Seven ways to boost the bottom line
Cut costs, raise revenue, train your people, and reap the rewards.
April 29, 2013
Accounting firms play a key role in helping clients improve their profitability, but CPAs aren’t always the best at running their own businesses. To help CPAs beef up their firms’ bottom line, I will be teaching a session called “Seven Ideas to Boost Your Bottom Line,” at the 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit, to be held June 10–12 in Las Vegas. This article introduces you to the seven ways and touches briefly on how each one works.
Software costs are one of the biggest areas where firms can save money. A lot of software providers now, especially with cloud-based platforms, are charging either by the number of clients you have or by the number of employees you have. We work with a vendor that provides storage and file transfer services and wants to charge by the number of email addresses a firm has. That’s a good approach for smaller firms, but it becomes kind of random—and expensive—for larger firms.
So we sat down with the vendor and said, “We aren’t going to pay you that much money because the service is not any harder to provide because there are 80 of us instead of 10. You already have it bought and paid for. We don’t like your scale, and we want to pay you less.” Typically, vendors will agree to charge you less because they want you on board.
Another area where you can save money is in your research material. That’s a big one. If you are a larger firm, you might want to double-check your policy on reimbursing tuition. And some of the items, you might want to increase. Let’s say you would like to provide more for tuition. You might save money in another area and use some of that savings to boost the tuition program.
Everybody just gets complacent with this stuff. Things like sending your malpractice insurance out to bid every two to three years. You need to say, “Let’s get it bid instead of being comfortable with it.”
Are you running your business like a business?
You also need to understand the profitability—the business part of the business. Understand who you are demographically as a firm and focus that effort into things you do well or things you like doing that you can concentrate on and build. Our firm is starting to put clients into channels, creating an estate and trust group and a construction group so we can focus a set of staff on a specific goal. Firms of all sizes can do that. You don’t have to be a bigger firm.
Firms often are reluctant to raise rates because of the pushback they will face from clients. But you can’t be in any business and not look at your rates on an annual basis. You need to understand whether you are charging the right amount. Use resources such as the AICPA Management of an Accounting Practice (MAP) Survey to compare your firm’s key metrics with those of your peers. You might be surprised by the number of firms that don’t know basic facts about their own business—such as how many billable hours the firm had.
Charge what you are worth, but make sure that you are worth what you charge.
That does not mean you simply cut clients loose. You need to talk about contractual matters in each instance to ensure that you know what you can and can’t do in terminating the relationship. You need to know what the breakup meetings will look like, and you need to have a destination in mind for the client—another accounting firm or service that is a better fit. Transforming a termination into a transition can keep bridges from being burned.