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Practice Tips: Richard Murphy offers advice on improving your practice

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20th Mar 2006
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Added value for the new client
I often recall the times when I have gone to see accountants to seek advice. Of course, most practitioners don't do this very often, but I've also had a career in business, not all of which has been in the UK, and have as a result had a long history as a client of the profession as well as being a supplier of accountancy services. This has significantly influenced my approach to clients, and what I think a firm should be supplying.

Over the last couple of weeks I've mentioned several essential issues a firm should address with a new client if pitfalls are to be avoided, all of which should seriously help to increase the status of the firm in the eyes of the person who matters ' the client who is paying the fee. But avoiding pitfalls is a negative approach to 'adding value'. What about some positives?

The first thing to say is the most important. You cannot add value to a client by demonstrating your technical prowess, and yet too often people have tried to do that to me. It's the last thing I've really wanted to hear. Think about it. Suppose your car has gone wrong. You have a choice. You buy a Haynes manual, set aside some time and do the job yourself or (more likely in the case of an accountant, I expect) you go to a garage who you identify as having appropriate expertise and ask them to do the job for you. Having done so you don't expect the garage to then read the Haynes manual to you, or worse still, to copy and paste it into your bill and to then charge you for the privilege. You assume they know what it says. You pay them to let you drive your car away again with the problem solved.

For exactly the same reason clients come to you assuming you can do accounts and tax. And by and large it will be hard to add value in those areas. In which case you have to look elsewhere to differentiate yourself, especially at the outset and before they realise just how good the solutions you supply to their problems really are.

There are ways to do indicate that you can supply this added value. The best way is to show that you can answer the questions they did not expect to ask of you. To do this I strongly recommend that you have a new client information pack (it can be called a web site ' but you can't take that away with you from a meeting, so this lot need to be in print as well). It would include:

1. up to date details of good business bank accounts, and how to apply for them;

2. details of local solicitors you would recommend (or if you'd rather not be so specific, have a list which does not mention those you would not recommend). Give a contact name ' that's what they have not got from Yellow Pages;

3. likewise other professionals and services e.g. chartered surveyors, insurance brokers, web designers, graphic designers, marketing companies etc.;

4. contact details for local and national business organisations the client may want to contact or join e.g. the local chamber of commerce, IoD, Federation of Small Businesses, Forum of Private Business and so on;

5. details of any organisations that might provide them with grant finance e.g. a local enterprise agency, the Princes' Trust and so on, with full contact details.

The ability to supply a list like that shows you are thinking much more broadly about their business needs and suggests as a result that you should be a first port of call when advice is needed. It does not take too long to create this pack, but is worth it.

And there's another aspect to this as well. Why not proactively involve your existing client base in developing the lists of recommended people? To do this mail the clients you like and whose judgement you trust and ask them to recommend people who have provided exemplary service (and nothing less) in any of the categories you're considering. Of course, the quid pro quo is that you share the result with them. But again, isn't that showing you want to be at the heart of a business advice network, not just to be the provider of accounting and tax services? And isn't that what value added is?

* * *
Complying with regulations
I mentioned in my last article that I would, over the next few weeks, be drawing attention to the things that I believe a practitioner should discuss with a new client if they want to differentiate themselves from the crowd. My guess is every accountant should be able to competently cover the accounting, tax and admin side of the new client meeting. But what do they say to 'add value'?

I started by saying you should talk about insurance, but the list does not end there. Insurance is compulsory. So are some other things, even if not all are obvious to the new business. Things to consider might include:

Every one of these points will let you open up avenues for discussion about the client's needs. The client will either think you're on the ball by asking, or really appreciate you checking if they don't know for themselves. Alternatively they might show an indifference to regulation. But that's value added for you because you can then decline to act because they will always be a problem client in that case.

Which just shows it really is worth tackling these issues.

* * *
Insuring the start up
Spring is in the air. It may be entirely untrue, but I associate this with new clients, and some recent comments on this site suggest others do too. There are good reasons. The tax season has ended so people are in the mood to change, but more especially, the mood is lifting after winter, people are more inclined to take risk, the frustrations which always seem to be associated with the new year are deeply embedded and those who want to start their own businesses are maybe more inclined to think about doing so now than at any other time of the year.

Whatever the cause, I hope it's true. I like new clients. I like new businesses even more, and to be candid, have always built my practices on the basis of wining start up business rather than business from other people. Again though, whichever is your preference, I hope over the next few weeks to offer some advice on what I think the practice that wants to differentiate itself from the crowd will offer to the new client.

Let's be clear about what that means. It's about impressing from the first moment. I don't mean just having good reception areas, being polite, serving decent coffee in decent cups, having acceptable literature about your firm and also looking highly efficient as you go through the process of the new client admin and identification. It's about adding value. So, what I'm going to suggest are the additional items that should be on that new client form that looks as though you're really trying to help by adding obvious value, straight away.

In which case, let's start at the very beginning. That, in my opinion, is insurance. I know people think it's about choosing a trading medium and all that other tax related stuff, and so it might be, in part. But it's as much about insurance. Because the moment you've chosen how you're going to trade you need employers and public liability insurance as a minimum. I only say here what I do for myself. Nothing, but nothing, happens on any project I'm involved in until insurance is in place. I might want to trade, but the last thing I want is an outright disaster on my hands as well. So every firm must know a broker who offers a cheap combined office policy just to get people going or have a list of web addresses where this is available. The reason is simple. You're not adding value if you simply say you need something and can do nothing to fulfil the need. Your job is to smooth the path.

And then you need at least two other things. The first is someone who provides product liability insurance and the next someone who provides professional indemnity insurance cover.

Insurance broking is now a regulated area. Be careful not to break the rules by offering advice you're not qualified to provide. And don't complicate matters by seeking to earn commission on the tiny premiums involved in many of these cases. Just add value by making sure the client knows they have an issue they need to deal with and that you've gone a long way to helping them solve it. That's value added advice for the start up.

* * *
Three cheers for generalists
I was at a tax conference recently. That's not an unusual event in my life. Nor was it unusual that it was multi-disciplinary and combined practitioners of various sorts, government officials, international agencies, large companies and lobby organisations. It was a frustrating event. There was a simple reason. By and large it discussed tax as if it existed in limbo, unrelated to the rest of the commercial, accounting or even reality.

What has this got to do with practitioners? Well, quite a lot really, especially if they are of the smaller, general practice variety. The reason is this. Specialists have their uses, and might on occasion be able to demand high fees for their expertise. They frequently look down on generalists, but generalists have many more uses ' quite literally. And that is the generalist's unique selling point. They combine a range of expertise to offer something a specialist can never do, which is both an overview of the whole issue and an ability to weight the relevant importance of each component part.

The specialist tends only to think within their own area, will often define a problem as either existing within that area, or to not be a problem at all, and usually cannot link what are related issues because they cannot see how they are related. So, a VAT specialist often cannot see the income tax consequences of what they recommend or a trust specialist cannot see lifestyle implications of their recommendations (to quote recently witnessed examples).

Generalists should be able to do that precisely because day in day out we have to look at an issue from all angles. Few people, and most especially HM Revenue & Customs, understand that.

That's why we should be selling it. Being a generalist does not mean you're not a specialist ' it's actually a very special, and rather demanding form of specialism in its own right. And a lot of issues would be resolved a lot more quickly if there were a few more of us. So go and sell generalism for all it's worth ' which is quite a lot.

* * *
What do you do with your staff in February?
I know February's more than half done, but I'm still getting serious feedback about the problems it's causing.

A young women of my acquaintance wanted to change jobs. She was worried, she said. The practitioners who employed her appeared to have no work. Was her job secure, she wondered? Thankfully I was able to offer reassurance that this was normal. Since she had yet to spend some time in the tax department she had yet to realise how distorting the 31 January deadline is to work patterns within the profession. She'll be staying after all, but it left me with serious (unexpressed) doubts about the real merits of her employers who had failed to communicate this point to their staff who are sitting round twiddling their thumbs when, contrary to all that is often said of staff, they'd much rather be gainfully employed.

And some practitioners have also complained of the dearth of cash as people have paid their tax and not their accountancy bills, matched only by the dearth of work until some 31 December work comes in.

Of course it was ever thus; I remember the "dead seasons" within the auditing year when I was training, and once upon a time when tax returns had to be in by 31 October (remember?) November and even December could be pretty dull times, which many of us might prefer.

Yet all this says two things to me. First we have to accept that just about whatever happens the tax and calendar systems create work cycles, and we'll never really break that. So, the second important thing is that we plan around them.

One way of doing so is to get some non-revenue earning tasks out of the way at this time. Why can't some professional exams be timed around these lulls, for example? Why aren't the major conferences for practitioners and their staff in February and March? The take up might be quite good.

But as realistically, this is a period which should be anticipated by some marketing. PAYE reviews are best done at this time of the year, for obvious reasons. This is also a time to be proactive to sell additional services e.g. year end planning (most of which is obvious use of allowances and reliefs made available by willing governments, but which people do not avail themselves of).

And then there is the next tax year to plan. Some clients appreciate letters telling them what is needed to be done (and I readily accept, it makes no difference whatsoever in other cases - but most practitioners can guess which clients are which). And there are files to be set up, check lists to prepare (unless entirely IT driven, and that seems rare in most practices) and even accounts files that can be set up for clients with 31 March or 30 April year ends.

OK, it might be work generation, and it is certainly not as efficient as the process can be. But what's better? Using time to best effect or having people feel like leaving because of the boredom of this time of year? To me the answer is obvious, and it's why I always put a lot of effort into making sure people were busy in February. They were happy, and it improved my bottom line, which to me is a win: win worth having.

* * *
Are you really suited to going it alone?
I've been asked by several people of late whether they should set up their own practices. It's something that in principle I encourage. It' worked well for me, after all. But I also offer words of caution. I do not think it right for everyone, whether they are currently an employee or they are ( as in some cases who have asked) a partner in a firm who's had enough and wants to control their own, even if smaller, empire.

The reason is simple. Being on your own can be a lonely experience. Some people thrive on this. Others need to work in a team, and as importantly, to be a part of that team. When you're a sole practitioner you're not part of your team; you run it.

I therefore suggest that anyone who is about to take this bold and potentially expensive step check that it is really right for them. And I have to say I normally do so by suggesting that they submit themselves to some form of personality testing. Of course these are models of behaviour, and of course, like all models they can produce false results. That's especially likely if you do them in 20 minutes on the internet. After all, who really believed the results of a quiz in the average pulp market magazine? But when done properly these tests can be really insightful, and when conducted with a well trained adviser can suggest real areas of strength and weakness in a person's character.

The one I know best is the Myers-Briggs Type Indicator (called MBTI for short). For what looks to me quite like a good introduction see the article on the subject in Wikipedia , but do be willing to invest time, effort and maybe cash to get real results.

Real results are possible. For example, if you're going to work at home as a sole practitioner you're going to need to be an 'I' in Myers-Briggs terms (that's an introvert, by the way, but not in the pejorative way it's now commonly used in society). If you're not and are an 'E' (for extrovert) instead you're going to find the isolation pretty hard to bear. So it's worth checking this sort of thing out in advance. Just as it's worth checking whether you've really got the discipline to organise yourself, which is likely to require you to be a J and not a P in Myers Briggs terms. To find out what they mean ' look it up.

There's another reason why Myers Briggs is really interesting even if you don't intend to go out on your own. It's fascinating to understand why people are different from you and yet seem entirely content to be so (when we all know that the only reasonable way to do things is 'our way'). Myers Briggs finally really helped me get my head round that. It doesn't stop you finding their habits irritating, but at least you know they have no intention of being so.

So, I would really recommend doing this at an early stage in your thinking, but I add a word of warning. It is just a model. It works for most people, but not everyone. So if it really suggests you do not have the right skills to be self employed you can do three things. The first is ignore it. The second is believe it. The third is do more research to see why you are sure you're right and it's wrong. That might require you to ask some people you know (quite well, hopefully) for their honest opinion of your strengths and weaknesses. If they think it's wrong as well, go with your own judgment. If they don't, you might just avoid a very expensive mistake.

* * *
Accounting for Hooch
I was chewing over issues with a practitioner of my acquaintance last week. He was talking about the problem of getting clients to prepare decent books and records.

It is a big issue. Your profit depends in no small part upon being able to turn the mess that arrives in a carrier bag into a decent set of accounts. If the records really are a mess your chance of much profit is low. If they're good, the chances are so much higher.

Years ago my firm produced a series of booklets on how to do book-keeping for clients. This was before the days of spreadsheets being commonplace and so the examples were all hand-written. Then the system was translated to spreadsheets. Now software packages are more common (but not as common as the impression given by their vendors). The purpose if these packs was simple. We wanted clients:

1) to work efficiently;
2) to have a set of books that would pass investigation by the Revenue or Customs (as then was);
3) to do all the book-keeping themselves; we did not sell the service;
4) to use a standard layout which meant our staff would be familiar with the information they got and the format in which it arrived.

The system worked. I still know people who use it, in some cases 20 years after starting to do so.

I recommended that the practitioner I spoke to update the idea. One way of doing so would be to supply the spreadsheets you want the client to use if they're not ready for a full accounting package. You could even add the analysis column headings and do a bit of automation of the process if you were feeling clever. As importantly, you can also chose to recommend one sort of accounting software for use by your clients. And, as importantly, once you've done that you can also recommend a standard chart of accounts which limits the choices they have and lets your people know where they're likely to need to look for things.

Each of us has our own favourite accounting package. If it's easy to use, affordable and you know it inside out then you can recommend it with confidence. You can support it too, and get back what you want from the client. It makes so much sense, but he was struggling with people on Sage, Quick Books, MYOB and others and many versions of each (especially Sage) plus a wide variety of made up Excel systems. No wonder he isn't making the sort of money he wants and clients aren't getting value added.

Will clients change? Yes, is my experience, if you show them how to and explain the benefits. That usually requires you to set it up and show them the input screens and suggest there might be a saving at the end of the day, which there could be. This is value added work which creates a win: win. Why not try it?

PS We also mused on the most unlikely analysis codes we've seen in accounts. I won with 'hooch'. The clients in question were architectural artists in the morning and artists of a different sort in the afternoon. But I never did know why I needed to information on how much they spent on booze.

* * *
Richard Murphy
AccountingWEB contributing editor Richard Murphy is a sole practitioner chartered accountant but was previously senior partner of a firm for 11 years. He has also been chairman, chief executive or finance director of 10 SMEs. A collection of previous articles by Richard on practice management themes is available in Practice Management Zone

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Replies (4)

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Kate Phelon
By Kate Phelon
09th Mar 2006 14:30

Comments from ‘Accounting for Hooch’:

Alastair Harris , 31 Jan 2006 @ 08:59 AM
manage them out
I worked for one chap who had a five point scale. He had a few 1's - lots of referrals and very good records; but no 5's - he claimed to manage them out or improve them!

* * *
Richard Murphy , 30 Jan 2006 @ 20:55 PM
Fair point!
I agree Alistair
Some will never manage anything - decide if you want them.

Some produce such perfect books its uncanny.

So maybe 5 is enough - but most are 2, 3 or 4.

* * *
Alastair Harris , 30 Jan 2006 @ 10:57 AM
exactly right
but don't forget point 5! Clients have differing levels of bookkeeping skill. Some are more than capable of dealing with the complexities of asset depreciation, HP or lease, quarterly utility bills, properly analysing costs, etc, and some are not. So grade your clients, and factor in the extra costs of analysis you will have to perform at the year end. A five point scale is more than adequate.

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Kate Phelon
By Kate Phelon
09th Mar 2006 14:32

Comments from ‘Are you really suited to going it alone?’:

Richard Murphy , 16 Feb 2006 @ 10:14 AM
You're an I and she's an E
Neville
Almost certainly in Myers Briggs terms you are an I and your wife is an E.

I know the feeling. I'm an I and enjoy working in the way you describe. My wife is an E and enjoys working as part of a team.

Otherwise my wife and I share our Myers Briggs categorisations - but just one difference is significant in the choices people make if they are to really suit them.

* * *
Neville Ford , 14 Feb 2006 @ 17:00 PM
Horses for Courses
Whether you agree with personality testing or not, I agree with Richard in that you have to be the right sort.
As a sole practitioner, working from an office on the side of the house, I spend much of my working time alone. I have some staff in the mornings but every afternoon I am alone. I can go for days and not leave the house during the day, fortunately I have very active social and musical interests so I am out most evenings (for those of you starting to think "Sad, Billy no mates"!).

For me this works, I enjoy my own company and I enjoy working in silence. However, I can see for others it would not work. My wife tried to work with me for a short while, when she was fed up of nursing, but it drove both of us mad for opposite reasons. She is now a university lecturer and enjoying every minute and I have my peace and quiet back! She is very much a people person and cannot abide silence.

Discipline is another aspect that some cannot cope with. If you find it difficult to get down to work without doing the washing up, walking the dog, putting the washing in the machine, etc and have to keep nipping off to check teletext or whatever then it's probably not for you. Personally, apart from about 5 years of my working life I have effectively been self-employed so it's not something I think about.

* * *
John Newth , 14 Feb 2006 @ 13:14 PM
Make sure you are suitable
I agree about Myers Briggs (I am an ENFJ), and also consider vocational guidance to be worthwhile. I did the VGA tests, which indicated strongly that I should go into publishing. It took 15 years to happen, as I was already a practising ACA, but has proved to be absolutely correct.

* * *
Alastair Harris , 31 Jan 2006 @ 08:59 AM
manage them out
I worked for one chap who had a five point scale. He had a few 1's - lots of referrals and very good records; but no 5's - he claimed to manage them out or improve them!

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Kate Phelon
By Kate Phelon
09th Mar 2006 14:33

Comments from ‘What to do with your staff in February’:

Frank Bebbington , 22 Feb 2006 @ 16:58 PM
Got away
I hate to sound smug, but as I work on my own I shut up shop last week and went to Paris for five days! and tomorrow I am taking another day off and going canoeing (yes, it really is a winter sport).
I have also spent some time evaluating tax software as my supplier, Objective Tax is changing. This is about the best time of year for a sole practitioner, apart from cash flow.
* * *

Stephen Quay , 22 Feb 2006 @ 14:28 PM
They Think It's All Over....... You Must Be Joking!
I get really fed up keep hearing "1st Feb, Well glad that's all over for another year!"
Get in the real world. I'm still working on 2004-05 tax returns that came in during Jan. Same as I did last year and the year before that. Ok so I did the easy ones but most are self employed and require accounts from a shoebox full of records. These can each take a week to complete.

Also in January was the new client with three years returns and accounts to prepare - still plodding through those. Another old client has just sent me his 2004 tax return and accounting records, 2005 will be along later.

Am I complaining? Of course not. This is good regular work without which times would be quieter. Yep! The 31 Jan deadline is great for waking clients up and getting them focussed and for keeping me in steady work until 31 March.

However, I do agree with Richard that if there is a lull, I plan to clear out old client files and anything over six years old. Then in April I shall mail out to all clients the tax return information requests. Then we can start all over again.

* * *
Nigel Harris , 20 Feb 2006 @ 12:41 PM
Not for all of us!
This was certainly the case for us up to a couple of years ago. However, the increasing bunching of tax return work in the post-Christmas period has ensured that we then stay busy in Feb and March doing all the work we didn't do while we were doing tax returns!
31 December corporate year ends keep that side of the practice occupied.

And, of course, training providers have cottoned on to Feb/March being a good time for CPD courses and conferences.

All of which means that there is no longer a 'dead' period when we can install new computer systems, hardware, etc!!

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Kate Phelon
By Kate Phelon
09th Mar 2006 14:34

New look Practice Tips

Dear Members

As you may have noticed Richard Murphy’s Practice Tips have been amalgamated into one article for easy reference. But just so you don’t miss out on all the valuable comments posted on the previous ones please find below the postings made on the various articles...

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