Key Performance Indicators for Accounts Payable

Are you struggling with the following Accounts Payable chronicle issues?

  1. Calls from suppliers for making urgent payments
  2. Constant dissatisfaction from user departments within the organization about delayed payments
  3. Several queries from Internal Audit Department on duplicate payments or inaccurate accounting
  4. Inaccurate accruals at month end resulting in wrong Management Information

You can improve image of your Accounts Payable department by implementing few of the KPI’s and becoming more user/supplier centric department

  1. Turnaround Time: The best way to calculate efficiency of your team is by calculating Turnaround Time of the Invoice. This is calculated as difference in number of days from when the invoice was received by Accounts Payable to the date when the invoice was processed.
    IN Arithmetical Term,
    Date when Processed – Date when Received = Turnaround time.
  2. Percentage On Time Payment: To reduce number of queries from suppliers and also to ensure you maintain healthy relationship with your suppliers, you need to make payments on time. On Time Payment Percentage can be calculated by number of payments made within due dates divide by number of payments made.
    ‘The better the on time payment percentage rate, lesser the chaos in the organization’.
  3. Accuracy Rate: One of the biggest challenges Accounts Payable team faces is processing invoices where either of the details is wrong. The same needs to be measured and provided to Accounts Payable staff. Errors can be identified while making payments, internal audit, supplier reconciliation, etc.
    The way to calculate accuracy rate:
    Number of errors identified divide (divided by) number of invoices processed = Accuracy rate
  4. Percentage of Electronic Payments: If you are not struggling with cash flow, best way to make payments is through NEFT/ RTGS. The more the better.
    This can be calculated as
    Number of payments made electronically (divide by) number of payments made = Percentage of Electronic Payments
  5. Suspected Duplicates: To ensure duplicate payments are reduced, best way is to monitor suspected duplicates on various parameters and ensure the number of suspected duplicate invoices is reduced.

If you need any help or free consultation on implementing the above KPIs, please contact us as below

Happy Paying

Author: Sachin Lohade is a Chartered Accountant and works with Accounting Firms to improve practice and reduce costs. He can be reached out at sachin@corientbs.com or you can visit www.corientbs.com

5 Simple Steps to ensure Uniformity across the Practice

While you may have a decent client base and you would be earning a good loyalty from clients and profitability, you may often be worried that your staff are doing enough to protect the goodwill of your practice which you have developed over years and also at the same time working efficiently. Some of the key things to ensure your staff are doing right things can be done by monitoring the following:

  1. Set Up Processes- Most accounting firms have complex processes where each individual does the entire set of work which includes things like data entry, preparing schedules, journalising, etc. If it’s and extremely small practice, this may be prudent but as your practice starts growing, you should start looking at dividing the team into various work streams such as data entry, preparing schedules, journals and then final review. You will think that there would be too many hand offs but you would be eliminating loads of risks while at the same time improving the productivity of your staff
  2. Hiring- It’s quite traditional that most people we hire come through referral or is based on likability. We generally see the overall suitability to the practice. That’s a big mistake we all make as accountants. We generally never think what processes we should have to manage the practice and what kind of people do we need to manage those processes
  3. Key Performance Area- It’s mostly seen that the appraisal process is seen as a process of giving salary hikes to employees every year. For many employees, when they join the company, they are just given a vague idea of what they should be doing but not in detail. It’s very important that you there are clearly articulated goals for each of your staff including that of admin staff and wherever possible, these should be linked to some numbers so that you remove biasness. Furthermore, it’s important that your senior staff have goals linked to revenue and profitability. Every month you should spend some time giving feedback to your staff on their performance rather than giving only at the year end. Your staff  will know where exactly to improve and your appraisal process would be a happier process rather than year end surprises
  4. Daily Monitoring- You should monitor daily the status of the work done by your staff. While it may sound to be too much of micro management, you will be surprised to know that every day of yours has no new surprises and in areas where you were struggling, those have completely eradicated. Your daily monitoring sheet may include the work in hand, status on them, expected time to complete, accounts in pipeline, etc.
  5. Checklists- Make sure your processes have checklist. These should be simple and completed at ease. These do not need to be too complicated where most of the items are marked as not applicable. Make sure all your clients work has a  completed checklist. This will bring in consistency across all your clients.

About the Author

Sachin Lohade is a Chartered Accountant and works with Accounting Firms to improve practice and reduce costs. He can be reached out at sachin@corientbs.com or you can visit www.corientbs.com for further information.

 

How can you improve your profitability

Most accounting firms make a very decent profit and generally its unheard of for any accounting firm to make losses. However, if you look at the recently published report on average revenue per partner, there is a significant variation. It varies from GBP 30K to more than 1 million GBP per customer. If your revenues per partner are less than 100K, its very important to introspect and take the right steps. Below are few steps of how you can increase the profitability

  1. Classify your clients into A, B and C Category: It’s important to divide your customers by Revenue. You should classify your Top 10% of clients by Revenue which forms more than 60% of the revenue. B Category of customers would be customers who are 20% of your size and 20% of your revenue. The C Category customers would be those which form just 20% of revenue but take your 60% of the time. You need to get rid of your C category clients or convert them into at least a B Category client.
  2. Sub Contract: Don’t just keep hiring people. You need to really plot number of hours required every month and draw up mean numbers of hours required per month. See where there are spikes and lows. You can talk to your sub contractors before hand and outsource the work when there are peaks. Wherever, there are lows, you can plan for holidays.
  3. Track the time- Track the time spent by your staff on each client. Budget the time based on the actual work and fees. Ensure the time spent on each client is thoroughly analysed. Also, compare the time spent by each of your staff on different clients. You can identify how the staff are performing and there would be several efficient practices followed by some of your employees
  4. Embrace New Technology: Do not shy away from investing or deploying technology. At times it may sound expensive, but there are really good tools and technology available in the market which can help you to bring in lots of efficiencies. You can look at simple things like developing Macros which can help you getting rid of several manual tasks
  5. Through Put Rate: Most of the accounting firms spend loads of time in following up with the clients and you would be surprised to know that there would be less than 20% of the clients where work is completed at one go while rest of the 80% of clients, there is a significant amount of rework required which eats up a significant portion of your profits. It’s suggested that you have your customised customer checklist ready for document collection. When you collect or the client drops the documents, ensure you have gone through the checklist and ensured all the documents are available. Do not start the work untill you get all the important documents or there are a sizeable chunk of records received
  6. Collections- Follow up with your customers on time. Best way to improve your working capital cycle

About the Author

Sachin Lohade is a Chartered Accountant and works with Accounting Firms to improve practice and reduce costs. He can be reached out at sachin@corientbs.com or you can visit www.corientbs.com for further information.

 

5 Simple Steps to Prepare Accounts in Record Time

At this point of year you may be thinking, why have I not looked at these accounts earlier or do I not have a right staff or shall I give up this client to some other accountant… These are really some of the Goosebumps you get facing filing deadlines. Once you are under the stress of completing the work on time you may often skip quality parameters and completely forget providing the value added services which you thought of at the start of the year.

Based on our experience of working with successful practices, we believe the best way to complete the records in real time is:

  1. Step 1- Segregate your accounts between Complex, Medium Complex and Simple Accounts. This can be done on the basis of volume of transactions, quality of book keeping , etc
  2. Step 2- Divide your team or time into these categories. This will ensure the team is completely focused on the task.
  3. Step 3- We can learn a lot from the Automobile Industry where the assembly line concept is followed. Divide your team or the work between data entry, schedule preparation, reviews, etc
  4. Step 4- As soon as the client financial year end is over, proactively chase for the records from the clients. Clients will appreciate you being genuinely interested in their business
  5. Step 5- Depending on the team allocations- Complex, Medium Complex and Simple, set out the target for each team. Your targets can be higher for simple and Medium Complex but a bit lower for Complex accounts. You will be able to complete Simple and Medium Complex accounts in record time. This will help reduce stress and allow you or your team more time to focus on completing accounts which are more complex and give the value added services your clients deserve.

In a nutshell, you will reduce pressure and stress in the office for yourself and your staff. Your clients will be happier because their work is completed on time and they will be grateful for the advice and feedback you have been able to give to improve their business.

About the Author

Sachin Lohade is a Chartered Accountant and works with Accounting Firms to improve practice and reduce costs. He can be reached out at sachin@corientbs.com or you can visit www.corientbs.com for further information.

Document Management System

Is your office paperless….In the current world of Smartphone’s and the Go Green campaign, it’s becoming increasing important to make your office space more sleek, clean and reduce your carbon footprint. But you still need to be able to access and retrieve your information fast. There are various reasons for the need to access stored data, business needs, HMRC and peer review etc, where stored documents have to be produced at the speed of light. This is where a Document Management System based upon digital images can help.

Some of the key considerations you need to make before making your document management filing processes:

  1. Segregation of Documents- Segregate documents between your clients, your own mails, client correspondences, etc
  2. Define the frequency of filing
  3. Define the way of filing the documents

Once you have decided on the filing system, you need to consider what kind of scanner needs to be bought and whether you need to use Sharepoint or other available software.

Some document management systems offer the following services and they can file your documents as a soft copy which can be accessed from any part of the world:

  1. Know Your Customer
  2. Correspondences from HMRC and Other parties
  3. Your client records
  4. Records and Reports created by you for your clients
  5. Your own correspondences
  6. Key and Critical Agreements

You can choose low cost and simple applications to make your office paperless. These applications and data repository are secured and meet international security standards. There are several big and small players in the market including Microsoft, Documentum and Corient

7 Steps To Improve Client Retention

When you are working with small and medium enterprises, it’s always a challenge to retain good clients while at the same time limiting C Class clients. While many clients are driven by a partners personification, there are several risks for the practice which include clients going away after partner has left/retired, taking up too much time of the partner, etc

Some important steps to consider in retaining clients are as follows:

  1. Understanding the client- Make sure when a new client comes on board, you spend time to understand their business, understand his expectations of you, his business plans for the next 2-3 years, his source of funds, etc.
  2. Under promise and Over Deliver- You should also ensure that you tell the client what he should expect from you as deliverables. Never over promise a client while on boarding. You should tell him what you will be able to reasonably deliver. When you over deliver on your commitments, you will command greater respect and get more referrals
  3. Updates- Send quarterly/six monthly updates to your A list clients. You can customise them for each client to send them more relevant information. The client will appreciate that you care.
  4. Follow Up- Ensure you follow up with your clients. Chase them for records rather than the client chasing you. You can deploy simple CRM tools to follow up your clients. Allow time for your clients to prepare their records and still send them to you in good time. Ensure you have clearly articulated your requirements.
  5. Deliverables: Make sure you book an appointment with your clients ahead of discussing accounts with them. It’s always preferable to go to visit your clients and have a discussion. Make sure while you have taken care of tax and other accounting aspects and how to reduce them, you have also taken care of how costs can be reduced. Some simple tips would be to look at their financing arrangements and see that the cost of borrowing is not too high. Also, if there are excess funds available, you can recommend how to utilise them tax efficiently.
  6. Get together- Arrange for a get together of your A Clients at least twice in a year. Introduce a client case study demonstrating how their business has grown and how you have helped them. Do not over sell but present facts. It will be a good networking event for your clients.
  7. Expose your next line- Introduce your managers/seniors to clients when you are meeting them. This will increase the depth of involvement with the practice and significantly reduce your time spent resolving day to day queries. Your client will see your practice as more of an institution rather than one man army ensuring they remain with you for years.

About the Author

Barry Pendleton is a Lead Consultant at Corient Business Solutions and has experience of more than 25 years in managing accounting practices. He works with Accounting Firms to improve practice performance and reduce costs. He can be reached out at barry@corientbs.com or you can visit www.corientbs.com for further information

5 Steps to Real Time Accounting

A lot is being heard about the introduction of ‘Real Time Information’ for PAYE, but it doesn’t end there. ‘Real Time Accounting’ is here too and growing fast. The advent of Smartphones and tablets means we are getting used to having instant access to data wherever we are with an internet connection and accounting information is no exception.

Your clients will be excited by hearing of ‘Real Time Accounting’ and will want it without really understanding what it means. There are lots of ‘Cloud based’ solutions and if you are looking to provide this service for your clients you may even be getting bogged down with all the different options.

There is not a simple ‘one fix solution for all’ so here are some quick tips on how you can provide real time accounting and also help your clients comply with the real time issues of real time accounting.

1. Choose the right software.

There are several online tools which are available in the market including Amoeba, Xero, Kashflow. Each of these tools have their own benefits and shortcomings.

Before you choose, please check which software provides the right modules for each clients specific needs.

Some of the important modules you should look for are whether they have a Document Management System, Workflow, customised Analytics, etc.

2. Set Up Processes

Once you have chosen the right software, you need to lay down a simple and sleek standard operating process. This will specify how you capture your payables, travel and expense, sales invoices, etc

3. Decide Frequency

Decide on the frequency in which you need to provide reports. Decide on whether these should be daily, weekly, monthly, etc

4. Design Reports

Sit down with your client and understand from them what really drives their business. It’s important to capture business relevant KPIs and publish them regularly. It’s also important to benchmark some of the costs and other KPIs with industry benchmarks

5. Follow Month End Process

While you may keep getting information from the client, it’s important to follow the hard close for the month end. You should complete all the reconciliations, provide for accruals, etc. This will help you to compare monthly performances, etc

There are several benefits from real time accounting. In this world of email and internet, businesses are changing rapidly and it’s essential to be aware of how the business is performing. Embracing technology at times can make a business as vulnerable as those who avoid it.  It’s very important to be on top and keep tracking the performance of your business to drive both yours and your clients business to the next level.

Accountancy – A Silent Revolution.

Self Assessment introduced in April 1996 was the largest revision of the UK tax system for decades and was ‘the industrial revolution’ for many accountancy practices.

Prior to the introduction of Self Assessment it was not uncommon for tax returns to be two or three years behind. In those days a late tax return resulted in the issue of an ‘Estimated Assessment’ of tax. An ‘Appeal’ on the grounds it was ‘estimated’ prevented collection of the liability and nothing happened until eventually the appeal got listed for a Commissioners Hearing. In some practices this was the signal to start preparing the accounts.

The introduction of Self Assessment, heralded by the Inland Revenue with a massive advertising campaign in the press, on radio and TV together with the threat of Automatic Penalties for late submission meant that a client’s affairs had to be brought up to date.

For many practices this was a major challenge and many resorted to introducing technology. The use of PC’s and accounts preparation software improved performance and efficiency and they prided themselves on bringing their clients affairs up to date and managing to file their clients returns before the 31st January deadline thereby avoiding the threatened Penalties.

With the introduction of Electronic filing the writing was on the wall but many failed to see it. Electronic filing was not the end, but the beginning of a new revolution.

Sixteen years later many accountants are still working late nights and weekends in December and January to prepare accounts that are needed for the next tax return deadline. They are ‘Chasing History’, the accounts they prepare are so far out of date they are of no use to the client other than to satisfy the statutory obligation to file accounts. Blinded by compliance dates and just surviving to get clients VAT Returns and Accounts filed by HMRC deadlines, these accountants do not realise that their clients need more.

In the last five years the next ‘silent’ revolution has crept upon the accountancy profession. Advances in technology have given consumers, instant messaging, online banking, instant answers to ‘Google’ searches. The ipad, tablet and smartphone have created a new generation that have come to expect instant access to everything. Access on the go to their social life but it doesn’t stop there.

The advent of cloud computing and new software means the modern entrepreneur can have access to their business records 24/7 from wherever they are in the world that has an internet connection.

Accountants that have embraced this have changed their role. They no longer chase history, they are helping their clients to have ‘real time’ accounting information and have become advisors and taken on a Finance Director role with their clients business. They have realised that their clients can have instant access to all their business data but need it interpreting so not only can they see where they are today, but where their business is going tomorrow.

To survive in business today entrepreneurs need quick and current information, accounting history is not as important as it once was, “Ask any bank manager”.

If you are still chasing history for your clients and need help in giving them real time information, maybe Corient could help, with our low tech solutions to hi tech problems.

About the Author

Barry Pendleton is a Lead Consultant at Corient Business Solutions and has experience of more than 25 years in managing accounting practices. He works with Accounting Firms to improve practice performance and reduce costs. He can be reached out at barry@corientbs.com or you can visit www.corientbs.com for further information

7 Steps to Improve Staff’s Performance

Passionate employees are the key to differentiating your company from competitors and grow your practice. Firms need employees who believe in the company and the value of the services it provides to clients. They need employees who are willing to be creative, have a common sense approach to decision-making, are innovative, and yes, passionate about the firm’s mission.

Below are the few simple steps to make your employees passionate about your firm’s growth

  • Key Performance Area- Set up a Key Performance Area for your staff at the start of the year. If you are going through a high growth period or negative growth period, have it done more frequently say every six months or even a quarter. If you are going through a very stable state, yearly goals should be good enough. Articulate goals set for your employees in as much detail as possible. Link goals to numbers wherever possible
  • Equip Your Staff- Make sure your staff is equipped with all the tools they need. Ask your staff if they need any help to deliver the goals. Provide tools or assistance wherever required
  • Review- Review the goals set for your employees on a monthly basis. You can just give them the update about the progress and suggest areas for improvement if they are not on track
  • Training- Make sure you identify areas of improvement for your staff and you send them for training.  Training can be for MS Excel, Report Writing, Use of New Technology, etc. There are several free training sessions also available which are conducted by Local Trade Promotion Councils. You can register your firm at local Chambers of Commerce
  • Innovation- Make sure you have an innovation box centrally located at your office. Promote employees to drop in their ideas into the innovation box. Review the ideas suggested by employees and atleast implement one of them at regular intervals. Put a reward for best idea of the month and so on.
  • Rewards and Recognition- Have a monthly/ quarterly reward system set out for your practice. Recognise people who have performed best. This will motivate others to perform as well. Have a Wall of Fame posted on the Office Wall. Whoever wins the awards, put his photo and name on the Wall of Fame
  • Family Get Together- Make sure every year, you arrange for a family get together of your staff. Recognise all the staff members. Your staff will feel proud when they get rewarded in front of their family.

In a nutshell, your staffs are key to your firm’s growth and all the above steps will make them partner your firm’s growth

About the Author

Sachin Lohade is a Chartered Accountant and works with Accounting Firms to improve practice and reduce costs. He can be reached out at sachin@corientbs.com or you can visit www.corientbs.com for further information

How to differentiate your practice with other Accounting firms

Every Accountant before setting up his practice desire of becoming one of the best in town but their desire of getting more clients force them to join the rest.

Accountants can take following few simple steps to differentiate themselves from the rest:-

Delegate your work: Don’t do everything yourself, start trusting your staff to perform a better job. It will be difficult in the start but it improves the overall performance of the practice. If you have staffing issues then consider outsourcing the extra work, this will allow you to concentrate on more productive areas i.e bringing new clients.

Have your presence in social media: Get yourself in LinkedIn, twitter, facebook. It gives clients a snapshot of who you are and how you operate and can work well for them to assess whether to appoint you as an accountant. These tools are very cost effective and in most cases it will only cost you the time it takes to update your account and it is fast too.

Read More…