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The cost of running a practice over four years

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Running an accounting firm needs constant attention as tech prices and client specifications change constantly. Practice owner Alex Falcon Huerta lays out her current tech stack and how her costs and priorities have evolved.

24th Jul 2023
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When new accountants make the leap into running their own practice, the initial mindset is usually to try and do everything yourself. I did exactly this when I went into business for myself in 2015. 

Getting started

I implemented a ‘tech-first’ approach from the start. I knew I had a lot to set up and to make sure I didn't miss deadlines.

This might sound counter-intuitive, but the cost of software wasn’t as important to me as it is now. Implementing cloud tools cut out a lot of the manual work and meant I didn't need to employ people at the start – nor did I need to be based in an office.

There’s a huge range of software available and while getting started is usually the hardest part, your tech stack needs to be maintained and evolved as the practice grows. Quite a few of the tools I started with have now changed: sometimes due to client delivery, sometimes due to cost, and occasionally because new apps have better suited my practice.

Here’s a list of my current tech stack, their functionality and any software they’ve replaced.

Current software

Function

Replaced

Xero

Practice/workflow management

 

TaxCalc

Tax and accounts production

Digita

BrightPay

Payroll

Xero Payroll

Fathom

Monthly reporting

Spotlight

Fathom

Cashflow forecasting

Fluidly

Xero

Bookkeeping

 

Dext

Receipt capture and processing

 

Dext Precision

Data cleansing

 

Ignition

Proposal engagement and payments

 

GoCardless 

Payments built into Ignition

 

Stripe 

Alternative payments for overseas clients

 

Telleroo

Bulk payments

 

Soldo 

Cash cards

 

Mydocsafe

Digital signing

 

Xama and Connectworks

Compliance screening and AML

Credit Safe

Translucent

Multi-entity platform

 

Google

Core services

Microsoft

Slack

Team communication

 
Hubstaff Employee time-tracking and productivity  

Confluence 

Internal wiki

 

The Gap

Business advisory

 

Youcanbook.me

Online booking system

 

Twiso 

Meetings and training recording

Loom and Zoom

Dialpad

Phone system

 

Zapier

Connect multiple apps

 

ChatGPT

AI experimentation

 

The next phase

I now constantly review costs and margins in my business to keep it lean. You can see in the stats below in the earlier years, software costs were actually higher. The market has become more competitive and we now have more options. In the list above, you can see where I've made critical changes to allow for reduced costs.

Tech adoption has meant I've needed to stay innovative so I can meet client demands and market rate pricing internally. 

I’ve also focused on increasing consulting work as opposed to just doing compliance work. In the stats below you can see how I have shifted the consulting income to 44% of overall annual income. This is always a moving target and a huge focus is placed on keeping my eyes on client opportunities. The importance of recognising what clients require is really important. It's not all about what tech to use but to remain proactive to client needs, and this includes keeping on top of your own practice.

In recent years, I’ve also focused on offshoring and outsourcing. At the start, this wasn't the case, my costs were a lot more! 

The cost of running a practice needs constant attention and review. Tech prices and specifications change constantly. Client requirements also change frequently, so our proposals are amended monthly to capture scope creep/stretch as well as hikes in software prices.

Split of Income as a % over four years        
  2023 (%) 2022 (%) 2021 (%) 2020 (%)
Compliance 56 74 79 85
Consulting 44 26 21 15
         
Split of Cost of Sales as a % over four years        
  2023 (%) 2022 (%) 2021 (%) 2020 (%)
Internal software costs 8 4 3 9
Client Software 20 16 14 17
Bank fees 2 1 1 1
Direct wages 64 72 80 70
Other direct costs 5 7 2 3
         
% over Turnover        
  2023 (%) 2022 (%) 2021 (%) 2020 (%)
Admin Costs 13 13 12 24
COS 31 53 49 45

Evolving personal and business goals

During my first year of trade, I managed to purchase a reasonable size home, which I didn't expect to do until at least year 5. I’ve traveled frequently, building my international network and client base and I continue to work as a digital nomad. 

Working around the world actually helps me to separate out my personal goals and business goals. Due to the time zone differences between myself, my clients and some of my staff, I’ve established focused time on what needs to be prioritised. I plan ahead where possible which places me in a position to remain agile with the rest of my time.

Growing the business and being successful to me is being able to take care of my existing clients rather than constantly chase for leads. Seeing my current clients achieve their goals and dreams because I've been able to clearly see what more I can do for them. 

Your work needs to be enjoyable. It’s important to have goals and targets, but they need to be what you want from it and that should be your main focus. What you put in is what you get out - in the end, it's your business.

There have been so many things to learn along the way, but I’m glad I decided to set up and take care of an awesome client base I can call my own.

*25 July 2023: This article was amended to add a time-tracking app to the list of software

Replies (29)

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By Hugo Fair
24th Jul 2023 23:36

My initial reaction was 'wow, that's top heavy with software for a small business' ... so I wondered if there was an underlying clue in the relative lack of mention of staff and unusual reduction in annual wagebill.
And I see from CH that total number of employees has, over that period, been 4, 4, 6, 4 and then 2.

So is this really a story of how to use software instead of staff?
Nothing wrong in that - and could be interesting - but it's hard work trying to find the 'angle'.

Thanks (2)
Replying to Hugo Fair:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 07:56

Hi Hugo. Yes absolutely not. I have team members as well as contractors. In the initial stages when I set up I focused in tech before hiring. Since I was trying to keep my costs down as a start up and do everything myself. Thanks. Alex

Thanks (2)
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By flightdeck
25th Jul 2023 09:31

What a super article - thanks!

Thanks (3)
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By arthvirg230
25th Jul 2023 09:39

what a bonkers article! 20% of your turnover on software costs?!! and how much software?
juts checked mine and my software costs me 4% of turnover!!

Thanks (2)
Replying to arthvirg230:
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By johnjenkins
25th Jul 2023 10:04

I can see your point and to a certain degree I agree. However Alex has said that she started out with a view to be High tech (for me anyway) and it looks as though she has achieved her goal. If the future goes even more High Tech and includes AI then she is well prepared and we will be retired. They will even have supermarket trollies that know their own way back to base.

Thanks (2)
Replying to johnjenkins:
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By arthvirg230
25th Jul 2023 10:45

AI... (chuckles!!!)

Thanks (3)
Replying to arthvirg230:
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By johnjenkins
25th Jul 2023 11:30

Alex might be AI. Would we know?

Thanks (2)
Replying to arthvirg230:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 13:05

20% is 'client software ' - these are products which are recharged to the client. As they have scaled, the software increases. Internal software this year was 8% but 4% previous years. The increase this year is due to a number of softwares increasing their prices all at the same time and I added a couple more to help with some further automation .

Thanks (1)
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By paudiematthews
25th Jul 2023 11:53

What software do you use for timekeeping?

Thanks (1)
Replying to paudiematthews:
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By johnjenkins
25th Jul 2023 12:30

Timex or Seconda. Never Rolex. They have software built in the hardware.

Thanks (3)
Replying to paudiematthews:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 12:59

We currently use Hubstaff

Thanks (1)
Replying to paudiematthews:
Tom Herbert
By Tom Herbert
25th Jul 2023 13:17

And I've added Hubstaff to the list in the article :-)

Thanks (1)
By ireallyshouldknowthisbut
25th Jul 2023 15:50

heh, my software costs, 0.5% on £220k t/o (which is all fee, excludes rebilling)

Its myself and no.2. No subbies, no complex systems.

Thanks (2)
Replying to ireallyshouldknowthisbut:
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By johnjenkins
25th Jul 2023 16:00

I'm currently running at 2.14% However if turnover doubled my software bill would be the same so percentage would come down.
I presume Alex would be in the same position.

Thanks (0)
Replying to johnjenkins:
By ireallyshouldknowthisbut
25th Jul 2023 16:53

johnjenkins wrote:

I'm currently running at 2.14% However if turnover doubled my software bill would be the same so percentage would come down.
I presume Alex would be in the same position.

I find 8% jaw droppingly high. if its only a hobby practice on say £50k that's still nearly 4 times what I spend.

Thanks (1)
Replying to ireallyshouldknowthisbut:
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By johnjenkins
25th Jul 2023 17:08

It would appear that Alex has fingers in different pies and has set herself up so that her software will cater for her every situation as long as she keeps on top of it. I really don't think the article goes deep enough into how the software is used for her daily life.

Thanks (2)
Replying to johnjenkins:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 22:37

Ive mentioned some examples above. We all run our practices in different ways. Im just sharing mine. But you're right - a more in-depth version would be better - could be on the next article :)
I do have other investments/businesses - you're also correct on that one!

I will implement tech / people where and when needed if it is a pain point for me.

Thanks (2)
Replying to ireallyshouldknowthisbut:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 22:33

8% is quite high but some softwares are required to meet client delivery. Around 14 of my clients are in audit threshold - out of the 50. Also, in late 2022 / early 2023 a lot of softwares companies put their prices up .We could only capture some of this in the following months after the year end. Im hoping software companies will start to recognise some of the challenges we face. This is why I constantly review and check other products .T/o is considerably more than the above mentioned. I have high value clients, but few of them. This is my ideal and preferred model.

Thanks (0)
Replying to ireallyshouldknowthisbut:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
25th Jul 2023 22:23

Yes this is great and ideal. Especially if you want to stay small. I have quite a niche business where the majority are SaaS and Creative with multi entities globally. I look after the UK entity only. Although it sounds complex and especially with the softwares, most of it is connected via Zapier. An example - I use Ignition to do my proposals, payments and engagement letters - Zapier sends this to google drive and slack. Ignition takes the payments and creates the sales invoice in Xero. Before this, I was manually creating repeating invoices in Xero and using GoCardless for payments . The team are notified of the new services signed up for to commence the work. - Another is DialPad. This is connected to slack via Zapier. - this notifies me of calls answered, a recording of the call and any missed calls. - Another is ChatGPT - connected via Zapier to create draft emails in Gmail ... I would say Im passionate about tech and love to test things out - basically to avoid any manual work .

Thanks (3)
Replying to Alex Falcon Huerta FCCA:
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By johnjenkins
26th Jul 2023 11:51

So the next chapter would be to "franchise" your model.

Thanks (1)
Replying to johnjenkins:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
26th Jul 2023 12:39

Yes potentially .. although Ive also heard some horror stories on that subject!

Thanks (0)
Replying to Alex Falcon Huerta FCCA:
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By johnjenkins
26th Jul 2023 13:05

The British Franchise Association have exhibitions, which are very helpful. I have a couple of clients that franchise their business, if you are interested.

Thanks (1)
Replying to johnjenkins:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
26th Jul 2023 17:56

Yes sure - please DM me

Thanks (0)
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By Aldo Scotia
26th Jul 2023 10:34

Wow ! So much software and frequent changes - id be spending half my time getting to grips with the new software. 14 audit clients with, as someone mentioned, only 2 staff - presumably you outsource some audit services- resulting in significant time spent in reviewing work papers etc. Add to that the international dimension and id say you work extremely long hours.

Thanks (1)
Replying to Aldo Scotia:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
26th Jul 2023 10:54

I outsource Audit work. Software does most automatically. I can confirm I don't work long hours. I have specialist contractors outsource and offshore. Changes are since 2015.

Thanks (1)
Replying to Alex Falcon Huerta FCCA:
Profile
By indomitable
26th Jul 2023 13:50

I think Alex means her practice doesn't do audits, correct me if I'm wrong? Software does most automatically? What are you talking about here? Audit work?

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Replying to indomitable:
Alex Falcon Huerta
By Alex Falcon Huerta FCCA
26th Jul 2023 18:04

Yes correct - I dont do the audits myself - I partner with a firm to carry these out. In some of my explanations above on the 'admin side', Zapier removes quite a lot of the mundane tasks I used to do manually. This frees up my time as well as my Ops Managers time so we can focus on more fee based work. Even now with 'Twiso', my Ops Manager used to manually update video meetings with a summary and action points for the client or the team...Twiso has this build in with AI. So its areas such as this where I look to save time - I compare how long it would take my team do action manually and see if its worth implementing or not.

Thanks (2)
By Silver Birch Accts
27th Jul 2023 17:56

We use Kettleon to make the tea.

Thanks (3)
Replying to Silver Birch Accts:
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By johnjenkins
28th Jul 2023 10:16

Interesting to know what add-ons you have.

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