Now the tax returns season is drawing to a close, prepare to declutter your business ready for the year ahead.
Japanese decluttering guru Marie Kondo has inspired millions across the globe to tidy up and re-organise their homes. Essentially, her premise is simple: get rid of useless stuff that gets you down and you will lead a happier life.
Why not apply this common-sense practice in your working life, too? If you review and improve or get rid of all the ‘stuff’ that is no longer profitable, effective or useful, you’ll end up with a ‘happier’, more efficient business.
Start with your P&L account
“The challenge is to pinpoint the areas that would benefit from your attention the most, those that could bring the biggest wins to the business,” says Carl Reader, director at accountancy firm Dennis & Turnbull. “I therefore suggest that you look at the three biggest numbers in your profit and loss account, and focus on the drivers behind them.”
At Dennis & Turnbull, they review turnover, total overheads and direct wages. Reader explains: “We look at market rates, services provided and invoicing processes to make sure the right amount is always billed to the right client, in a timely fashion. We want the total overhead to be within a budgeted tolerance. We also look to improve our gross profit margin by improving the efficiency of our team who make up our direct costs.”
Dust off your client list…
Which of your clients cause the biggest headaches, and which ones deliver the least in fees?
“It’s not a crime to sack a client who zaps your energy, constantly asks the same questions and demands immediate answers; it actually feels like a weight has been lifted from your shoulders,” says Pete Edwards, partner at accountancy practice Warr & Co.
Reader says you should also ditch clients who are rude to your staff. “Often, they are polite to you, so ask your team to point out the troublemakers and then trust them and support them by making the right decision.”
Purge your loss-making and low-profit clients. “They probably also quibble over fees and pay late,” says Tim Prizeman, director and marketing consultant at Kelso Consulting, who has been advising accountants for 25 years. “You may feel their fee contribution – however small – helps, but they distract you from what you need to do to win more decent, profitable clients.”
Remember the Pareto principle, too: work out the 20% of clients that pay 80% of your overall fee income and review the other 80%.
… and your fees
“If you haven’t increased your fees in a while, check if they still provide the return you want,” says Joy Eziefula, founder and owner of accountancy practice Joy & Co.
Mark Lee, accountancy commentator and mentor of sole practitioners, suggests you also change your billing policy in respect of those clients who are the slowest to respond with their tax return information. “Why should they pay the same as those who respond promptly? Notify them now of a 10% increase in your fees, but say that you can limit this to 2% as long as they supply all key data before the end of October.”
Upgrade your technology
Review your internal systems. Reader says: “Could you benefit from a cloud CRM system, a centralised to-do list, a project management system or Optical Character Recognition technology to reduce data input?”
Lee Murphy is chief executive officer at cloud bookkeeping software provider Pandle. Naturally, he recommends that you get all your clients onto cloud accounting software. He explains the benefits: “If your clients invoice their customers through the same platform and you use bank feeds and receipt upload features, then you can spend far less time sifting through paperwork and trying to reconcile balances, and more time on giving your clients constructive, real time advice.”
Have a good look at your team
Are your staff doing what you want them to do? “Design your practice again with a blank sheet of paper. Draw an ideal organisation chart, but with no names. You might find there’s a difference between what you have and what you need,” says Reader.
Now may also be a good time for performance reviews. “Each team member should get a one-to-one review, when you also agree on their future goals and objectives,” says Edwards.
Start measuring productivity, too. Murphy says: “Use the billing ratio: the amount billed over the gross pay. If this ratio averages less than 3 – which is the industry standard – then either the team member is not productive enough or you are not charging enough.”
Clear the decks of fraff
Last but not least, get rid of all the “fraff”, says Eziefula. “It’s all that rubbish and stupid bits of paper that build up in your intray over time and that never seem to serve any purpose.”
In fact, Eziefula plans to rid her office of all excess paper. “I’ve wasted too much time shuffling through piles of paper before I can get down to actually completing a set of accounts. Paper is the enemy and I strive to be as paperless as possible.”
She will now scan every piece of paper that comes into her office and shred the original. Each piece of correspondence will sit as a PDF in the relevant client’s directory on her computer. Non client-specific stuff will be assigned to directories named ‘Magazine articles’ or ‘CPD’.
Eziefula adds: “Along with my war on paper I’ll also be a clearing my email inbox by deleting or moving emails to designated folders as soon as they arrive. Hopefully, if I manage to implement these changes, I’ll be working shorter hours and have more time to spend with my family. After all, that is why I became self-employed in the first place.”
Iwona Tokc-Wilde is a business journalist.