EFFICIENCY HELPS THE BOTTOM LINE

Process improvement increases profitability and helps you do more with less

In today's economy, cash flow is king. When you manage to get work in the door, complete it and deliver it more efficiently - the quicker you can bill for your services and increase your cash receipts.  

What would it mean to your firm if you could:

  • Increase cash receipts by 10 percent during tax season?
  • Decrease charge hours by seven and a half per­cent? 
  • Gain an extra 100 hours of capacity per per­son? 
  • Complete more work in less time?  

Any one of those statistics would have had a posi­tive impact on your bottom line. All four would be even better. And the best part is that one firm did realize all those improvements this past tax season by focusing on making its processes more efficient.

Efficiency Increases Profitability

We, as CPAs, have always been trained and reward­ed to increase chargeable hours. Unfortunately, by rewarding increases in chargeable hours, we re­ward ourselves and our teams for being inefficient, rather than improving processes that will allow us to gain greater capacity and effectiveness.  

Here's how efficiency can help you increase profit­ability on a tax return:  

Let's say you billed $800 for a tax return in 2008. How much did you bill this past year? I'm guessing that whether you had $700 or even $1,000 in work in progress, you probably still billed the return at $800 plus a fractional increase for inflation.  

However, if you were able to increase efficiency, you'd have less WIP. So when your staff only has $500 in the return, you can still bill that $800 plus amount and increase realization - and profitability - on the job. If you were able to achieve similar results on every tax return you complete, the results would be huge.  

Managing with Fewer People

Increased efficiency impacts more than just positive bottom-line results. It also creates capacity. Think about what your firm looks like that first week in April? Are people working around the clock trying to get all your returns complete? It doesn't need to be that way.  

And if you happen to be one of those many firms that had to lay-off employees at the end of tax sea­son, what are you going to do next tax season? Who will do all that work? If you focus on improving your processes between now and January, it won't be a problem. You'll be able to complete the same amount of work you had last year with the number of people you currently have - without working harder either.  

Accounting firms as a whole have always done a great job in holding down and cutting expenses. With the current economic conditions, holding down expenses may not be enough. Now, it's more important than ever that your firm operate as ef­ficiently as it can - which will help you improve the bottom line.

Lean CPA
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