SME Performance Issues for Accountants

       

 

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Research into small-business operational needs has shown that SME business clients are seeking a broader range of business advice and commercial assistance, especially (but not only) in the first two years of life and especially in business analysis, planning and tactical execution.

The range of commercial expertise and practical experience required to provide this unique assistance is often greater than that available from their current professional advisor, including their accountant.

Many small accounting firms themselves often require assistance to improve the dynamics and financial metrics of their own business operations.

The regulatory and compliance expectation and burden often leaves little room for smaller accounting firms to provide much other than taxation and statutory compliance advice and work for their clients.

It is then little wonder that these same smaller accounting firms do not often develop many of the broad business skills (skills to which their clients would appreciate having access) to effectively and efficiently run their own accounting practices. There is simply too much to do and too many compliance deadlines to meet in a working week.

It for this specific reason that The Business Solutions Shop has developed a range of performance measurement ratios and tools to assist smaller accounting firms to better measure and manage the output of their businesses.  The Business Solutions Shop has expertise in accounting firm operational management that can enhance the efficiency output and business practices of small (>5 partner) firms. 

Entry to the Portal will provide access to four pages of practice management improvement tools, methods and information: -

  1. Performance Issues - information, samples of performance statistics and links to professional references regarding the analysis, reporting and use of          financial information in forecasting and planning SMB  performance

  2. Practice Profitability - a range of sample tables and ideas used by The Business Solutions Shop in Financial Performance Analysis

  3. Practice Efficiency - a range of sample tables, ideas and an efficiency calculation tool used by The Business Solutions Shop in Financial Performance Analysis

  4. Software Analysis - an example of the need to reconfigure financial accounting software output for financial analysis planning and forecasting

Performance Management for  Accounting Firms

Historically, many small accounting firms are operated in a similar fashion to SME businesses.  That is, there are usually one or two partners with support staff that may number 3 7 people.  In this regard, accounting firms that can be categorised into this size of business operation generally suffer from many of the same performance management issues found in SME companies, namely, business planning, financial performance measurement and benchmarking, strategic growth plans, organizational efficiency and awareness of general business principles, including succession planning.

A measure of client work written off due either to firm policy for service levels or work undertaken without client discussion, knowledge or approval.  Also, junior staff preparation time which is of insufficient quality to be charged.

A measure of the fee generation capacity of the firm.  Also an indication of the FTE carrying capacity of the firm.  Threshold levels for this ratio need to be set for best practice performance.

A measure of the efficiency in converting WIP to chargeable client fees.  Also, a measure of clerical and junior staff effectiveness.

An example of industry data used to undertake performance analysis

Chargeable Rates using Partner rate as base

Source: FMRC Benchmarking 2000

Practice Turnover

<600K   <999k   <1.69M   <2.49M   <2.5KM   Average  

Principals

$140.83

 

$152.14

 

$173.01

 

$181.73

 

$201.69

 

$169.88

 

Managers

$100.83

71.60%

$130.75

85.94%

$123.31

71.27%

$133.62

73.53%

$144.66

71.72%

$126.63

74.54%

Financial Planners

$125.00

88.76%

$74.00

48.64%

$75.00

43.35%

$0.00

0%

$107.67

53.38%

$95.42

56.17%

Seniors

$106.57

75.67%

$92.93

61.08%

$96.10

55.55%

$104.08

57.27%

$98.25

48.71%

$99.59

58.62%

Intermediates

$76.67

54.44%

$80.00

52.58%

$75.85

43.84%

$79.91

43.97%

$73.35

36.37%

$77.16

45.42%

Juniors

$55.00

39.05%

$44.00

28.92%

$59.07

34.14%

$60.28

33.17%

$55.57

27.55%

$54.78

32.25%

Computer operators

$45.00

31.95%

$73.80

48.51%

$73.67

42.58%

$65.37

35.97%

$80.00

39.66%

$67.57

39.77%

Support staff

$53.29

37.84%

$62.33

40.97%

$64.66

37.37%

$70.94

39.04%

$66.00

32.72%

$63.44

37.35%

Administration staff

$63.17

44.86%

$64.64

42.49%

$70.32

40.65%

$82.21

45.24%

$77.89

38.62%

$71.65

42.17%

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