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 or you can visit for further information.


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