Making Money in CPA Firms – Follow Up
In my last blog post we talked about the 2010 Rosenberg survey and that his “Elite” firms enjoyed both a significantly higher leverage ratio and overall net firm billing rate than the rest of the firms in the survey. We also gave you several factors that influence average rate per hour beyond the billing rates themselves.
Here are some things that you can work on in your firm that will help you make incremental improvements to your net firm billing rate and ultimately the profitability of your firm.
- Billing Rates. Make sure that you keep upward pressure on them even in this economy. It really is true that the more mud you throw at the wall, the more that will stick. If your realization rate is in the upper 80% range or higher, you need to raise your rates.
- Efficiency. When was the last time that you looked at your work programs, job flow, supervision and review processes, the use (or misuse) of your technology, job scheduling, communication/interaction with your clients, etc. Odds are it’s been awhile. Remember that deep down we’re all auditors and the tendency is to fill up the files with procedures and “stuff” that we don’t need, regardless of the level of work that we are being paid to do. Talk to the team – ask them for efficiency suggestions. If it’s been awhile since you’ve had AuditWatch come in to re-engineer your work files, call them.
- Scope Creep. Address this in a couple of different ways. First, make sure that the client is ready before you start the job. If you show up and they aren’t, stick to your guns and pull off until they are. Second, educate your staff to know when they are out of scope and to get change orders from the client when they are.
- Who are the billers and what are their billing philosophies? You know who your conservative billers are and who the aggressive ones are. It’s not necessarily about who is doing the fixed fee audit work vs. the higher value consulting. Every partner should have improving their overall realization percentage as one of their goals You can’t expect everyone to be the same; that’s why improvement goals are the way to go. Also, don’t be afraid to “help” some of your more conservative billers by having a more aggressive biller review their billings to challenge write downs and offer suggestions.