18% of all work is being written off before being billed
Newcastle: January 5th 2016 – A major new benchmarking study compiled by global Business Advisory software specialists, Panalitix, has revealed that accounting practices are writing off on average £187,523 work per firm every year. The study of 103 firms, ranging from a brand new start up firm with little revenue through to one with a £24m turnover, found that 18% of all work is being written off before being billed. The total across the 103 firms surveyed came to £19,502,400. This compelling data suggests that the UK accountancy profession really enjoys writing work off.
The survey found that some firms in the UK budget for write offs in their annual/job planning process. “Write offs are a curious thing in the profession,” says Rob Nixon, CEO, Panalitix and a global industry thought leader. “Some firms in the UK survey actually ‘budgeted’ for write offs in their annual / job planning process. They expect to fail before they start. Why not budget for ‘write ons’ and plan to succeed?”
Write offs are inevitable, according to Rob, when accountants operate in a ‘price in arrears’ model and/or a ‘chargeable time’ model. “This old pricing model is unethical,” he suggests. “When you price by the hour you are not incentivised to be as efficient as possible and get the job done super fast. In fact, you are directly incentivised to do the task slower.”
Write offs can be eliminated with this 5 step process:
- Commit to scoping and pricing every piece of work in advance and communicating this with clients in writing and the get the client to sign off on it
- The price is based on value and not based on a charge rate system
- Have an ‘hours budget’ only on each job – not a pounds budget
- Become super-efficient with every client job and take time out of the job – reducing the chargeable time
- Stick to the scope of works only – everything else is outside of scope and needs to be communicated with the client before proceeding
The same 103 firms were asked to set a 12-month goal for 2016 and the (average) goal for these 103 firms was STILL 5% written off or an average of £91,539. Rob adds: “You could probably buy a top of the line Range Rover for that. At least it’s better than ‘torching’ 2 of them every year!”
A copy of the full report and findings can be downloaded from https://www.accountingweb.co.uk/directory/panalitix
PANALITIX is the innovation of Rob Nixon, who for the last twenty-one years has been coaching and teaching accountants around the world how to run profitable and efficient firms. More than 150,000 have heard him speak and 16,000 accountants have used Rob's training products.
PANALITIX is cloud software that enables accountants to offer real time business advisory services to their clients and helps them to have conversations about the future, rather than the past, based on their numbers.
A unique combination of cloud technologies and ‘how to content’ embedded within the software provides a suite of highly targeted and focused planning and monitoring tools, which focus on adding value during the consulting process.
Over 500 firms use the software globally.