Home Accounting and Auditing Reimagining your firm in the wake of Covid-19

Reimagining your firm in the wake of Covid-19

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Some larger firms have had their best year ever, in part because of reduced overheads, others didn’t survive and went looking for mergers.

2020 was a year like never before, and yet it was a time when when stepped up and managed clients in real time. 2021 is also a year of great challenge, said Mark Lloydbottom, founder of Ignite Practice Management, speaking at the Saiba Practice Management Conference on Wednesday 15th September 2021.

Here’s the challenge that firms face: achieving a work-life balance among staff and maintaining mental health, while at the same time reinforcing the firm’s culture.

Home-2020-holder - The CPD Fest 2020 - OmniPro
Mark Lloydbottom of Ignite Practice Management

“I’m far from convinced that the hybrid model (of working partly from home and the office) is here to stay. I would urge a modicum of caution of enforcing work from home.”

Technology makes this possible. Routine transactional tasks will disappear because they can be done automatically. Many more jobs will be created by, for example, checking on companies’ transactional activity in real time, and identifying trends.

The threat of “Lock-up”

“Lockup” is debtors (including VAT) and work in progress at realisable value. Add that together and you have the largest asset on your balance sheet.

“Many surveys show that lockup for many accounting firms is more than 90 days. That tells us we are not completing work and getting paid on time,” says Lloydbottom.

“Contrast that with tech firms that charge by debit order. Reducing lockup should be a major priority for accountants and will enable us to compete with tech companies. It’s easy to blame the client but perhaps we should be blaming ourselves.”

Advice to grow your pratice

Schedule calls with your clients. Your competitors are probably not doing that. We must all live life in accordance with our priorities.

Your own firm is your best client. You need to engage with your best client, and avoid failure to implement. The Saiba conference has an abundance of great presentations that are designed to help you grow your practice, so make use of them.

We need positive people around us, and Nicolaas van Wyk, CEO of Saiba is one of the most positive people I know and he is doing amazing things to develop accountants.

Why your top line is not your top line

A client in London had seven partners, one doing 950 chargeable hours and another doing only 350 hours. Turnover was £7 million. I was determined to crack this problem. I told them they were turning over £10 million, so there was a £3 million gap.

Margin Mastery: manager comes to you with a quote for R100,000. You say we cannot accept that, can only charge R90,000. That difference is a pricing variance. The job then takes R110,000, which is R10,000 above budget – that is known as the productivity variance.

The £3 million is made up of £1 million time variance, and £1 million sales variance and £1 million productivity variance.

You have to manage what you can control, so manage the partners’ time monthly, and eleiminate these variances.

Secondly, eliminate the word “Write-down” – it has no person responsible for it. Allocate responsibility for each variant.

3 important lessons about Budgeting

  1. Make sure that managers produce budgets that enable them to get the job done on budget. Managers tend to be optimistic budgeters – so include a sum to cover (minor) contingencies.
  2. Do you use a simple feedback form that will help next year’s team beat budget? Create a job postscript that provides some details that will help next year’s budgeter beat this year’s budget. They should be able to beat the budget
  3. Negotiate fees early. If you keep on allowing last year’s budget fees to form the basis of next year’s fee, plus inflation, you’ll never get it down.