7 Negative Trends You

Transcription

1 7 Negative Trends You Must Reverse! Make sure your firm is ready for the Future Steve Erickson National Consultant to CPA Firms Current Situation Profits decreasing as a % of Net fees Salaries continue to rise Technology costs increasing Good people hard to find & keep Succession looming 1

2 Current Situation Partners working harder than ever Workload compression continues Increased competition and fee pressure Current Situation Client retention a concern Client service a challenge Receivables and WIP on the rise Role confusion and a lack of accountability in many firms 2

3 Can you grow your firm out of these issues? The Reality Current situation cannot be sustained indefinitely CPAs are getting older Fewer new CPAs Change is a certainty 3

4 Objectives Today Identify negative trends that cannot be sustained indefinitely Start the dialog for needed changes in the profession Offer some ideas for immediate improvement The Change Chart The Crisis Stage The Hard Work Stage The Tough Decision Stage The Unexpected Pain Stage The Joy and Integration Stage Source: Taking the Fear Out of Changing Dr. Dennis O Grady

5 National Survey 2010 Career Development Survey Conducted in 2010 Over 1800 responses Proven research Methodology Well-being and work Personal control Use of skills Reasonable workload Variety of work Defined roles and culture 5

6 Methodology Well-being and work Money Physical security Supportive supervision Interpersonal contact Valued work Survey Demographics Current Position 6

7 Survey Demographics Size of Firm #1 Declining Profit Margins INSIDE Public Accounting 2010 Used with permission 7

8 Pricing and Margins Pricing trends Have not kept up with expenses Realization issues More fixed fees Client expectations have not been managed Value has not been communicated Level of Agreement False Reporting There are times when I don't record all of my time on engagements to meet performance expectations Number of Responses 8

9 Change Orders Develop a firm wide standardized change order process Starting and stopping work Failure to prepare Errors in records Records not ready at time specified #2 Rising Salary & Benefit Costs Personnel costs as a percentage of net revenues %* % * % * %* In many firms costs now exceed 50% of net revenues * INSIDE Public Accounting 2010 Used with permission 9

10 Increasing Salaries Dollar Amount Average Professional Salary INSIDE Public Accounting 2010 Used with permission 50% Report Being Underpaid Limited raises for the past 2 years Automatic increases were expected in the past Salaries & benefits at an all time high 10

11 AICPA Demographics Source: AICPA 2009 Salary Strategy Reverse upward trend Use lower cost labor when possible Don t allow people to work below their level Higher level personnel must leverage Consider alternative pay arrangements p y g Goal: Reduce salary and benefit costs by 2% per year for the next 5 years 11

12 What tasks are you doing that you shouldn t be doing? Scanning Admin duties Setting up files Making copies Inputting 1099s Typing letters Write up work Payroll reports Chasing client info Data entry Data imports Filing PDF docs Ordering supplies Deliveries Filing Bank reconciliations Salary Strategy Reverse upward trend Use lower cost labor when possible Don t allow people to work below their level Higher level personnel must leverage Consider alternative pay arrangements p y g Goal: Reduce salary and benefit costs by 2% per year for the next 5 years 12

13 Pay Structures Pay when services are needed Is the 40 hour work week a thing of the past? Pay for charge hours Core vs. non-core positions #3 Decreasing Utilization Overall utilization averages g about 52% Declining for some years Significant competition for our time 13

14 False Reporting There are times when I don't record all of my time on engagements to meet performance expectations. Level of Agreement Over 60%! Number of Responses Decreasing Utilization Seasonal work Cubicles Constant interruptions Meetings Starting ti and stopping work 14

15 Expansion of 600 Time spent each day on min 30 min 45 min 1 hour 2 hours 2+ hours Utilization Strategy Plan Block out time to work exclusively Schedule every week Reconcile hours worked every week to the schedule Pay for charge hours 15

16 Utilization Strategy Minimize disruptions Cubicles Meetings Minimize distractions Social media Web Work time? #4 Increasing Capital Requirements Invested capital has increased 20%+ in many firms over the past 5 years Accounts receivable Work in process Technology Debt reduction 16

17 Excessive Capital Needs Limits ability to grow Decreases in value over time Disproportionate risk Limits compensation Cost of money Capital Reduction Strategy Stop extending excessive credit Firm wide credit policy Payment arrangements Scheduled payments Budget payment plans Deposits 17

18 #5 Passive Management & Governance After the fact monitoring Charge time Budgets Accountability Profitability Firm management Benchmarking #5 Passive Management & Governance Lack of defined roles Unclear decision rights Partner & Staff confusion Lack of support of processes and procedures 18

19 9 8 Processes Lagging Everyone in our firm uses standardized processes and procedures. Level of Agreement Responses Files not Consistent Files are consistent regardless of the partner or manager on each engagement. 9 8 Level of agreement Responses 19

20 Active Management Continuous budgeting and reporting Manage Margins Leverage Scheduling/utilization Standardize processes/procedures #6 Reactive Client Service Service centered client service Task oriented Deadline driven Have to services FIFO processing Emergency room processes 20

21 #6 Reactive Client Service Not managing client expectations Timing of work Fees Delivery Value Scope According to a recent CCH Accounting Firm Client Survey 36% of your clients are dissatisfied and already shopping for another accounting firm. Source: CCH a Wolters Kluwer business CCH Accounting Firm Client Survey

22 Client Service Strategy Accessible Responsive Competent Deliver on time Understandable fees Deliver value Business advice Trusted Business Advisors Selfless independence Empathy Deep generalists Big picture thinking Judgment Conviction Integrity 22

23 Trusted Business Advisors Reading Clients for Life Sheth & Sobel Making Rain Andrew Sobel Trusted Business Advisors David Maister Million Dollar Consulting Alan Weiss True Professionalism David Maister Client Expectations Manage client expectations about fees Better engagement letters Bilateral Time sensitive Stop quoting fee ranges 23

24 #7 Declining Staff Engagement After the fact Job management Feed back Career development Limited Guidance Expectations are not clear Budget overruns are more likely 24

25 Unrealistic Expectations Lack of creditability Less accountability Less optimism Involuntary Overtime 25

26 Personal Plans on Hold Insufficient Feedback Le evel of Agreement I receive the feedback I need to be successful in my career Responses 26

27 Confusion About Advancement Le evel of Agreement I understand what I have to do to get promoted to the next level Responses Rating of Motivators 27

28 Management/Staff Engagement Strategy Annual plans Coaching Career Development Focused on success After the fact unexpected feedback doesn t work! We are going to train you to be the best accountant you can be. As with anything worthwhile hil it requires hard work and diligence. The rewards are great. Personal control over your career, financial security and a sense of accomplishment and success. 28

29 Copyright 2010 Steve Erickson LLC Firm Strategy Institutionalize the value in your practice Standardize processes & Files Clearly define operational structure Eliminate role confusion Define your culture Adopt core values 29

30 7 Trends to Reverse 1. Declining Profit Margins 2. Increasing Salary & Benefit costs 3. Decreasing Utilization 4. Increasing Capital requirements 5. Passive management & governance 6. Reactive client service 7. Declining staff engagement Accounting Firm Profit Improvement Model TM Copyright 2010 Steve Erickson LLC 30