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Are You Monitoring These Top Accounting Firm KPIs?
Posted on 10th August 2017 in KPIs
Written by Amy Harris
The accounting industry has been through a massive upheaval in the last decade. Many firms have migrated to the cloud, embraced advisory services and upped their revenues, fast becoming leaders in this space. For those firms that don’t keep up, their days are numbered. When you’re dishing out KPIs to clients, it’s important you practice what you preach: measure each and every metric in your firm. You know what will happen if you don’t.
We frequently speak to a lot of accountancy firms across the world. FUTRLI came about as a tool for business owners to use, but predominantly for accountants to employ in their practices to help make sure that people in business are getting the guidance they need. Each and every one of our advisory community preaches the importance of Key Performance Indicators, as they are the most effective way to track the inner workings of any business (and that includes your firm!). You must be thinking about the future and helping your clients strategise their next moves. Keeping tabs on each department within their company – and setting up alerts to notify you to any worrying dips – will allow you to help them understand what makes their business tick. So you can make sure your clients’ businesses are flourishing, here’s a round up of our top accounting KPIs.
Have a look through our accounting and bookkeeping case studies, and hear from some of our partners how their transition to the advisory space is helping their firm flourish.
Don’t forget to check in at our KPI Library, open all hours and applicable to many of your clients. If you’re new to metric measurement, browse our industry-specific KPI lists and refer to them whenever you need to.
Everyone’s least favourite metric, churn is critical to measure. Your churn rate is the essential means of calculating customer retention. Churned customers are those which cancel their services during a given period of time. When clients don’t stick, something’s up. It’s imperative that you try and find out exactly why your clients aren’t staying loyal to your firm. Are your staff keeping customers updated with changes to their data? Are they keeping in regular contact? Is your firm offering broad enough services for a range of business owners? Your services must be helping your clients grow their companies, otherwise they will not hesitate to jump ship.
EzyAccounts reported a 7% customer churn drop after using software that unifies their teams, who are spread out across Australia. They’re able to refer to shared documents for industry information, and use one another’s knowledge to provide more guidance for their clients than ever before.
Measuring your churn rate lets you see how effectively you’re retaining revenue. If you’re achieving a low rate of churn, ensure your standards don’t slip and you’re constantly looking for ways to improve. Churn is one of the biggest killers across most industries, so get this one right. Learn how to calculate churn here.
Staff to client ratio
You must measure how many clients you have signed up, per staff. A high number of clients may seem like a positive, though if you’re understaffed they will suffer. The advisory space calls for conscientious accountants. Your team need to be making regular contact with clients, or the quality of service will decrease. Clients will be neglected and have less support, this will impact negatively on the reputation of your firm. Staff may well end up overstretched and reach a burnout point far sooner than expected, which will then impact your bottom line as you’ll need to arrange cover or a replacement.
Conversely, you don’t want to find yourself with too few clients per staff. If this does happen, you’ll have to drum up some new leads quickly or, in the worst case scenario, make a member of the team redundant. You don’t want to be scaling back – quite the opposite in fact. Protect your firm by measuring this ratio carefully, plugging the data into your firm’s forecast to work out if/when hiring needs to happen or slow down.
Revenue per client
If you’re charging by the hour, there’s a direct correlation between your billable hours and revenue. This performance metric is best measured by individual staff member, as you’ll get a granular breakdown of how each member of your team is doing. Maximising your billable hours is essential to optimise income. However, providing advisory services means you’re able to adjust your pricing. In a recent study, presented by Bill.com, we learnt that most millennial business owners actually prefer being billed a set rate every month. For your firm, this is like a dream come true – ready to go MMR that you’ve not had to hunt down. Download the study (via AccountingWEB) here. Learn how to calculate your revenue per client here.
Referrals are one of the key ways firms land business. Business owners trust other business owners, so word of mouth is pivotal to your bottom line. If you’re seeing a low referrals rate, you need to work out why you’re not hitting the mark for your existing clients. They’re not recommending you – why? Are you not providing sufficient support? Are your team too thinly spread? Your referrals rate is a key way to combat churn.
We spoke to Compass EAST, a firm based in Nashville USA, who told us since they white labelled FUTRLI.
“Current and prospective clients have been extremely positive and excited about managing their businesses via FUTRLI. Because their financial data is presented so clearly, we can see them start to really connect with their figures.”
This is the kind of feedback you should be yearning for, so look internally and work out how you can reach this level.
Revenue per existing vs new clients
Insert the old adage, “don’t put all of your eggs in one basket” here. It’s all too easy to become satisfied and comfortable when your firm appears to be ticking away nicely. However, if you’re not comparing your revenue brought in by existing versus new clients, you may be oblivious to disparity between older and newer business. Say you have 20 clients that all signed up with you a decade back. You’re likely to be performing compliance services for them, and that’s all they’re paying you for. That might be paying your bills and wages, but you’ll find if (or when, we should say) one or two clients leave or close up shop your revenue will deplete.
If you have a whole host of new clients, but none seem to be sticking, there should definitely be alarm bells ringing. Advisory is a way of working that you need to embrace wholeheartedly. If you talk the talk but have no substance, your clients will drop like flies. Having a good balance for this KPI will see your firm looking healthy. Aim to get a small number of new clients in a given time frame, and when your firm is ready start to up the targets. You should be preaching about sustainable growth to your clients – follow your own advice.