We all have different reasons for starting our business…
- For some it’s about providing a certain lifestyle for themselves and their family,
- For others it was about escaping the constraints of being employed,
- And for a few, it’s just for the love of accounts & tax (yes, really…)
But whatever your reason, one thing you have in common with everybody else is a need to be profitable, and to make sure that your making the level of profit that you deserve.
So how do you do it?
The answer is 3-fold…
In part 1 of this series I shared exactly how to implement a profitable pricing & sales system that will improve your top line.
In part 2, I looked at how you can decrease your cost base by utilising outsourcing/offshoring and dealing with unprofitable clients head on.
And in part 3, we’re going to look at how to increase your teams output and efficiency in order to move closer to that magic 40% net-profit mark.
So, let’s get into it…
Increasing output and efficiency
One of the ways to improve your practices profitability is to get more done in the same time (or the same done in less time, whatever way you want to look at it…)
For example, if you can finalise 20% or even 30% more jobs in the same amount of time, then your overall profitability is going to increase.
Now, one of the most common objections I hear from practice owners at this stage is…
“But me and my team are so busy Rudi, we can’t get any more done in a day”
With your current set up, this might be the case.
So, ask yourself the following 2 questions:
- Are you currently using the best possible tech stack that maximises your team’s efficiency?
- Are all of your team working as productively as possible?
If you can answer yes to both of them, honestly, then you may be right.
But if you’re like most practice owners I speak to, then there’s an opportunity for improvement in both of them.
1. Maximising efficiency through technology & automation
I know what you’re thinking…
The more technology I use, the more my technology and software costs will increase.
Yes, they will.
But the efficiency gains that can be had from using the right stack of software far outweigh the increase in cost (plus, you can always pass that cost on to your clients if it’s a piece of software they will be using)
You want to implement software that saves you and your team time AND adds value to your clients.
Right now, there are literally hundreds of applications and pieces of software that accountancy practices can use….
So, what will have the biggest impact?
Data capture/entry software
If your team are still spending time manually entering data from invoices and receipts into spreadsheets and/or bookkeeping software, then you’re wasting an enormous amount of time (which is impacting on your profitability).
In addition, apps such as Hubdoc which can automatically import all of your client’s financial statements (phone bills, utility bills etc) straight from the providers into your cloud accounting application, can also save you and your team a lot of time.
Bookkeeping in general is an area lots of practices don’t make nowhere near enough money as they should. With the right mixture of profitable pricing and technology it can become a very profitable part of your business.
Cloud accounting software
The data captured from the afore-mentioned apps needs to be somewhere, and that somewhere is straight into the cloud.
Cloud accounting software can have a number of efficiency benefits for both your team and your clients and is where the industry is transitioning to (and has been for the last 7+ years).
If something can be automated vs. a member of your team having to do it then it’s going to free up their time and ultimately bump up your profitability.
But remember, it’s important to make sure your operation is running smoothly before you apply automation. Bill Gates famously said “Automation applied to an efficient operation will magnify the efficiency. Automation applied to an inefficient operation will magnify the inefficiency”.
So, what can be automated?
- Proposal/Letter of engagement creation – check out Practice Ignition and GoProposal
- Chasing clients for missing info – check out AccountancyManager
- Workflow/job creation and allocation – check out Glide, Senta and AccountancyManager
- Everything else? – check out Zapier – there aren’t many apps it doesn’t connect to…
2. Maximising team productivity and output
So, you’ve got the right technology in place, but still you feel like your team might be dragging their feet slightly.
What can you do to improve their productivity and output?
1. Setting and reviewing regular targets
I’m all for giving your team autonomy and freedom to manage their own workload.
That’s exactly what I do in both of my accountancy practices.
But even the best performers need targets to keep them focused and give them something to aim for.
Does Usain Bolt just aim to win the race? Or does he aim to knock 0.01 seconds off every time?
Setting targets for your team is a great way to kick them into gear and get their output levels up.
It’ll also highlight (if it wasn’t already clear) who your top performers are, and who might be dragging their feet slightly…
If you want to add some extra accountability into the mix, use whiteboards in your office to monitor the targets on a weekly basis. This is also a great way of keeping it at the front of their minds.
2. Hold your team accountable to the targets
Setting targets is good, but without the accountability to follow them up, they won’t have as big an impact as they should.
So how do you go about holding your team accountable to their new targets?
You could do a weekly meeting at the start of each week e.g. did we hit our target for last week, if not then why? And what is our target for this week?
But I prefer to do daily huddles.
Daily huddles are great for accountability but also for motivation and a little bit of team camaraderie.
Here’s a really basic agenda you can use where each team member answers the following questions:
- What jobs were you working on yesterday?
- What jobs are you working on today and how much time do you anticipate they’ll take?
- Do you have any bottlenecks?
And what you’ll find is that these huddles often throw out interesting observations and learnings…
E.g. one of your team members might mention they’re working on the same job over multiple days. You can then discuss whether this is an issue with the client or in fact a productivity issue with the team member.
3. Get your team to buy into your vision & goals
If your team are bought into the vision for your practice, and the goals that you have, then they’re going to be much more motivated to make things happen and move things forwards.
So how can you do this?
If you want their buy in, then they need to have some part in creating it.
Because after all, ‘the person who says it, owns it’.
And what this means is that you telling your team what the vision/goals are vs. you asking your team to help you create the vision/goals (and you coaching them to give the right answers) will result in 2 very different outcomes.
If people feel part of something, then they’re much more likely to work harder to make it a success.
Remember, you’re running a business
One of the most important things to remember is that you’re not just running an accountancy practice, you’re running a business.
And like any other business that you work with on a daily basis, maximising profitability is key.
If you’re not hitting at least 40% net-profitability in your accountancy practice, then I truly believe that you’re leaving money on the table.
So, in summary, here are the steps you need to take to hit that magic 40%:
- Increase your top line
- Implement a profitable pricing system
- Implement a profitable sales system
- Decrease your cost base
- Explore an outsourcing/offshoring strategy
- Deal with unprofitable client’s head on
- Increase your output and efficiency
- Implement the right technology & automation
- Maximise team productivity and output
Making small improvements to each of the things mentioned above will have a big impact on your overall profitability. But by taking the time to focus on each one as a project, there’s nothing to stop you hitting and exceeding the 40% mark.
What could you do with the additional profits?
You could pay yourself a better wage, you could pay your team more, you could even use it towards increasing your capacity ready to grow and scale your business.
But whatever you choose, profit isn’t something you should be adding on at the end, it’s what you should be planning for in the beginning.