IMGCAP(1)]Quite often, firms simply don’t know which engagements, service lines or clients are truly the most profitable.
You probably have substantial information about each engagement—time spent winning business, actuals versus estimates, unplanned expenses—but you just can’t access and analyze all of it. That’s usually because all of this great information is spread across a variety of different systems you use to run your practice.
And without that visibility, it’s hard to know which clients to keep, how to best grow your firm and where to cut costs.
In a recent webinar, I was joined by Jim Boomer, Boomer Consulting’s CIO, to discuss how CPA firms can get the insight needed to identify their highest-margin services and clients.
Generally speaking, clients that don’t generate meaningful profit tend to fall into at least one of three categories:
Low Revenue: Despite all you can offer, they use very little and don’t pay much for it.
High Cost: They suck up a lot of time, effort and energy—all of which come at a cost. Maybe they aren’t very well-prepared or perhaps the guidance they need far outpaces what’s typically needed for the service you’re providing. In fact, 43 percent of webinar attendees reported in an informal survey that the most irritating client profitability issue is the client never being ready for work to begin.
Poor Alignment: There may also be “softer,” yet still important, reasons they’re costing you. Perhaps they’re in an industry you’ve long abandoned or failed to penetrate. Maybe they're in a hard-to-reach geographic location that makes them costly to serve.
But isolating your truly unprofitable clients means analyzing more than just their invoices.
For example, it helps to know not just what the client has paid, but what they were supposed to pay according to the project’s original scope. Other key details include how much time it took to complete deliverables and which staff members have the skills, expertise and cost-basis to best meet the client’s needs while also meeting yours.
Getting all of this information could ultimately draw on up to five different sources, including your CRM system, your engagement management system and your resource management system. Such a fragmented environment leaves you with a very disconnected view of your firm’s relationship with this client.
But it doesn’t end there. Without the needed perspective, this pattern will repeat itself. As a result, your firm will wind up with the same types of unprofitable clients, leaving you wondering why this keeps happening.
So what’s the solution? You can probably guess where I’m going with this.
Identify a system that brings together all the details that make your projects unique—including service lines, locations and engagements—and allows you to put all the puzzle pieces together.
A better, integrated approach should offer:
A complete perspective for each client—your past work, WIP and upcoming projects;
Process automation—for more efficiency and streamlined workflow;
Systems and workflow consolidation—for less duplication of data and greater accuracy; and
Insight—easier analysis and deeper meaning than today’s disconnected reports.
A single, firm-wide solution that links all administrative activities across your practice—from front-office activities like CRM, proposals, SOW’s and resource plans to back-office activities like time collection, invoicing and financial reporting—will help you achieve the 80/20 rule: 80 percent of your time spent on the top 20 percent of your clients.
Remember, at the end of the day your ultimate goal is making the most of how you spend your time. With better information and wider visibility comes the knowledge and confidence you need to know which clients to keep, and which to let go.
To listen to the webinar,
Drew West is a former product director for
