The first thing most people think about when attempting to increase their profitability is ‘how can I attract more clients’.
While more clients can undoubtably lead to higher profitability, there are other factors to consider that also have an impact on your overall bottom line.
- Increase revenue faster than costs
Attracting new clients requires a combination of both time and effort, and depending on your marketing strategy, it can also involve cost.
Even the best laid client attraction plans don’t always work in the time frames we’d like them too, and if increasing client revenue is proving difficult, most businesses then start to think about decreasing expenses.
- Decrease expenses
Typically, the largest expense for an accounting firm is their staff. By downsizing staff, you’ll certainly see an uplift in available cash, however you may risk your ability to continue to offer timely and high-quality services to your clients.
It can also cause issues for the sustainability of your business because it puts extra pressure on your remaining staff and limits your ability to respond quickly to changing client needs.
- Improve efficiency
Improving efficiency is not only something you can control, but it can also have a significant impact on your firm’s profitability.
From a simple maths standpoint, if a practice has $1m in operating expenses, an marginal operational efficiency improvement of 2% adds an additional $20k to the bottom line.
There are three key areas you can start to improve your operational efficiency.
- Workflow – the very nature of accounting means you’re managing multiple moving parts to keep your operations running. Data entry, tax management, report generation, compliance, SMSF processing, payroll, accounts payable and accounts receivable are just some of the activities you’re likely managing.
All this activity leads to some important questions ie are there any bottlenecks in your process? What is the ripple effect if an activity is delayed? If a client doesn’t provide the right data, how does that impact the P&L? And what does incorrect data mean for the forecasts and the reports you’re creating?
The good news is that these days there are plenty of technology options to help ease the burden of inefficient workflow and help clients provide you with accurate and timely data.
- Technology – Accounting cloud technology has taken off in the last few years and for good reason. In the early days of technology, many products were desktop based and stand alone, meaning they could quickly become outdated and therefore inefficient.
Cloud technology has the advantage of ensuring you always have access to the latest features, many of which are developed to keep up with legislative change. The right technology can save you hours in mundane and repetitive tasks and can help minimise the risk of data mistakes caused by human error.
- Outsourcing – more and more, accounting firms are relying on reputable outsourcing companies to manage their repetitive back-office tasks. This in turn frees up practice staff to spend more time growing the business and providing proactive services to their clients.
Offshore service providers enable accounting practices to access qualified accounting team members on demand and the ability to scale up quickly at a fraction of the cost of trying to increase resources locally.
Increasing profitability in your firm requires more than just looking at incoming revenue. By taking a more holistic approach and addressing opportunities to improve efficiency, you’ll be able to build longer term sustainability for your practice and your staff.
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