What’s the best way to improve your firm’s profitability? Should you increase prices? Bring on more clients? Rather than leaping to “do more work”, you might consider the following strategies to work smarter!

Watch our video below or read the article underneath to understand more!

Eliminate Low-Value Services

Instead of raising prices, consider how you can provide more profitable services. Low-margin work like bookkeeping can eat up valuable time.

Identify low-value services in your firm by calculating the average time it takes to complete various tasks. If certain services take far more time than they should, look for ways to eliminate or outsource them. However, be sure not to eliminate services that are part of the client journey and could lead to the client eventually using more of your higher-value services. Rather, find ways to streamline or automate portions of these “stepping stone” services so you can offer more value while spending less time on time-consuming manual tasks.

Reduce Operating Inefficiencies

Money wasted on operating inefficiencies could be spent on better staff, more technology, or even a higher profit. Reconsider the tools you use, the processes you’ve built, and how you communicate with coworkers and clients.

Think you don’t have any operating inefficiencies? You might not be looking hard enough.

Is there a more efficient way to store your data? Could you eliminate or automate steps in your workflow? Even just saving a few minutes of time on a single process could save thousands of dollars on tasks you complete on a regular basis.

Move to a Value-Based Pricing Model

Many CPA firms still rely on an hourly pricing model, where rates are based on how long tasks take. This model can create additional work, as you are forced to spend time accounting for every moment of your day. It can also make it difficult to provide clients with accurate quotes for services.

A value-based pricing model charges based on the amount of value your firm provides. This creates a more effective selling process as well —- after all, your clients don’t really care how many hours you spend on a particular task. What they really want to know is how they benefit from the work you’ve done.

Upsell Existing Clients

Instead of focusing on bringing in new clients, which requires a high time investment upfront, look for ways to increase profits by offering the clients you already have additional services.

For example, if you currently offer tax services or other one-off services, try upselling on-going services such as payroll, auditing, or management consulting services.

Make Sure New Clients Are Right for You

In some cases, it makes sense to upsell current customers. But when your current customers are high-maintenance, it may make more sense to let some clients go and bring on new clients instead.

Focus on finding new clients that are organized and proactive. These clients can increase profitability because they take up less of your time — particularly if you move to a value-based pricing model versus a per-hourly model.

Offer Staff Education Benefits

A highly educated staff can have a long-term impact on CPA firm profitability. Consider offering employees a matching scheme or grant to pursue secondary education or certifications.

Worried about the cost? Paying for employee education can save your firm money. Cigna, a worldwide health organization, saw a return of $1.29 for every dollar they spent on employee education. The staff that used Cigna’s education benefits were more likely to stay and be promoted, saving the company on hiring costs.

A knowledgeable staff may also allow you to expand your client base into new niches, increasing overall profits.

Reduce Billing and Accounting Costs

According to the Rosenberg Survey, the average CPA firm spends 25% of its revenue on overhead costs such as accounting, marketing, and rent. Reducing these costs can increase your revenue by cutting costs rather than increasing billing.

For example, using AI billing software can decrease billing costs by allowing you to:

· Streamline the billing workflow process

· Gain access to data that makes billing easier

· Get better insights into the work going on in your firm

· Automate billing reminders

· Eliminate paper billing processes

Invest in Tech

In today’s world of Silicon Valley startups and SaaS (service as a software) businesses, investing in tech is no longer optional. If you want to compete with other firms and online services, accounting firms must invest in tech to reduce overhead costs and increase overall productivity.

For example, meeting management software can help firms better use their space and reduce the time employees spend planning meetings. Visitor management software can increase security while streamlining the reception process. Cloud document storage can make it easier than ever to organize and access documents, saving time, and increasing security at the same time.

Don’t feel like you have to have every new thing; instead, carefully consider how a new solution could save your firm time or increase profits before diving in.

Conclusion

To stay profitable, accounting firms need to reconsider the way things have always been done. If old practices aren’t working, it may be time for a change. Luckily, that doesn’t have to mean spending more time working — instead, eliminate services and clients that are not as profitable and rely on technology to reduce manual tasks.