BUSINESS WITH CONFIDENCE icaew.com Practice Support Services Top tips on practice management John O’Donnell 6 December 2011

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved.

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. The PSS Team John O’Donnell Graham BaleCatherine Woodthorpe

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Top tips Practice profitability Practice management Risk management Strategy for 2012

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Practice profitability

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Problem to overcome Lock-up Work in progress plus debtors Problematic issue Varies significantly Barrier

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Billing bases Historical charge-out rates based on hourly fees Issues Bad debts Lag in payment Cash-flow disadvantage Overdraft Client relationship issues

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Alternative bases Fixed fee Useful for basic compliance services – Cost estimation easy – Standing orders or direct debits Advantages – Clients pay regularly – Firm receives funds regularly – Mutual cash-flow advantage

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Things to consider Menu of charges – Different cost for same service based on different levels of transactions, complications, etc – Make sure you take all into account before quoting – Include annual meeting with the client Consider retaining hourly fees for more complex and non- routine work

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Maximisation of fees Contractual terms – Ensure that the terms clarify the work to be done on fixed fee – Base fee on provision of information – complete and – on time (to your pre-agreed deadline) – Clarification of scope For ad hoc work have separate bespoke engagement terms and make sure the client understands that this is not included in the fixed fee

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Collecting over-runs Improvement of billing efficiency Fee £1000 Inefficient client – Fee £1000 – Additional cost£ 150 – Total£1150 Actions – Tell client before doing additional work – Client aware – Make sure staff know they need to tell you immediately a problem is apparent

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Setting reasonable charge-out rates Charge-out rates vary considerably Use them as reasonable target Focus on under-achievement Ask why Is it your fault or the client’s? And how can it be better managed in future? Leading to – Better use of the staff you have to do more work and improve fee income

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Addressing under-recoveries Bill the fee Write-off under-recovery If you retain it – Do not carry the balance forward – Carrying it forward will distort next year’s results (and this year’s!)

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Optimise recovery How can you optimise recovery? Many ways – Charge an element before starting work – Good for poor payers – Good for larger clients with work spanning some while – Bill fees once £x of recoverable wip – Standing orders – Direct debits – Credit card Standard firm’s procedure makes implementation easier

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Should you keep time records? Benefits of moving to fixed fees is no need to retain them – (so long as your engagement terms are drafted correctly) But – How can you be sure your fixed fees are correctly calculated without a point of reference – And how can you periodically check? – How can you assess staff efficiency? – Do you pay staff a bonus? If so, how will you measure it? – What about the partner-level ad hoc work?

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Credit control Should be process in place Mechanistic When to raise fees? – Not month end – raise as soon as possible Credit control pre-set timings – Bill plus a period – Reminder – Second reminder – Credit control phone call

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Credit control Credit controller to have a script Then take action Partner override of credit control process to be avoided (or justified)

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Practice management

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Expanding the business Set partners and senior employees key performance indicators (KPIs) Include – recoverability – billing and cash collection – Generation of new business Be careful not to compromise quality and professional standards (including ethics)

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Expanding the business Set budgeted chargeable hours for staff to recover Clarify and agree how these will be measured Ensure a reasonable measurement tool is in place What if staff achieve their target? Incentivisation – Bonus?

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Acquisition / merger Dealt with separately

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Differentiation Brand – Presentations – Web presence – Client perception Positive first impressions Corporate colours Corporate logos Messages to clients Layout of correspondence

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Pareto analysis 80:20 principle Analysis of client base to clarify clients for whom you want and are able to provide more services Questions to ask Take action based on answers

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Focus on markets Specialism What areas could you focus on? What interests you? Where do you have experience/interest/specialism? What are specialist markets?

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Risk management

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Professional indemnity insurance (PII) Requirements – icaew.com/regulations Cover must be with participating insurer Can have excess of up to £30,000 per partner If licensed for DPB and undertaking insurance mediation work (typically certain fee protection insurance) additional requirements

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. PII Excess PI above required level (secondary cover) can be with non-participating insurer Consider risks your firm may be exposed to eg (but not restricted to): – High value or complex tax computations – Strategic tax advice – Complex tax solutions – Audit of high value or judgemental balances Based on these, is your PII at a sufficient level?

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Engagement terms Review them regularly – Are they up to date? – Ensure that they reflect what you do for your clients – Update changes to services you provide – Prevent ‘scope-creep’ Consider merits of limiting liability – Take advice as necessary

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Strategy for 2012

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Strategy for 2012 Do you have a strategy? Valuable to take time to consider plans for the future Make it a formal document When? When you have time to reflect Enjoin your partners Include your senior staff And inform everyone of the key messages

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. What to consider Gaining referrals from current clients Ensuring that you recover the RPI increase in fees to clients – Communicate why you are raising your fees – Consider introduction of standing orders/direct debits

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Practice Support Services Practice Support Services team is Catherine Woodthorpe, Graham Bale and John O’Donnell Services explained on next slide Confidential and exempt from duty to report misconduct To find out more or to book a coaching session: – call +44 (0) or –

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Practice Support Services Audit – Clarified ISA coaching – Audit compliance reviews – Solicitors Accounts Rules reviews – Bespoke coaching and compliance reviews Practice assurance and DPB compliance reviews Consultancy – Practice management – Practice succession planning – Anti-money laundering coaching – Ad hoc consultancy

BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW All rights reserved. Q & A

A world leader of the accountancy and finance profession BUSINESS WITH CONFIDENCE icaew.com