THE NEW ACCOUNTING KPIs
THE NEW ACCOUNTING KPIs ADDING VALUE FOR YOUR PRACTICE AND YOUR CLIENTS
RECEIPT BANK
THE NEW ACCOUNTING KPIs
THE NEW ACCOUNTING KPIs ADDING VALUE FOR YOUR PRACTICE AND YOUR CLIENTS The advent and accelerated adoption of automation and cloud technology mean that a number of manual processes performed by accountants are being disrupted by software.
Empowered by technology, these fully customizable KPIs give accountants and bookkeepers the freedom to measure success by their lifestyle choices and personal ambitions rather than by a set way of doing things.
As a result the long established KPIs of accounting firms, typically hours billed and fees recovered, are being superseded by a new valued added set which allow practices and accountants to focus on their own goals.
This approach is not prescriptive and allows practitioners to define success on their own individual terms.
CLASSIC INDUSTRY KPIS AND THEIR ORIGINS KPIs typically associated with accounting firms look to sweat staff costs, and allocate as many billable hours as possible. Historically, these KPIs have been informed by timesheets, allowing accounting staff to accurately document their charge out time.
HOURS CHARGED
STAFF ATTRITION AND VALUE ADDED WORK SOLD
This hourly-based way of billing used in accountancy firms was first adopted by law firms in the 1950s, and shortly afterwards became prevalent across other professional services companies.
Additionally, other common classic industry KPIs include staff turnover and added value work sold. The latter is important as such assignments tend to have higher margins than routine compliance work.
The main benefit of KPIs based on billable time is that they allow senior management to see the utilization rates of staff.
It is important to keep tabs on staff turnover as a high attrition rate can result in lost billable time due to new members of staff being needed to be trained, alongside also being an early indicator of the likelihood of client dissatisfaction. Whilst classic KPIs are unlikely to be phased out anytime soon, a number of accounting firms are adopting a new more flexible set, made possible by advances in technology.
2
RECEIPT BANK
THE NEW ACCOUNTING KPIs
HOW SHIFTS IN THE INDUSTRY AND SMES ARE LEADING TO NEW KPIS
Valued Accountancy chooses to include such work within their fixed fee structure.
The increasing use of cloud accounting software and changing regulation has meant that a new set of KPIs are emerging, which utilise efficiencies from software and the real-time data which they provide.
Paul says, “We answer all queries within our fixed price agreements.” This allows them to develop a closer relationship with their clients, without their clients worrying about being charged for questions.
INCREASED PRODUCTIVITY
ADVISORY AND VIRTUAL FD SERVICES
Productivity can now be measured on how accurately software is setup, as opposed to the volume of manual work an accountant or bookkeeper can perform within a set time period.
Accounting firms with a preference for advisory service are now able to take on a greater percentage of their fees from lucrative value added and virtual FD work, as opposed to standard audit and compliance services.
Automation software like Receipt Bank, and accounting software that connects to bank feeds, allows for bookkeepers can take on an ever increasing volume of clients, as long as the software is set up efficiently to code transactions for the third party accounting software used.
This is indicative of accountants using technology to market themselves as business advisers and consultants.
Stephen Paul, founder of Valued Accountancy, a Newcastle based firm with 13 staff members, and over 600 clients, has moved away from timesheet based KPIs to ones based on efficiency.
Best Suited, a small London based firm run by Dom Ahern currently receives around 50% of its revenues from advisory work.
He says, “Instead of allocating timesheets, we allocate work to the team and then measure the efficiencies around the production of that work.”
VALUE FOCUS RATHER THAN TIME FOCUS Technology means that accountants can place a greater focus on creating value for their clients, rather than spending time manually coding transactions. One way this can be demonstrated is by using real time information to highlight commercial opportunities or warn about the potential of red flags.
Currently this accounts for 35% of turnover for Valued Accountancy up from 10% two years ago.
Ahern says, “Part time FD work gives [us] an opportunity to be more hands on within businesses, normally where clients are looking to grow rapidly and need support.” The main KPIs Best Suited uses to assess this type of work are based on value and efficiency, with the firm setting targets around client goals such as raising investment or a company sale. He says, “Our measure of success is helping the client achieve their goals as cost effectively as possible so measuring efficiency is key. This ensures effective collaboration and division of duties.” The main cost of delivering these assignments tends to be frontloaded, with more senior members of the team initially setting up and creating processes. Best Suited then
3
RECEIPT BANK
aim to bring this cost down, and provide more value, by enabling more junior staff members to take over their day to day aspects. Common targets around transactions for clients can include reaching a minimum amount of investment and closing a deal within a set timeframe.
THE NEW ACCOUNTING KPIs
Additionally, Gilchrist thinks that the introduction of the Making Tax Digital reforms will result in a stronger focus on client service due to firms needing to measure KPIs associated with cloud adoption: “KPI’s will include; How many clients have switched to the cloud, how many have we approached this month, this year to date, how many have said “not yet”, and how many are going to struggle to make the switch?”
FOCUS ON CLIENT SERVICE The digitisation of client data has enable a shift to a higher level of service offering from accountants, based on KPIs related to communication and collaboration. From an operational perspective some cloud firms are setting out service level agreements with clients, based on how frequently they should submit their financial data and how often bookkeepers will update ledgers. It is in the interests of business owners to keep their ledgers up to date, as this will allow for accountants to offer a real time advisory service. Stephen Paul of Valued Accountancy says, “We normally tell clients that records will be updated weekly or monthly if we are doing the bookkeeping.” The main benefit of doing this is that up to date financial information can create greater opportunities for accountants and bookkeepers to collaborate. Gordon Gilchrist of 2020 Innovation, a consultancy for accountants, believes that firms having cloud access to client data has resulted in less manual chasing.
DATA ON THE MOVE Cloud communication and widespread use of smartphones have resulted in accountants being able to offer a real time service due to being able to access information anytime and anywhere. A number of cloud accounting software providers have mobile apps on which bank reconciliations can be conducted. This makes it easier for accountants to meet service level agreement KPIs due to completing tasks whilst they are away from the office. Depending on the complexity of queries, Dom Ahern tries to respond to emails in a speedy manner when out of office. He says; “If a reply only takes a couple of minutes I will respond quickly, even if out and about. Replies which require research can be difficult to fit into a busy day and will take longer to answer.” Whilst widespread mobile and cloud adoption does not explicitly create the expectation of an on demand service, being able to respond quickly to clients is likely to increase satisfaction levels.
He says, “The relationship has switched from accountants having to chase their clients for their books to accountants being able to access their client’s records at any time, and thus making planning easier.”
4
RECEIPT BANK
HOW KPIS CAN BE TAILORED TO YOUR OWN PERSONAL AND BUSINESS GOALS
FLEXIBILITY OF CLOUD SOFTWARE By its nature cloud software is fully customisable and modular. Proprietary cloud accounting software and associated add on partners can have their functionality and user experience tweaked to fulfil the needs of a diverse range of users.
HOW TECHNOLOGY CAN ENABLE TO TRACK YOUR KPIS As an increasing number of tasks performed by accountants are taking place within the cloud, it is now possible to track KPIs in real time, by using visual and interactive dashboards which fully integrate with cloud accounting tools. Software such as Crunchboards, Spotlight Reporting and the Receipt Bank Practice Platform allow for financial and operational company performance to be analysed by accountants with real time reports and forecasts. Key features of Receipt Bank’s dashboard include being able to see the average submission rate of receipts, and amount of outstanding items. Paul Bulpitt is the founder of The Wow Company, a firm which employs over 35 staff and has over 500 clients. He aims to grow the firm to be “the UK’s number one choice for thriving businesses.” The Wow Company use the Receipt Bank Practice Platform to monitor the efficiency of clients, and the to review the level of automations across their client base.
THE NEW ACCOUNTING KPIs
Additionally, they use Spotlight Reporting to evaluate the progress of departments and individual team members. Paul Bulpitt says, “We use Spotlight to pull in data synched from Xero and Google Analytics, and then upload and manually enter non financial data related to KPIs. The main KPIs we measure in the dashboard are client satisfaction, response time to client and recurring revenue.”
ADD ONS THAT SUITS GOALS OF ACCOUNTANT/BOOKKEEPER The variety of add ons mean that accountants can pick their own suite of tools to measure KPIs to match their own individual goals. The key tools The Wow Company uses to achieve this are Google Docs for document creation, Slack to communicate progress, and One Big Thing to track the team’s productivity. Correspondingly, Stephen Paul of Valued Accountancy seeks to grow his business at a steadier rate in order to be able to spend time with his family. He manages this steady growth by monitoring KPIs with Receipt Bank’s Practice Platform dashboard, which allow him to track current workload, client efficiency and automation levels for each client. This allows him to allocate work as efficiently as possible and ensure that he and his team maintain a healthy work life balance. AUTOMATION TO SUIT THE DEMANDS OF YOUR PRACTICE Effective automation of tasks can also help accountants and practice owners suit the demands of the industry niche or client specialisms they serve, irrespective of their location.
5
RECEIPT BANK
The Wow Company have a number of creative and digital agency clients. As record keeping and administration tends to not their key focus, Paul Bulpitt has found the automation features of Receipt Bank and Xero as being key to meet the demands of this client base. Firms which have clients whose workflows feature a number of repeating tasks can have elements of this automated with task management software. Dom Ahern of Best Suited says, “Asana is a fantastic tool for setting up recurring tasks such as payroll and VAT for submissions, and we use Trello for collaborating and managing ad hoc tasks.” He finds Trello essential for collaboration with clients, as well as for working with members of staff when they are based remotely.
THE NEW ACCOUNTING KPIs
CONCLUSION The new tools and working practices made available by the cloud are redefining the way that a number of core accounting processes are carried out. This creates a great opportunity for established and new firms to shape their KPIs on individual goals. The flexibility of cloud accounting software and business dashboards mean that these can easily be changed over time if the objective of firms changes its focus from being a profitable lifestyle business to one focussed on growth. The examples outlined above present just one of many KPI combinations available. Practice owners are encouraged to experiment to see what works best for their own individual objectives.
6
Receipt Bank is the leading bookkeeping productivity tool, used by over 4000 accountants and bookkeepers worldwide. Receipt Bank extracts the key information from your clients’ bills, receipts and invoices, removing the need for manual data entry. Receipt Bank then allows you to publish this data directly to your chosen accounting software. Our Account Managers help you grow your business in a partnership that goes beyond just software to advice on marketing, to process mapping, pricing and more.
Bookkeeping Analysis & Management
Automating Data Extraction & Coding
Line item extraction
Accuracy 98%+
Phone support + 24/7 email support
Boost functionality
While You Were Away workload manager
Xero match
Expense Reports
Co-branded 5-Star Client mobile app
World-class Integration with Xero, QuickBooks Online, Sage One, Twinfield, Kashflow, FreeAgent
Built-in foreign currency support
Project and Class management
Dedicated training platform and education resources
5 Star reviews on Xero Community & QuickBoooks Apps.com
A Personal Cloud Consultant to help you grow your business
TO FIND OUT MORE, GET IN TOUCH WITH OUR TEAM TODAY. REQUEST A CALL
RECEIPT BANK
THE NEW ACCOUNTING KPIs
THE NEW ACCOUNTING KPIs ADDING VALUE FOR YOUR PRACTICE AND YOUR CLIENTS The advent and accelerated adoption of automation and cloud technology mean that a number of manual processes performed by accountants are being disrupted by software.
Empowered by technology, these fully customizable KPIs give accountants and bookkeepers the freedom to measure success by their lifestyle choices and personal ambitions rather than by a set way of doing things.
As a result the long established KPIs of accounting firms, typically hours billed and fees recovered, are being superseded by a new valued added set which allow practices and accountants to focus on their own goals.
This approach is not prescriptive and allows practitioners to define success on their own individual terms.
CLASSIC INDUSTRY KPIS AND THEIR ORIGINS KPIs typically associated with accounting firms look to sweat staff costs, and allocate as many billable hours as possible. Historically, these KPIs have been informed by timesheets, allowing accounting staff to accurately document their charge out time.
HOURS CHARGED
STAFF ATTRITION AND VALUE ADDED WORK SOLD
This hourly-based way of billing used in accountancy firms was first adopted by law firms in the 1950s, and shortly afterwards became prevalent across other professional services companies.
Additionally, other common classic industry KPIs include staff turnover and added value work sold. The latter is important as such assignments tend to have higher margins than routine compliance work.
The main benefit of KPIs based on billable time is that they allow senior management to see the utilization rates of staff.
It is important to keep tabs on staff turnover as a high attrition rate can result in lost billable time due to new members of staff being needed to be trained, alongside also being an early indicator of the likelihood of client dissatisfaction. Whilst classic KPIs are unlikely to be phased out anytime soon, a number of accounting firms are adopting a new more flexible set, made possible by advances in technology.
2
RECEIPT BANK
THE NEW ACCOUNTING KPIs
HOW SHIFTS IN THE INDUSTRY AND SMES ARE LEADING TO NEW KPIS
Valued Accountancy chooses to include such work within their fixed fee structure.
The increasing use of cloud accounting software and changing regulation has meant that a new set of KPIs are emerging, which utilise efficiencies from software and the real-time data which they provide.
Paul says, “We answer all queries within our fixed price agreements.” This allows them to develop a closer relationship with their clients, without their clients worrying about being charged for questions.
INCREASED PRODUCTIVITY
ADVISORY AND VIRTUAL FD SERVICES
Productivity can now be measured on how accurately software is setup, as opposed to the volume of manual work an accountant or bookkeeper can perform within a set time period.
Accounting firms with a preference for advisory service are now able to take on a greater percentage of their fees from lucrative value added and virtual FD work, as opposed to standard audit and compliance services.
Automation software like Receipt Bank, and accounting software that connects to bank feeds, allows for bookkeepers can take on an ever increasing volume of clients, as long as the software is set up efficiently to code transactions for the third party accounting software used.
This is indicative of accountants using technology to market themselves as business advisers and consultants.
Stephen Paul, founder of Valued Accountancy, a Newcastle based firm with 13 staff members, and over 600 clients, has moved away from timesheet based KPIs to ones based on efficiency.
Best Suited, a small London based firm run by Dom Ahern currently receives around 50% of its revenues from advisory work.
He says, “Instead of allocating timesheets, we allocate work to the team and then measure the efficiencies around the production of that work.”
VALUE FOCUS RATHER THAN TIME FOCUS Technology means that accountants can place a greater focus on creating value for their clients, rather than spending time manually coding transactions. One way this can be demonstrated is by using real time information to highlight commercial opportunities or warn about the potential of red flags.
Currently this accounts for 35% of turnover for Valued Accountancy up from 10% two years ago.
Ahern says, “Part time FD work gives [us] an opportunity to be more hands on within businesses, normally where clients are looking to grow rapidly and need support.” The main KPIs Best Suited uses to assess this type of work are based on value and efficiency, with the firm setting targets around client goals such as raising investment or a company sale. He says, “Our measure of success is helping the client achieve their goals as cost effectively as possible so measuring efficiency is key. This ensures effective collaboration and division of duties.” The main cost of delivering these assignments tends to be frontloaded, with more senior members of the team initially setting up and creating processes. Best Suited then
3
RECEIPT BANK
aim to bring this cost down, and provide more value, by enabling more junior staff members to take over their day to day aspects. Common targets around transactions for clients can include reaching a minimum amount of investment and closing a deal within a set timeframe.
THE NEW ACCOUNTING KPIs
Additionally, Gilchrist thinks that the introduction of the Making Tax Digital reforms will result in a stronger focus on client service due to firms needing to measure KPIs associated with cloud adoption: “KPI’s will include; How many clients have switched to the cloud, how many have we approached this month, this year to date, how many have said “not yet”, and how many are going to struggle to make the switch?”
FOCUS ON CLIENT SERVICE The digitisation of client data has enable a shift to a higher level of service offering from accountants, based on KPIs related to communication and collaboration. From an operational perspective some cloud firms are setting out service level agreements with clients, based on how frequently they should submit their financial data and how often bookkeepers will update ledgers. It is in the interests of business owners to keep their ledgers up to date, as this will allow for accountants to offer a real time advisory service. Stephen Paul of Valued Accountancy says, “We normally tell clients that records will be updated weekly or monthly if we are doing the bookkeeping.” The main benefit of doing this is that up to date financial information can create greater opportunities for accountants and bookkeepers to collaborate. Gordon Gilchrist of 2020 Innovation, a consultancy for accountants, believes that firms having cloud access to client data has resulted in less manual chasing.
DATA ON THE MOVE Cloud communication and widespread use of smartphones have resulted in accountants being able to offer a real time service due to being able to access information anytime and anywhere. A number of cloud accounting software providers have mobile apps on which bank reconciliations can be conducted. This makes it easier for accountants to meet service level agreement KPIs due to completing tasks whilst they are away from the office. Depending on the complexity of queries, Dom Ahern tries to respond to emails in a speedy manner when out of office. He says; “If a reply only takes a couple of minutes I will respond quickly, even if out and about. Replies which require research can be difficult to fit into a busy day and will take longer to answer.” Whilst widespread mobile and cloud adoption does not explicitly create the expectation of an on demand service, being able to respond quickly to clients is likely to increase satisfaction levels.
He says, “The relationship has switched from accountants having to chase their clients for their books to accountants being able to access their client’s records at any time, and thus making planning easier.”
4
RECEIPT BANK
HOW KPIS CAN BE TAILORED TO YOUR OWN PERSONAL AND BUSINESS GOALS
FLEXIBILITY OF CLOUD SOFTWARE By its nature cloud software is fully customisable and modular. Proprietary cloud accounting software and associated add on partners can have their functionality and user experience tweaked to fulfil the needs of a diverse range of users.
HOW TECHNOLOGY CAN ENABLE TO TRACK YOUR KPIS As an increasing number of tasks performed by accountants are taking place within the cloud, it is now possible to track KPIs in real time, by using visual and interactive dashboards which fully integrate with cloud accounting tools. Software such as Crunchboards, Spotlight Reporting and the Receipt Bank Practice Platform allow for financial and operational company performance to be analysed by accountants with real time reports and forecasts. Key features of Receipt Bank’s dashboard include being able to see the average submission rate of receipts, and amount of outstanding items. Paul Bulpitt is the founder of The Wow Company, a firm which employs over 35 staff and has over 500 clients. He aims to grow the firm to be “the UK’s number one choice for thriving businesses.” The Wow Company use the Receipt Bank Practice Platform to monitor the efficiency of clients, and the to review the level of automations across their client base.
THE NEW ACCOUNTING KPIs
Additionally, they use Spotlight Reporting to evaluate the progress of departments and individual team members. Paul Bulpitt says, “We use Spotlight to pull in data synched from Xero and Google Analytics, and then upload and manually enter non financial data related to KPIs. The main KPIs we measure in the dashboard are client satisfaction, response time to client and recurring revenue.”
ADD ONS THAT SUITS GOALS OF ACCOUNTANT/BOOKKEEPER The variety of add ons mean that accountants can pick their own suite of tools to measure KPIs to match their own individual goals. The key tools The Wow Company uses to achieve this are Google Docs for document creation, Slack to communicate progress, and One Big Thing to track the team’s productivity. Correspondingly, Stephen Paul of Valued Accountancy seeks to grow his business at a steadier rate in order to be able to spend time with his family. He manages this steady growth by monitoring KPIs with Receipt Bank’s Practice Platform dashboard, which allow him to track current workload, client efficiency and automation levels for each client. This allows him to allocate work as efficiently as possible and ensure that he and his team maintain a healthy work life balance. AUTOMATION TO SUIT THE DEMANDS OF YOUR PRACTICE Effective automation of tasks can also help accountants and practice owners suit the demands of the industry niche or client specialisms they serve, irrespective of their location.
5
RECEIPT BANK
The Wow Company have a number of creative and digital agency clients. As record keeping and administration tends to not their key focus, Paul Bulpitt has found the automation features of Receipt Bank and Xero as being key to meet the demands of this client base. Firms which have clients whose workflows feature a number of repeating tasks can have elements of this automated with task management software. Dom Ahern of Best Suited says, “Asana is a fantastic tool for setting up recurring tasks such as payroll and VAT for submissions, and we use Trello for collaborating and managing ad hoc tasks.” He finds Trello essential for collaboration with clients, as well as for working with members of staff when they are based remotely.
THE NEW ACCOUNTING KPIs
CONCLUSION The new tools and working practices made available by the cloud are redefining the way that a number of core accounting processes are carried out. This creates a great opportunity for established and new firms to shape their KPIs on individual goals. The flexibility of cloud accounting software and business dashboards mean that these can easily be changed over time if the objective of firms changes its focus from being a profitable lifestyle business to one focussed on growth. The examples outlined above present just one of many KPI combinations available. Practice owners are encouraged to experiment to see what works best for their own individual objectives.
6
Receipt Bank is the leading bookkeeping productivity tool, used by over 4000 accountants and bookkeepers worldwide. Receipt Bank extracts the key information from your clients’ bills, receipts and invoices, removing the need for manual data entry. Receipt Bank then allows you to publish this data directly to your chosen accounting software. Our Account Managers help you grow your business in a partnership that goes beyond just software to advice on marketing, to process mapping, pricing and more.
Bookkeeping Analysis & Management
Automating Data Extraction & Coding
Line item extraction
Accuracy 98%+
Phone support + 24/7 email support
Boost functionality
While You Were Away workload manager
Xero match
Expense Reports
Co-branded 5-Star Client mobile app
World-class Integration with Xero, QuickBooks Online, Sage One, Twinfield, Kashflow, FreeAgent
Built-in foreign currency support
Project and Class management
Dedicated training platform and education resources
5 Star reviews on Xero Community & QuickBoooks Apps.com
A Personal Cloud Consultant to help you grow your business
TO FIND OUT MORE, GET IN TOUCH WITH OUR TEAM TODAY. REQUEST A CALL
