it takes three dollars of additional revenue to recoup your loss.
Instead of offering all of your clients credit, use scheduled payments for larger jobs (i.e. 30% each for three payments with the 10% final payment upon delivery of the financial statements) and offer budget payment plans to clients ("as a benefit to our clients we are now offering a budget payment plan").
Start the payments in the off season and offer a discount for participation (3%-5%). Of course these plans have to have the covenant that the budget plan is based upon the prior year’s fees and additional work required will be billed separately.
These steps will speed up cash flow and result in lower capital requirements for your partners while at the same time improving profitability.
The Profitable CPA Firm . . . A creative forum for moving your CPA firm to 50% profitability.
January 18, 2011
December 30, 2010
Profit Points #2 - Handling Scope Creep
Are you subscribed to Profit Points yet? It's a short, easy, 1-tip read that can help you, the partners & employees get the most out of your firm.
We recommend having all of your employees and partners sign up for the weekly blast and start your firm profit improvement efforts now!
Profit Point # 2 - Handling Scope Creep
During this great recession it has never been more important to manage client expectations.
Remember you get to set your fees.
Unfortunately out of scope work very often becomes a negotiation with the client when it should be a simple change order.
Change the wording in your engagement letters
from “If any matters come to our attention that will increase the scope of our work…”
to “When we discover matters that require us to increase the scope of our work we will discuss the situation with you, amend our engagement letter and increase our fees accordingly.”
Then act promptly when these situations arise.
Standardize your change order process and have materials readily available for everyone’s use.
Realization and profitability will increase... guaranteed.
We recommend having all of your employees and partners sign up for the weekly blast and start your firm profit improvement efforts now!
December 13, 2010
Profit Points #1 - Stop quoting in ranges...
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Get useful tips that you and your entire team can start implementing right away to improve your overall profitability. They'll be posted here over time, but you can get them each week, in order, free!
We recommend having all of your employees and partners sign up for the weekly blast and start your firm profit improvement efforts now!
We have also now completed our 2010 EMPLOYEE CAREER DEVELOPMENT SURVEY and the results are now available to the public... get yours, free, today!
We hope you'll subscribe to Profit Points! They are delivered on Tuesdays at 11am EST, allowing plenty of time during the week to share them with your teams and mobilize the troops to start improving profitability right away!
>>> Subscribe now!
http://www.SteveEricksonLLC.com/profit-points
Get useful tips that you and your entire team can start implementing right away to improve your overall profitability. They'll be posted here over time, but you can get them each week, in order, free!
Here's the first Profit Point:
Stop quoting a range of fees when clients ask about your fee, as the bottom of the range is irrelevant.
You seldom bill the lesser amount and lock yourself into a cap on your fees.
Rather than telling you clients that you estimate the fee to be $12K to $15K, tell them that your fee could be $15K or more and that you will keep them informed about the fees as the engagement progresses.
We recommend having all of your employees and partners sign up for the weekly blast and start your firm profit improvement efforts now!
We have also now completed our 2010 EMPLOYEE CAREER DEVELOPMENT SURVEY and the results are now available to the public... get yours, free, today!
We hope you'll subscribe to Profit Points! They are delivered on Tuesdays at 11am EST, allowing plenty of time during the week to share them with your teams and mobilize the troops to start improving profitability right away!
>>> Subscribe now!
http://www.SteveEricksonLLC.com/profit-points
October 13, 2010
The Current Economic Reality for Accounting Firms
A message you must share with your staff!
During my speaking and consulting travels this year, partners and managing partners say they are frustrated with their staff’s expectations in spite of the effects the “Great Recession” has had on their accounting firms. Prior to the past two years, staff members became accustomed to receiving automatic annual salary increases while the economy was booming and are now having some difficulty adjusting as the economy has deteriorated. Unfortunately the market values for goods and services have declined and all of us must now deal with this new reality.
These challenging times require diligence, increased efforts and sacrifice by everyone in order to retain your current clients and remain competitive. Failure to do so could result in losses far greater than those experienced to date in this recession. None of us have ever experienced anything like this so now is the time to communicate clearly to your staff and then ask for their help and understanding.
Team Members: How you can help us build for the future and for your long-term success.
Since 2008 the accounting profession has experienced events that have had a profound impact on how firms must operate. The “Great Recession” has reduced the spending of countless millions which has a negative impact on the clients we serve. As a result, our revenues have been relatively flat or decreasing while our costs have continued to rise. This trend will have to be reversed if we are to remain viable and able to serve our clients successfully. Here are some of these major trends:
• Pricing has moved substantially from a cost-plus model, where a multiple of a person’s hourly salary was charged for services, to a fixed fee for many of the services we provide at a time when regulatory agencies are imposing ever increasing requirements and standards. As a result, our realization has decreased on many engagements due to budget overruns that cannot be billed to our clients. Since our clients are also experiencing the downturn in the economy many have requested fee decreases from us.
• Competition for off-peak seasonal work has become extremely intense as firms vie for those few engagements where work can be done over the summer and fall months to keep their staff busy which has resulted in net realized fees that are extremely low during this time of the year. Staff utilization rates continue to be a concern within the entire profession due to the seasonality of our work and our inability to keep everyone fully utilized during the June to December time period.
• Employee costs and benefits have increased over the years and now in many firms exceed 50% of net revenues which is an historic high. As a result of the down economy and client fee pressures we have been very limited in our ability to give pay increases to our employees for several years and in some cases we have had to adjust our staffing levels and salaries. Dealing with the effects of the recession has not been pleasant or easy. Our objective has been to keep as many people working as possible.
• Our need for technology has continued to increase requiring substantial investment by the partners of the firm not only for equipment but also software, training and the loss of efficiency while employees are learning how to apply the new technology. Software vendors continue to look for ways to increase their revenues from their software which has put further pressure on our cost structures.
• The aging demographics of our profession and our society. Baby Boomers represent approximately 25% of our population and they are just now starting to retire. This is having a direct impact on the services required by clients and our ability to provide those services as many CPAs, 50% of which are baby boomers, begin to retire. The resulting “brain drain” is concerning as we want to give our clients the very best advice and service possible while creating opportunities for everyone to grow professionally.
The good news from all of this is that there will be an ever increasing need for certified public accountants in the future. As the economy picks up there should be many opportunities for growth. There are many ways you can assist us during this time of change and uncertainty. Following are a few ways for you to help and at the same time enhance your career in public accounting:
• Have a great attitude and be a person that others want to be around. Negativity is not helpful or productive and we need to be in a positive state of mind to be creative and provide solutions to our clients. Take responsibility for your own career satisfaction by consulting with mentors and getting the information you need to be successful in your career. As you experience greater feelings of success you will be more positive and our clients will receive better service which will benefit all of us.
• Take responsibility for your assigned engagements and tasks and be accountable for successful outcomes. The key idea here is to communicate timely and effectively so that everyone involved in an engagement knows exactly where the job stands. This will allow for collaboration and timely problem solving by your engagement team which will be helpful in limiting cost overruns and client write downs.
• Manage your time. Email, voice mail, social networking all take time and can be disruptive when trying to do work requiring critical thinking skills. Block out time to devote to your client work exclusively. While at the office work with intensity and then go home on time to be with your family. In the long run this approach will make you happier in your career and also at home.
• Talk positively about our clients. They need our services and we have an obligation to provide those services in the most professional manner possible. Clients are not a burden. They are the life blood of our firm and allow each of us to provide for our families. We have the responsibility to communicate our needs and manage their expectations for a great outcome every time.
• Leverage your knowledge. In this way you become much more valuable to the firm and will assist in the “institutionalization” of our clients. Holding on and hoarding work that is beneath your level of expertise will limit your ability to grow at some point in the future. If you really want job satisfaction make sure you are doing work that is commensurate with your experience and value.
• Help us get the word out in the community about our firm. Everyone has an opportunity to participate at this level and should choose to do so in order to get new clients and achieve our mutual goals. If you belong to an organization participate actively. It will not only be more personally satisfying, it will also show everyone else that you approach your work with purpose and dedication which clients see as great qualities for an accountant.
Working together we will get through these times, serve our clients more effectively and make our firm a satisfying and rewarding place to work. We must be prudent in our business practices while at the same time be innovative and creative in serving our clients. Help us make our firm and our profession even better. We need you! Hopefully with these efforts we will all benefit economically and personally in the future. Thanks for all of your hard work and understanding.
During my speaking and consulting travels this year, partners and managing partners say they are frustrated with their staff’s expectations in spite of the effects the “Great Recession” has had on their accounting firms. Prior to the past two years, staff members became accustomed to receiving automatic annual salary increases while the economy was booming and are now having some difficulty adjusting as the economy has deteriorated. Unfortunately the market values for goods and services have declined and all of us must now deal with this new reality.
These challenging times require diligence, increased efforts and sacrifice by everyone in order to retain your current clients and remain competitive. Failure to do so could result in losses far greater than those experienced to date in this recession. None of us have ever experienced anything like this so now is the time to communicate clearly to your staff and then ask for their help and understanding.
Team Members: How you can help us build for the future and for your long-term success.
Since 2008 the accounting profession has experienced events that have had a profound impact on how firms must operate. The “Great Recession” has reduced the spending of countless millions which has a negative impact on the clients we serve. As a result, our revenues have been relatively flat or decreasing while our costs have continued to rise. This trend will have to be reversed if we are to remain viable and able to serve our clients successfully. Here are some of these major trends:
• Pricing has moved substantially from a cost-plus model, where a multiple of a person’s hourly salary was charged for services, to a fixed fee for many of the services we provide at a time when regulatory agencies are imposing ever increasing requirements and standards. As a result, our realization has decreased on many engagements due to budget overruns that cannot be billed to our clients. Since our clients are also experiencing the downturn in the economy many have requested fee decreases from us.
• Competition for off-peak seasonal work has become extremely intense as firms vie for those few engagements where work can be done over the summer and fall months to keep their staff busy which has resulted in net realized fees that are extremely low during this time of the year. Staff utilization rates continue to be a concern within the entire profession due to the seasonality of our work and our inability to keep everyone fully utilized during the June to December time period.
• Employee costs and benefits have increased over the years and now in many firms exceed 50% of net revenues which is an historic high. As a result of the down economy and client fee pressures we have been very limited in our ability to give pay increases to our employees for several years and in some cases we have had to adjust our staffing levels and salaries. Dealing with the effects of the recession has not been pleasant or easy. Our objective has been to keep as many people working as possible.
• Our need for technology has continued to increase requiring substantial investment by the partners of the firm not only for equipment but also software, training and the loss of efficiency while employees are learning how to apply the new technology. Software vendors continue to look for ways to increase their revenues from their software which has put further pressure on our cost structures.
• The aging demographics of our profession and our society. Baby Boomers represent approximately 25% of our population and they are just now starting to retire. This is having a direct impact on the services required by clients and our ability to provide those services as many CPAs, 50% of which are baby boomers, begin to retire. The resulting “brain drain” is concerning as we want to give our clients the very best advice and service possible while creating opportunities for everyone to grow professionally.
The good news from all of this is that there will be an ever increasing need for certified public accountants in the future. As the economy picks up there should be many opportunities for growth. There are many ways you can assist us during this time of change and uncertainty. Following are a few ways for you to help and at the same time enhance your career in public accounting:
• Have a great attitude and be a person that others want to be around. Negativity is not helpful or productive and we need to be in a positive state of mind to be creative and provide solutions to our clients. Take responsibility for your own career satisfaction by consulting with mentors and getting the information you need to be successful in your career. As you experience greater feelings of success you will be more positive and our clients will receive better service which will benefit all of us.
• Take responsibility for your assigned engagements and tasks and be accountable for successful outcomes. The key idea here is to communicate timely and effectively so that everyone involved in an engagement knows exactly where the job stands. This will allow for collaboration and timely problem solving by your engagement team which will be helpful in limiting cost overruns and client write downs.
• Manage your time. Email, voice mail, social networking all take time and can be disruptive when trying to do work requiring critical thinking skills. Block out time to devote to your client work exclusively. While at the office work with intensity and then go home on time to be with your family. In the long run this approach will make you happier in your career and also at home.
• Talk positively about our clients. They need our services and we have an obligation to provide those services in the most professional manner possible. Clients are not a burden. They are the life blood of our firm and allow each of us to provide for our families. We have the responsibility to communicate our needs and manage their expectations for a great outcome every time.
• Leverage your knowledge. In this way you become much more valuable to the firm and will assist in the “institutionalization” of our clients. Holding on and hoarding work that is beneath your level of expertise will limit your ability to grow at some point in the future. If you really want job satisfaction make sure you are doing work that is commensurate with your experience and value.
• Help us get the word out in the community about our firm. Everyone has an opportunity to participate at this level and should choose to do so in order to get new clients and achieve our mutual goals. If you belong to an organization participate actively. It will not only be more personally satisfying, it will also show everyone else that you approach your work with purpose and dedication which clients see as great qualities for an accountant.
Working together we will get through these times, serve our clients more effectively and make our firm a satisfying and rewarding place to work. We must be prudent in our business practices while at the same time be innovative and creative in serving our clients. Help us make our firm and our profession even better. We need you! Hopefully with these efforts we will all benefit economically and personally in the future. Thanks for all of your hard work and understanding.
March 23, 2010
Serve More, Sell Less. It Works!
During this current economic crisis I have seen many articles emphasizing the need for increased sales and marketing efforts and virtually none on improved client service and strategies to differentiate accounting firms from their competition. While extraordinary client service is not a substitute for marketing or making sound and persuasive presentations to current and prospective clients, it is a mindset that gets everyone in the firm thinking about how they can better serve and cross serve their clients. Serving clients in a selfless, trusted advisor manner always focused on each client’s value proposition. A rare and valuable commodity in these hectic times as it requires time and intentional action on everyone’s part at a time when there are so many people competing for our time. A client centered service strategy in your firm will not cost any money yet will differentiate your firm and blow away your competition. If you want to have meaningful value added conversations with your clients you must first have a high level of trust in your relationship.
Trust in professional relationships is built through participatory positive experiences that benefit both parties so it is very important that your client interactions be as positive as possible and focused on solutions that create value for the client. If the majority of your conversations with your clients are about the late delivery of your products and services and misunderstandings about fees it makes it difficult for the clients to trust that you can provide truly exceptional service and value to them. Accountants must get past these most basic administrative matters to move into the trusted space of their clients. Failure to do so may result in the client thinking that you are trying to “sell” them when you offer them additional services. Many opportunities will be created with your clients when you are able put these routine matters to rest and then focus intently on their specific needs and wants.
Here are a few places to start:
1. Most accountants’ idea of client service is to react when the client calls. Unfortunately this strategy fails when too many client requests are made at the same time and their ability to react quickly and meet the client’s expectations is limited as everyone in the firm is busy. Of course the clients really don’t care that you are busy as they just want their needs satisfied. The first step to extraordinary client service is to manage client expectations by scheduling their work and then delivering on time. A very simple concept, however, it is difficult to implement due to the many matters that compete for your time and attention. This is without a doubt the #1 challenge facing accounting firms today and one that must be overcome if a winning client service strategy is to be successfully implemented. Sit down with your staff and discuss how everyone can make this happen. Successful implementation will take innovation as well as some restructuring of your processes.
2. Place yourself in situations where you can have meaningful conversations with your clients. One study at UCLA found that communication is 55% body language, 38% intonation and volume and only 7% the spoken words. You cannot communicate effectively and you risk losing 93% of your nonverbal communication effectiveness if you do not meet with your clients. In today’s competitive business world be very careful when you use email as it’s great for distributing information but horrible as an effective communication tool. Meet with your clients face to face. There is no substitute!
3. Learn about your client’s perception of value. Start by asking them questions about the decisions they will be making at some point in the future and then listen carefully. The following are but a few examples:
a. What business decisions will you be making in the future? (Month, year(s) etc.)
i. Equipment, personnel, product lines, locations, etc.
ii. Sale, acquisitions, merger, etc.
b. What are your personal goals and what decisions do you need to make to get where you want to be?
i. What are your plans for retirement?
ii. Where are your children going to college?
iii. Are you comfortable with your liquidity and reserves if your business experiences a downturn?
4. Assist your clients by helping them make the decisions that make their life better. The cognitive process (how we think) results in the acquisition of knowledge, experience and problem solving ability. When you participate with your clients in making decisions their experience with you will be positive and they will want to repeat the process when the next decision needs to be made. You can participate by:
a. Furnishing pertinent information.
b. Analyzing and synthesizing complex financial information to make it more understandable to the client.
c. Giving your clients your best selfless professional advice. (Independence for your attest clients must also be a consideration)
5. Remember that we think as we speak so I recommend that accountants start talking more about “service” and a little less about “selling” when discussing how to implement an extraordinary client service strategy. Get everyone in the firm involved and make sure they understand their roles and responsibilities for exceptional client service.
Once you develop and implement an exceptional client service strategy in your practice you will soon find that clients are happier, making more referrals and gladly paying their fees. It could well be the most important strategic decision you ever make to truly differentiate your firm. Your competition will not know what happened or how to compete effectively, guaranteed!
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