Marketing for Accountants: Accounting Firms Measuring Wrong Numbers For Growth?
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’.
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 Toggl or Time Doctor — or if you use a task or collaboration platform such as Wrike (which we use at PARADOX HQ) you can use its Time Log feature or, as another example, if you use Podio you can use a time tracking integration such as TimeCamp for tracking time usage. Use the modern time tracking tools with the understanding that the purpose 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 and represents old school “time and billing” thinking. 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 (now here), 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.