Making and keeping a practice profitable has never been more difficult. And as any good accountant knows a growing practice does not automatically mean a profitable practice, however getting full visibility on this can also be a real struggle, says Geoff Perkins from TallyPro.
Part of the issue is the rising cost of securing the best talent, and even once you’ve overcome that challenge there’s been a real slump in the output of these employees. The NatWest 2015 Financial Benchmark Report highlights a mere 1000 chargeable hours per fee earner in the average accountancy firm.
Compounding the issue is offering clients a fixed fee option. It’s a great way to streamline the billing process and an attractive proposition for potential clients - after all no unexpected costs - but if you’re spending more time than is being billed for or you get the costing wrong in the first place this will be eating away at your profits.
The Natwest report found that the average amount of time it takes from the recording of an hour to the billing of that hour is 42 days. It’s well documented that late payments are having a toxic effect on the economy and a delay such as this is increasing the chances that you will also be subject to late payments. A business that has not been paid does not have access to funds to pay its own suppliers and staff and then has to borrow money which again starts to negate any profits. Not to mention the time wasted on chasing these late payments.
It’s unsurprising then that profitability is a challenge and each and every one of the issues above serve as a stark reminder that productivity drives profitability. Something that hasn’t gone unnoticed by most industries with the growing adoption of productivity tools such as time tracking.
Time tracking is the process of capturing time spent by different staff on different project components across a business. It provides a 360-degree view of projects, with the ability to log and analyse all activity, such as time, expenses and invoicing against individual projects and generate reports on all this activity.
Therefore something like measuring the relationship between fee earners and a number of fees they generate is made simple.
Furthermore, time tracking helps boost productivity by highlighting time inefficiencies and motivating staff through increased accountability to get the most out of their time. It doesn’t stop there, it also simplifies the billing process by collating all the information to generate an accurate invoice at the click of a button.
Above all else, it can give you visibility of profitability across all your clients so that you can address unprofitable clients and better cost your work for future clients.
Anything you can do to boost productivity will undoubtedly impact your bottom line and help ensure your firm thrives beyond the next few months.
About Geoff Perkins
Geoff is Managing Director at TallyPro a time tracking software built by Commercial Software Limited (CSL) a Microsoft Partner, with 36 years’ experience of developing software solutions for accountants. A previous Director at PwC and Associate partner at KPMG before that, Geoff has practical knowledge of the value of software as a tool for maximising profitability.