Case study: Six characteristics of a high performing firm
From the desk of one of Australia’s most efficient accounting firms
By way of background, we are a regional NSW firm working from two offices with a total of nine accounting team members. We are always very excited to receive the Good Bad Ugly report each year and the results show us in the top five firms for the Business Fitness Efficiency Factor the past few years.
For us, success has been delivered through a combination of hard work and implementing the right systems – from staff training right through to marketing. Our biggest strength and asset are our systems, it’s the main reason we are achieving the success we are.
To expand in more detail, we have identified six areas we believe are crucial to all accounting firms and their level of performance.
1. Quality staff backed with quality training
When a new team member walks through our doors for the first time, they are trained to the standards expected of a highly efficient firm. Induction and training are ‘rolled out’ as a matter of course, with the firm relying on documented procedures to support the process.
Making sure staff are trained in this way – learning how to use the firm’s systems to execute all jobs within a six week period – has resulted in hourly rates for trainees reaching an impressive $200 within their first 12 months of work.
It has also bolstered the team’s ability to overcome the unanticipated challenges that have occasionally arisen. In the past we have lost some key staff which puts pressure on capacity and working hours for the remaining team members. We would not have been able to maintain our commitment to a six week job turnaround during this time without having our effective systems in place, and without staff trained in how to use them.
2. Efficient Systems
We believe we have the efficient execution of compliance jobs down to a fine art. We have been careful that this has not come at the expense of our clients. We have learnt that fast job turnaround and active client contact go hand-in-hand – this is absolutely crucial and clients make us their first port of call for any issues that arise. So what is our secret? We systemise our client contact. For each of our clients, we schedule three face-to-face meetings each year, plus make active contact with them at least every two months. As a partner, you must have a personal commitment to client service. By limiting partner involvement on client jobs to final reviews and some tax planning and business development work, this provides extra capacity to do the client meetings and to provide the right business advice as soon as the calls come in
3. Non-compliance focus
Our experience tells us that proper tax planning and structuring cannot be separated from compliance work. If we fail in this area, it means our clients are less reliant on us but for our clients it’s also less than an ideal outcome. A number of years ago we trialled outsourcing our compliance work, but found that any benefits the arrangement offered in terms of efficiency were outweighed by issues arising from inadequate tax planning and structuring for clients – this is a ‘no brainer’ for us.
With the onset in popularity of cloud-based accounting applications, this may lead to the so-called commoditisation of accounting and tax compliance work for traditional accounting firms. Consequently, this could bring with it pricing pressures, but for us it provides us with another reason to contact our clients if they haven’t already approached us. Additionally, if you have a focus on tax planning and structuring this will always negate the price pressure scenario.
4. Disciplined Marketing
Our target client profile is ‘mum and dad’ businesses worth an average annual fee of $7,500 – although this is starting to shift because we have a focussed approach to growing our client base.
We have achieved some amazing results through a very simple, yet disciplined marketing effort. We employ the services of a marketing firm to make a regular series of ‘cold call’ approaches to local businesses fitting our target client profile. This leads to meetings with new prospects approximately once or twice each week. Our success rate from this approach is recruiting new clients 50% of the time. For some firms who struggle to grow revenue and bring new clients on board, this has been a very effective approach for us.
Obviously, having a compelling service offering that differs from traditional firms definitely helps in this situation. By conducting regular meetings and lots of contact points with our clients, and always turning things around quickly seems to differentiate us from other firms.
5. Effective pricing leads to getting paid
Not to sound like a broken record – we are disciplined in our approach to client engagement, providing full engagement letters for each job and quoting for compliance work upfront as part of the engagement process. Being very aware of what it costs us to complete a job provides us with the confidence our quoting is right.
It’s not really a secret, it’s simply just about being efficient. Our standard annual client fee is no different from other local firms; we simply rely on doing our work ‘very’ efficiently.
In addition to quoting fees upfront, we also use a monthly direct debit system for clients, which has resulted in a significant improvement in our cash flow. Approximately half of our revenue comes from monthly payments made by direct debit and the rest is just a matter of getting bills out the door quickly.
6. Future planning
Our big picture is to take on larger business clients with an average annual fee of $15,000 and a need for value-added services outside of standard compliance work, as well as offering a wider range of value added services to our existing clients. The focus will be to develop the firm’s proven and efficient systems to obtain a higher profit margin from these clients, with the objectives being to grow profit and improve on our already impressive average hourly rate.
Although we have experienced some challenges with a tough economy recently, resulting in a greater focus on assisting clients with cash flow and liquidity issues, we managed to grow our fees by 14% in the previous year. We are confident that our strong client relationships will allow us to help local businesses see through any pain.
In summary, it’s simple but not easy. It’s been a matter of staff training and efficiency for us, rather than taking on high end work. As for the future, we have a lot of opportunity for growth – we have only just scratched the surface.
For more info on supercharging your accounting firm, head to www.businessfitness.net.