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. All rights reserved.
icaew.com
A world leader of the
accountancy and finance profession
BUSINESS WITH CONFIDENCE
icaew.com