Practice Support Services Top tips on practice management John O’Donnell 6 December 2011 BUSINESS WITH CONFIDENCE icaew.com BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com The PSS Team • John O’Donnell BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. • Graham Bale • Catherine Woodthorpe icaew.com Top tips • Practice profitability • Practice management • Risk management • Strategy for 2012 BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Practice profitability BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Problem to overcome • Lock-up • Work in progress plus debtors • Problematic issue • Varies significantly • Barrier BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Billing bases • Historical charge-out rates based on hourly fees • Issues • Bad debts • Lag in payment • Cash-flow disadvantage • Overdraft • Client relationship issues BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Alternative bases • Fixed fee • Useful for basic compliance services – Cost estimation easy – Standing orders or direct debits • Advantages – Clients pay regularly – Firm receives funds regularly – Mutual cash-flow advantage BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Things to consider • Menu of charges – Different cost for same service based on different levels of transactions, complications, etc – Make sure you take all into account before quoting – Include annual meeting with the client • Consider retaining hourly fees for more complex and nonroutine work BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Maximisation of fees • Contractual terms – Ensure that the terms clarify the work to be done on fixed fee – Base fee on provision of information – complete and – on time (to your pre-agreed deadline) – Clarification of scope • For ad hoc work have separate bespoke engagement terms and make sure the client understands that this is not included in the fixed fee BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Collecting over-runs • Improvement of billing efficiency • Fee £1000 • Inefficient client – Fee £1000 – Additional cost £ 150 – Total £1150 • Actions – Tell client before doing additional work – Client aware – Make sure staff know they need to tell you immediately a problem is apparent BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Setting reasonable charge-out rates • Charge-out rates vary considerably • Use them as reasonable target • Focus on under-achievement • Ask why • Is it your fault or the client’s? • And how can it be better managed in future? • Leading to – Better use of the staff you have to do more work and improve fee income BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Addressing under-recoveries • Bill the fee • Write-off under-recovery • If you retain it – Do not carry the balance forward – Carrying it forward will distort next year’s results (and this year’s!) BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Optimise recovery • How can you optimise recovery? • Many ways – Charge an element before starting work – Good for poor payers – Good for larger clients with work spanning some while – Bill fees once £x of recoverable wip – Standing orders – Direct debits – Credit card • Standard firm’s procedure makes implementation easier BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Should you keep time records? • Benefits of moving to fixed fees is no need to retain them – (so long as your engagement terms are drafted correctly) • But – How can you be sure your fixed fees are correctly calculated without a point of reference – And how can you periodically check? – How can you assess staff efficiency? – Do you pay staff a bonus? If so, how will you measure it? – What about the partner-level ad hoc work? BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Credit control • Should be process in place • Mechanistic • When to raise fees? – Not month end – raise as soon as possible • Credit control pre-set timings – Bill plus a period – Reminder – Second reminder – Credit control phone call BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Credit control • Credit controller to have a script • Then take action • Partner override of credit control process to be avoided (or justified) BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Practice management BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Expanding the business • Set partners and senior employees key performance indicators (KPIs) • Include – recoverability – billing and cash collection – Generation of new business • Be careful not to compromise quality and professional standards (including ethics) BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Expanding the business • Set budgeted chargeable hours for staff to recover • Clarify and agree how these will be measured • Ensure a reasonable measurement tool is in place • What if staff achieve their target? • Incentivisation – Bonus? BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Acquisition / merger • Dealt with separately BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Differentiation • Brand – Presentations – Web presence – Client perception • Positive first impressions • Corporate colours • Corporate logos • Messages to clients • Layout of correspondence BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Pareto analysis • 80:20 principle • Analysis of client base to clarify clients for whom you want and are able to provide more services • Questions to ask • Take action based on answers BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Focus on markets • Specialism • What areas could you focus on? • What interests you? • Where do you have experience/interest/specialism? • What are specialist markets? BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Risk management BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Professional indemnity insurance (PII) • Requirements – icaew.com/regulations • Cover must be with participating insurer • Can have excess of up to £30,000 per partner • If licensed for DPB and undertaking insurance mediation work (typically certain fee protection insurance) additional requirements BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com PII • Excess PI above required level (secondary cover) can be with non-participating insurer • Consider risks your firm may be exposed to eg (but not restricted to): – High value or complex tax computations – Strategic tax advice – Complex tax solutions – Audit of high value or judgemental balances • Based on these, is your PII at a sufficient level? BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Engagement terms • Review them regularly – Are they up to date? – Ensure that they reflect what you do for your clients – Update changes to services you provide – Prevent ‘scope-creep’ • Consider merits of limiting liability – Take advice as necessary BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Strategy for 2012 BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Strategy for 2012 • Do you have a strategy? • Valuable to take time to consider plans for the future • Make it a formal document • When? • When you have time to reflect • Enjoin your partners • Include your senior staff • And inform everyone of the key messages BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com What to consider • Gaining referrals from current clients • Ensuring that you recover the RPI increase in fees to clients – Communicate why you are raising your fees – Consider introduction of standing orders/direct debits BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Practice Support Services • Practice Support Services team is Catherine Woodthorpe, Graham Bale and John O’Donnell • Services explained on next slide • Confidential and exempt from duty to report misconduct • To find out more or to book a coaching session: – call +44 (0)1908 248 250 or – email [email protected] BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Practice Support Services • Audit – Clarified ISA coaching – Audit compliance reviews – Solicitors Accounts Rules reviews – Bespoke coaching and compliance reviews • Practice assurance and DPB compliance reviews • Consultancy – Practice management – Practice succession planning – Anti-money laundering coaching – Ad hoc consultancy BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. All rights reserved. icaew.com Q&A BUSINESS WITH CONFIDENCE Copyright © ICAEW 2011. 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