As business owners and accountants, we always know that we should prepare for a rainy day. But let's be honest, how often do you push this thought to the back of your mind? Take the 2008-09 recession and the current Covid-19 pandemic as primary examples; many business owners were and still are being hurt by these recessions. (And many more will be as the COVID-19 recession really starts to bite.) So how can you do things differently? What steps can you take to prepare your business to weather these storms so that you can emerge from them even stronger? Here is part four of a four-part series on how to recession-proof your practice. This series is based upon a webinar we did with GI. How to recession-proof your practice; Click here to download the whole recording.
Step 4: You need to increase efficiency AND reduce costs
Of course, we all need to reduce our overheads during a recession. What's not quite so obvious, however, is that we should be looking at how we can increase our efficiency too.
If you can increase productivity and efficiency in your practice whilst decreasing your costs, imagine what impact that would have on your business? Get this right and you will start to thrive rather than just survive during a recession.
How to reduce your overheads but increase your practice efficiency
If you want your practice to be recession-proof, then you need to know how to decrease costs while increasing efficiency simultaneously. Here's how.
1. Involve your whole team
Anyone can go through their overheads line by line and see where the money is being spent. If you really want to know where to make the most positive changes to improve efficiency, you need to involve your team. They are the ones on the ground all day using your processes and software. It seems clear that they'd be the best people to ask when it comes to making improvements.
When you get your whole team together, make sure you discuss the following:
- What tasks can be done by non-accountants or outsourced to reduce wage costs but also free up UK staff for higher-value work?
- What do we do for our clients that doesn't add value? Even if we have always done it this way?
- How do we get the workflow more under control and better organised? E.g. less duplication of effort or rework?
- If we were to reduce our costs by 25% or more, what would you do?
These are important areas to explore if you're looking to increase practice efficiency and decrease overheads; And they are essential to recession-proof your practice.
While involving your whole team is absolutely the best way to make changes in your practice, just be aware that it could cause some issues and worries too. Your team may be happy helping you to identify tasks that can be done by non-accountants but they may not be keen on you outsourcing these tasks. Outsourcing can be met with resistance as some team members may feel like their jobs are under threat. If you find that this is the case, then explain to them how the role of the accountant is changing and how they can be used more effectively on the ground.
2. Start (or continue) a culture of continuous improvement
If you haven't already, start (or continue) to foster a culture of continuous improvement. This means nurturing your team to always be looking for ways to develop and improve work processes.
Although this will take some time at first (and a lot of pushing and reminding from you), soon your team will start to do this naturally. Imagine a scenario where your team identifies opportunities for improvement and come to you with their own ideas and suggestions? This can happen if you do the following consistently:
- In every weekly team meeting, ask team members to identify one thing that can be improved or made more efficient.
- When something hasn’t worked or is delivered late, don’t blame but always insist on a root cause analysis of what happened.
- Give team members objectives around improving the efficiency of the practice.
- Ask each team member to be the firm’s champion for a particular piece of software and ask them to build a strong relationship with the software vendor.
- Have a daily conversation with your operation team on what to improve and how you will drive this through.
Many accountancy practice owners are not doing as much as they could to improve the efficiency of their own operations, so review yours and see how you can improve. The pandemic and recession have caused many of us to refocus so use this time to put everything under the microscope.
3. Get tough on low performance
You're looking at how to survive during a recession, you can't afford to have team members who aren't performing. The trouble is, however, especially with most teams currently working remotely for the foreseeable future, is that it's very hard to monitor performance when managing a virtual team.
If you're trying to reduce costs but increase efficiency, you have to do what you can to monitor performance and then get tough on those who aren't performing as they should. To help with the monitoring, we have a great blog on The 7-step guide for small accountancy firm owners to effectively monitor the performance of employees who work virtually. When it comes to getting tough, here are a few things that you need to do:
- Give each team member written targets to achieve and schedule regular conversations with them to check how their work is going. Make sure to discuss their progress and identify the root cause of any missed targets.
- Provide training for areas of low competence, particularly low familiarity with key pieces of software the firm uses.
- Don’t be afraid to move low-performing staff members onto formal performance management procedures.
- Utilise outsourcing to make up for any capacity issues caused by exiting low performers.
It may be hard, but a key component to survive during a recession is strong employees who work productively. Help them perform at their best by coaching them through any hiccups and give tough love to them when they need it.
4. Measure and monitor your KPIs
What are your key performance indicators (KPIs) and are you measuring and monitoring them regularly? If you're not, you should be. To survive during a recession, you need to know what is working and what is not working. To recession-proof your practice, you need to focus on those things that are working.
To do just that, here are some key KPIs that you should be measuring and monitoring:
- Practice efficiency monthly by calculating 'amount billed – outsourcing costs ÷ UK staff hours available.
- Average time it takes to file year-end accounts after clients’ year-end passes.
- Average time it takes to file VAT returns for clients.
- Net profit margin of the firm as a percentage.
- What analysis you do in the background to identify and measure practice efficiency (as productivity is pivotal).
Once you collect the data for the above, you then have a clear idea of exactly what changes you need to make. Have you ever heard of the quote "With data collection, 'the sooner the better' is always the best answer?" That's because once you know exactly what you need to do, the sooner you do it, the quicker you can benefit from it.
Recession-proof your practice
Accountancy practice owners know that they should be prepared for tough times, but they don't always take the necessary steps. If you want to take the steps (if you want to know how to recession-proof your practice), then you will:
- Choose the right mindset
- Increase your marketing activity
- Make it easy for your clients to pay little and often
- Increase practice efficiency and reduce your overheads
If you do all 4 of these steps, you will be able to navigate any future storms - such as pandemics and recessions that will normally damage your practice - fairly unscathed. You will be one of those businesses that doesn't just survive during a recession but thrives through it. Imagine emerging even stronger than before? That could be you.
Get your practice ready to thrive in a recession
Download the recording of 'How to recession-proof your practice' and you will discover how to:
- Reduce your practice overheads without having to make anyone redundant or reduce their hours
- Get 4-8 decent leads every month without having to spend a fortune or all your time on marketing; even if marketing and sales is your weakness
- Make the time to recession-proof your practice even if you are overwhelmed with client work right now
- Get clients to pay for the services they need even if they plead they have no money
- The top 3 areas to investigate to find the quick wins to cut your firm’s cost base