Marketing for Accountants: Accounting Firms Measuring Wrong Numbers For Growth?

By Posted in - The Public Blog on December 31st, 2013 8 Comments

Accountants love numbers. Yet, paradoxically, in their own businesses accountants tend to measure the wrong numbers.

They focus on relatively ‘Pointless KPIs’, when they could instead be measuring Key Performance Indicators (KPIs) that are the drivers of their business growth.

Let’s call these more useful indicators, ‘Potent KPIs’.

Marketing for Accountants - Measure What Matters

With our specialisation of marketing for accountants, one of the the ways we guide accounting firms is by helping them focus on the numbers that will drive growth.

In our experience, Pointless KPIs that accountants often spend too much time and energy measuring—that won’t actually grow their business—include:

  • Productivity: The percentage of available chargeable time, allocated to time sheets. This is better termed ‘Utilisation’ because the more apt measure for productivity is billings, not the stories told on time sheets. That is, productivity equals revenue, not time allocation.

    Focusing too much on productivity (utilisation) as a measure within your business creates team members who are great at making their time sheets look good. It hurts your culture. It gives your team an ineffective focus. It says to them, “We sell time.” It creates lots of busy work that adds no value to clients or to the firm.

    By the way, don’t interpret what I am saying as “Throw out your time sheets” as many value-pricing advocates preach.

    Personally, I believe it makes sense to know where the time sinks are, where tasks are taking longer than expected. We recommend the use of smart technology like Time Doctor for tracking time usage, with the understanding that the purpose of this time tracking is to identify process improvement opportunities, not for billing purposes.

    Traditional time sheet software however (including within Practice Management software), is a low-value zone. Stay away from it.
  • Time increments: Directly related to the previous KPI, the sooner an accounting firm Principal accepts that his or her business is not selling time but is selling outcomes, the sooner he or she can stop expending so much time and energy tracking those 5 or 6 or 10 or 12 minute increments of time, and instead focus their energies on activities that add value.

    When you adopt the entrepreneurial mindset, you accept that you are selling results that themselves are like products, and they have a market value. How long they take to create does not affect their market value.

    Interestingly, Most Practice Management software applications have time and billing as their core and, in my opinion, this paradigm is not useful for actually managing and growing the business. It’s paradoxical that most Practice Management software doesn’t really help you do what their generic name describes: Manage your practice.

    At PARADOX, because we tend to deal with the more innovative cut-through firms (as opposed to traditional crusty firms) we are noticing that the younger breed of tech-savvy and more entrepreneurial firms coming through are abandoning the old-school time-and-billing-focused Practice Management systems and are instead basing their business systems around Client Relationship Management (CRM) platforms such as Infusionsoft or AffinityLive.

    This makes sense. Your clients are at the core of your business. Those time increments are not. Managing relationships is what your advisory business is all about. If your Practice Management system is not brilliant at CRM, change systems.
  • Write offs: We see many coaches and consultants bang on with the bravado-laden advice of “ban write offs” when, in reality, write offs don’t even exist. They don’t. Not if you’re pricing your services based on market value, instead of some archaic time-based rationale for pricing your services.

    Sure, you can (and should!) work out the target hourly yield you want to achieve on an engagement, and you can calculate the actual yield achieved on the job, but to bother measuring and reporting on write offs in the first place, and then to “ban them” by billing to clients all time logged and therefore increasing the fee for an engagement when it takes more time than budgeted, not only doesn’t make any logical or commercial sense, it’s unethical.

    Why should clients of a firm reward it for being inefficient and taking longer than budgeted to complete a job?

    The flip side of this naive “ban write offs” policy is that staff simply won’t enter all their time on their time sheets. They will hide their inefficiency (or their difficulties, caused by inadequate training and/or lack of good systems and processes) from you. They will work unpaid overtime which engenders resentment and erodes loyalty towards their employer. The managers and Principals are kept in the dark about how much time jobs are actually taking to complete and therefore, the firm’s level of efficiency.

    As an entrepreneur clearly you want to know this data, for process improvement purposes. Why encourage your team members to hide this from you? Firms who “ban write offs” are flying blind.

    That’s poor management practice.

Marketing For Accountants – Where To Focus?

So rather than expending time and effort on the no-value-add activity of recording thousands of tiny time increments each month, what business growth and marketing-related KPIs should an accounting firm be monitoring?

In our next post, we’ll list Potent KPIs that are directly related to the growth of your firm and that, where marketing for accountants is concerned, is where the rubber hits the road.

(8) awesome folk have had something to say...

  • Stephan Goldsmith - Reply

    January 1, 2014 at 3:07 pm

    Great post. You just summarized everything I’ve been thinking in developing new pricing and time tracking for my staff. Keep up the good work and jeep the posts coming!

    • Michael Carter - Reply

      January 7, 2014 at 2:08 pm

      Hi Stephan. Thanks for your comment.

      Yes, price on market value, track time only for calculating hourly yield in engagement post-mortems.

      Have you checked out Time Doctor yet? How will you be tracking your time usage?

      Next post will outline the Potent KPIs that are the lead indicators on growth.

  • Drew Grosskreutz - Reply

    January 8, 2014 at 9:13 am

    Moving to a value pricing model or ‘pricing the end outcome’ enabled Otium to move ahead with more critical planning issues instead of the boring weekly meetings about write offs and timed jobs per client. It further reduced the need to be looking over staff shoulders and allowed us to transform into focussing on the more important lead measures. In the end of the day the whole process from finding a client, quoting up the job, implementing the work and getting to the outcome all hinged on removing timed increments.

    • MC Carter - Reply

      January 9, 2014 at 6:19 pm

      Thanks for sharing your experiences on this too, Drew. I love seeing professional services firms move away from the outdated ways of doing business such as”selling time” and “shuffling time increments/WIP around”. Great to see Otium has focused its target market, productised its offering, and is applying great tech in streamlining the delivery. Keep that momentum going… (and your focus on the most important lead measures will ensure that!)

  • Rich Devlin - Reply

    January 16, 2014 at 1:48 am

    Great post and I’m looking forward to the coming post on ‘Potent KPIs’.

    I haven’t tried Time Doctor yet, but am interested in checking it out. Could Time Doctor along with Capsule CRM be a good replacement/alternative to Workflowmax?

    Or, for a complete Practice Management system, is Time Doctor paired with either Infusionsoft of Affinity the best combination?

    • Michael Carter - Reply

      January 21, 2014 at 4:34 pm

      Hi Rich. Thanks for your comment.

      I would treat Time Doctor as standalone time usage tracking tool, independent of other apps such as practice management or workflow. They have integrations coming (as per http://blog.timedoctor.com/2013/10/02/time-doctor-integrations).

      Capsule CRM + Time Doctor would not be equivalent to WorkflowMax, as WFM is a dedicated workflow/job management system, along with time and billing, though it supports Value-Based Billing (http://www.workflowmax.com/value-based-billing.aspx) which is the only logical approach to pricing. It also facilitates the outdated timesheet approach to invoicing (http://www.workflowmax.com/time-sheets-and-invoicing.aspx), and in doing so they are obviously just catering for the marketplace there (as most firms are behind the times and still think they are selling time, not value),

      re your last question, I would say there is no across-the-board ‘best’ Practice management system as it depends on your business model, pricing model, existing apps that you want to integrate with, etc. So what is best for a firm is always contextual.

      AffinityLive is certainly a sophisticated platform for running a service-based business and it integrates with Xero, Google Apps, MailChimp, Twitter, QuoteRoller and others (http://www.affinitylive.com/partners/). Infusionsoft is mind-blowing and is great for automating tasks, including marketing, sales and cyclical/repeating tasks via their Campaigns module. It’s not so good at ad hoc and collaborative task management (for which we use Wrike).

      Actually, here’s a link to a diagram of ‘the buckets’ (to use the GTD – Getting Things Done term) we use at PARADOX: https://twitter.com/PracticeParadox/status/408199677402566657/photo/1

      At one point we were using both Infusionsoft and AffinityLive (as both are great, but different), but we found there was too much overlap and we needed to reduce the number of ‘collection buckets’ we had for tasks.

      What would you say are your top 5 criteria for your perfect Practice Management system? If you are clear on that, it makes it easier to eliminate certain tools that, for example, are great if you want to charge based on time increments (save me!) but not so great at value-based pricing/billing.

      I know you’re a big fan of Xero, so what’s motivating you to look beyond WorkflowMax? Is the integration between the two sufficient for you? Does the feature set meet your requirements? I’m guessing something is missing the mark for you there?

  • Steph Hinds - Reply

    January 22, 2014 at 8:59 am

    Great post as always MC. This is more of a comment for Rich. As a business who loves Xero (we use Workpapers and produce Financials in Xero) Workflow Max is the obvious choice for us. It’s certainly not the *best* product in the marketplace for lead generation and small tasks but its brilliant in the integration. We have our Workflow process, jobs to do etc working perfectly in WFM and it’s hard to ignore the 1 button lodge activity statements now as well! With Tax Returns coming next the efficiencies with be huge.

    We also use the Leads module in WFM and love it. It’s great to be able to tick the won button and have the client automatically turn from prospect to client!

    We also love the flexibility of WFM. We have fixed price agreements with our clients which means there is no need to do timesheets, however I love the fact we can still do those in WFM and therefore track our costing and efficiency improvements each year as well.

    I’d also suggest for those using WFM to get one of the experts to help you set it up properly. The reports and data you can get out to track is actually really good. You just have to setup some favourite reports :)

    • MC Carter - Reply

      January 27, 2014 at 12:17 pm

      Thanks for your input Steph. Great points about WorkflowMax. To Rich… When deciding on which tools to use, the overall app ecosystem and the efficiencies from current (and coming) integrations need to be given priority in the evaluation process. One of the advantages of using WFM as a firm is that many of your clients can also use it, which helps you add value to them, due to your understanding of the tool. For tracking where jobs are at, WFM is a good choice for a Xero-based firm. AffinityLive is good too, but is much more complex. For some, that’s great, for others that’s confusing. In the mix of apps mentioned, Infusionsoft is in a separate category and does not excel at workflow monitoring/job management, but does excel in many other areas such as marketing automation, lead nurturing etc.

      Fantastic point Steph re investing in a consultant to help set up WFM properly. It’s a false economy — yet I see it a lot — where firms/businesses invest in an app, and then don’t spend money beyond the basic subscription, thinking that a DIY approach to getting it set up will be the best option. Better to budget in a configuration and setup project at the outset, when evaluating apps, and then let an expert make it happen faster and better than you could on your own learning curve.

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