When it comes to numbers, most accountants have got it covered. After all numbers is our thing, right? Often the opposite is true when it comes to our own practices. Therefore, this article explores what KPIs your firm should be monitoring.
Why obsess about your KPIs?
In the last 3-4 years we have nearly tripled in size at Global Infosys. Our headcount in India has probably doubled rather than tripled. So, how did we do this? We took a leaf out of Dave Brailsford (UK cycling team manager) and became obsessed with the 1% improvements we could find in our ways of working over in India. The reason we took this strategy was we’d run out of the easy things to do. The big “quick” (or even slow) wins had already been done. So, we looked towards incremental improvements. We could only do this if we had clear KPIs which we religiously measured and monitored.
It’s the same with your practice, your KPIs will firstly point you towards where the big wins are. Then you will need them to help guide your decision making to identify where you can make the 1% improvements. As the British Cycling team really demonstrated, those 1%s can really make a difference when they are all combined.
When you are trying to make improvements to your practice it can be easy to be seduced by what I call magpie syndrome. This is where software vendors and other suppliers to the profession entice you to try out their product or service as it will (apparently) transform your practice. If you are truly close to your KPIs and know which ones you need to change, you are in an informed position about what of these products and services will actually help your practice. You can then use your KPIs to see whether the product or service is doing what it says it is. I.e. are you getting the return on your investment.
Your KPIs will be slightly different to other practices
The right KPIs for your practice will be the ones which show you how well your strategy is panning out. For example, if your strategy for immediate growth is to grow your existing accounts you will want to be looking at average client fee. Or if you are looking to move all your clients onto cloud, the % of clients on Xero/Quickbooks/Sage one will be something to monitor.
Client related KPIs
When you are a growing practice, marketing and sales can be a massive profit drain on your practice. Therefore, it makes sense to monitor the efficiency and effectiveness of your practice’s business development efforts. This means looking at KPIs such as:
- Number of monthly leads split by work for new and existing clients
- New business won (value) split by new clients and existing clients
- Enquiry to new client conversion rate
- Cost per lead
- Average new client fee
- Client churn, both number and value per month
- Referrals from existing clients
- Client satisfaction score
- Job turnaround time
- Number of client complaints
Practice profitability and turnover KPIs
It would be unwise to assume that in your practice this is already covered. Cobblers’ children and all that! What’s your:
- Revenue split by recurring and one-off fees?
- Monthly income via direct debit
- WIP/Debtor days
- Cash survival time, ideally measured in days and weekly
- Gross and net profit margin for the whole practice but also by parts of your business
- % of turnover of salaries + IT subscriptions
People and operational efficiency
And lastly, but by no means least, it’s important to keep an eye on your people. Such as:
- Staff turnover (under 18 months service and over 18 months service)
- Average cost to produce a set of accounts (A useful metric to see how much money outsourcing your accounts is saving you!)
- Staff satisfaction score
- Revenue per full time equivalent
- Profit per full time equivalent
Measuring and monitoring your KPIs and then using them to inform your decision making is key to profitably growing and scaling your practice. Without decent management information, as a practice owner you are in effect dancing in the dark.