weave the review actions right into your processes.
by hitendra patil
client accounting services: the definitive success guide
why review your client accounting services offering periodically?
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most accounting firms ultimately optimize their internal processes and resources that produce their services. the measurement of such optimization is the profitability of the firm. when firm owners/partners feel the pressure on profitability, it is natural for them to measure the factors that contribute to profitability, and the cost thereof.
you can measure the performance of your cas offering in similar ways. but there is a difference that makes cas performance measurement processes somewhat unconventional. it is not just for the cost and profitability parameters you will measure, but because cas is about outcomes your cas clients (are supposed to) receive/experience, measuring the “promise fulfillment” of cas is a necessity. and if you do not do it periodically, at pre-decided intervals, it can be challenging to course-correct when it is too late.
cas as a revenue segment will continue to evolve, especially given the pace of technological advancement, and also because of comparatively much higher levels of awareness among clients because information is so much more easily available to
people (compared to let’s say about 20-30 years ago). the internet and social media make it easier for your clients and prospects to do their “due diligence” about your firm. it means cas clients’ expectations will keep evolving and changing. you would want to make sure your cas offering is, at the very least, “contemporary,” ideally “ahead of the curve.”
you might feel this is true for any other service, not just cas. but think about what is the perception of your clients about “tax preparation services.” it is a highly mature service segment that is highly commoditized by technology. client expectations of what they experience as an outcome are nearly unchangeable – as low tax a preparation fee as possible, filing in time, and the peace of mind that they have not paid more than what they are required to pay. cas is still to find that unchangeable perception/expectation level in clients’ minds, and that is a great opportunity for accountants to show the new possibilities and deliver the value.
when to review
your firm’s cas performance needs to be reviewed periodically. but how frequently? when?
it depends on how new you are to offering cas. because i interact with professional accounting firms day in day out – with firms that are just starting to offer cas, those that have been offering it for some months and those that have been at it for many years – i could figure out some common patterns in how firms evaluate their processes, and when. i identified one particular factor that seemed to indicate how frequently accountants review their cas processes is related to the maturity of their cas practice. i analyzed and correlated the frequency of their review to the length of time that the firms have been offering cas. as a rule of thumb, the ballpark timelines for your firm’s cas performance review should be as described below:
- if you are just starting with your cas offering: essentially, you are starting with process effectiveness assumptions based on your experience of offering other services. but because cas is about outcomes, you would need to measure cas performance every time you deliver outcomes to your cas clients. more often than not, most firms start their cas offering with a handful of clients. in this stage of your cas journey, measure the cas performance at the time of delivery of service to each cas client. measure your cost of producing the service. consider just the operational cost that can be allocated to the work required to produce the cas outcomes. do not consider the common overhead and management expenses, which should be treated as your marketing and “learning” cost because your initial cas clients are teaching you how to perfect your cas craft.
measuring your cas costs is just one part of the equation. again, because cas is about outcomes, you must measure it from the cas client’s point of view. from the very basic “what did we deliver extra in cas that we don’t deliver in our basic services?” to more ambiguous “what value did the cas client perceive from the cas outcomes we delivered?” – measure everything.
when you deliver cas to a few clients for say three months, review the “business performance indicators” from the client’s financial statements. for example, are your clients experiencing some cost reduction/optimization in their business because of the insights you delivered? if not, did the clients actually act on the insights you gave them? depending upon the nature of each of your clients’ business, the industry, life cycle of the company, competition, regulatory and technological shifts in their industry, etc., the value of different types of cas outcomes will vary client by client. but the key thing to understand here is you need to figure out what would be a few measurable indicators from a client’s business accounting that will reflect the impact of your cas offering.
for some, it could be a reduction of the average amount of money stuck in monthly/quarterly inventory; for others, it could be a lesser number of average days to collect receivables (which can reduce overdraft/financing cost), and so on. the concept here is to be able to measure cas performance. you need to be able to identify what would make a difference to a client’s business and how you will measurably show it to the client.
if you managed to get clients who are a better fit for cas, you would find they ask multiple and more profound questions than other clients who buy lower-priced basis services from you. however, when smaller businesses start growing, the business owners are neither used to asking such questions nor have the time to focus on accounting (hence the cas opportunity for accountants). you will need to educate such clients to ask relevant questions that make them take notice of the cas outcomes you provide. one way to do this is to make a list of common, generic questions that other cas clients ask and tell the other clients something like, “when our other clients receive these cas insights from us, generally they ask us such and such questions. the reasons they ask these questions are such and such. do you have any such questions on your mind right now?” after the initial few months of your cas journey, once you are able to identify and lay down the “cas performance measurement parameters and processes,” you will be ready to fine-tune and optimize your cas practice.
- if you have at least one year of experience of providing cas: if you have provided cas to a few clients (at least 10-20 clients, preferably from different industries/niches) regularly for at least a year, you are ready to set up your periodic cas performance measurement processes. these will be based on the frequency (at least quarterly), more defined measurement parameters, and a one-on-one discussion with the client at least once a quarter.
many cas performance measurement criteria you find out during your first year of providing cas will continue. but making sure that you show the clients a “before and after” comparison of their critical business indicators is a must.
your “before” point is the financial statements of your client’s company at the time of signing up for your cas offering, and preferably the immediate past two years of business revenue and profitability trend. you’d want to demonstrate that your cas insights are helping the client enhance their business on multiple parameters. after a year of experience of providing cas, it is advisable to continue to measure cas performance as follows:
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- for each new cas client, every month for the first three to six months
- after providing at least six months of cas to any client, at least a quarterly measurement (you will continue to provide daily/weekly/monthly insights and information as per the service level agreed)
- annually, overall cas performance measurement at the firm level
what to review
there are several performance factors you can track for reviewing your firm’s cas performance. you need to focus on a few most impactful ones. a technique to know which ones are more impactful is to separate the measurement of “activities” from the “outcomes of the activities.” here are a few examples of what to review:
client-level review:
- before and after comparison of client’s key financial performance indicators, e.g., cost of goods sold, revenue, profitability, per product/service profitability, comparison of aging of payables and receivables, inventory turnaround ratio, other key financial ratios, etc.
- the number of business decision support insights delivered and how many were implemented by the clients (without asking clients specifically so, it is possible to know from the financial statements if they implemented your advice)
- growth rate: revenue, profit, number of new customers added
- the number of new/better accounting processes implemented at the client’s business, etc.
firm-level review:
- number of cas clients added during the review period
- the average number of key insights listed in the “professional observations about client financials.” this is not about information points like revenue and profit figures. it is about why those figures are what they are.
- the average revenue per client per month
- the average cost of providing cas per client per month
- average profit per client per month
- if you offer three levels of cas packages, which package has the most number of clients and which package gained the most number of clients during the review period
- agreement renewal rate
- how many “aha” moments clients had, how many emails your firm received from the clients that thanked you profusely
- how many referrals were received from clients during the review period
- how many testimonials/online reviews clients gave you during the review period
these are just some examples to get you started with the cas performance measurement processes. as long as you can design these review processes around the outcomes and impact of your cas offering, you can expect to enhance your cas practice.
how to review
while the cas performance review findings are essential for your firm’s cas progress, it is also important that such review processes are relevant, fast, efficient, effective and useful. therefore, it is advisable to weave the review measurement actions right into your cas processes rather than taking all the information at the end of each review period and trying to analyze it all at once. do not think of these cas performance reviews like “free consultations” you may be offering to prospects. so, how should you review the performance of your cas offering? here are some starting recommendations:
- use client portals (document management online storage solutions) to upload “insights” in a separate folder per client. provide each of the cas clients their own private portal access. when you upload periodic insights to such insights folders, the name of the monthly insights file/pdf should start with a serial number (one glance at the folder will tell you how many times you delivered insights).
- within each insights document, number the insights sequentially. this shows the client how many insights their accountant is delivering.
- maintain a per-client performance comparison database (simple excel files will do, to begin with) and list all the key “client business performance” parameters one per row. use the columns to capture relevant figures per such parameter per service delivery period. this will give you, at one glance, a quick grasp of how the client’s business is progressing under your cas guidance.
- use graphs to show your cas clients their year-to-date business performance. most accounting software solutions have such charts built in now. these graphs are also a quick indicator of your impact.
- for each of the “what to review” factors you decide, develop a process to capture periodic data to enable comparisons and analysis at a later date.
- set up a recurring, non-cancelable time for the review of your firm’s cas performance. explain the key actionable findings to all staff who work on cas processing, e.g., we delivered cas reports on an average in x days after each period, but we need to bring that time down to 0.8x day. what would you suggest on how we can make our processes more efficient?
- define and set up a process to inform each client of the findings of their own company’s cas review.
- work out some sort of an overall rating/score for measuring each cas client’s value to your firm. for example, give a score on a scale of say one to 10, with 10 being the best and one being the worst, to each parameter on which you measure firm-level cas performance. so you will have a rating of cas fee (revenue amount, profit amount), number of referrals, number of online testimonials/reviews, client business growth rating (value of such clients will be higher for your firm as revenue from such clients will be more for your firm), and so on.
- average out such score to one figure per client to help you compare which clients you are delivering more value to and which clients are more valuable to your firm. ultimately, at the firm level, the average of all cas clients put together will be your firm’s “cas score.”
think differently
you are a professional accountant. you innately sense and understand business performance and trends. if you created a separate business for offering cas, how will you analyze the performance of this business? answering this question can give you ideas on how to measure the financial performance of your cas practice.
if you look at each of your cas clients as a cas salesperson for your firm (because they will upsell themselves by buying more cas components or other services from your firm as well as give you referrals that turn into new revenue and profit for your firm), you will find ideas on how to measure the value of each cas client. if you assign even a notional dollar value to your firm’s “brand,” the number of positive online reviews and testimonials will give you a good measure of the brand value of your cas practice. these are just some ideas on how to think differently when deciding about your firm’s cas performance review system.