{"id":109830,"date":"2023-04-06t14:57:46","date_gmt":"2023-04-06t18:57:46","guid":{"rendered":"\/\/www.g005e.com\/?p=109830"},"modified":"2024-08-07t23:09:28","modified_gmt":"2024-08-08t03:09:28","slug":"how-partner-and-staff-actions-impact-profits","status":"publish","type":"post","link":"\/\/www.g005e.com\/2023\/04\/06\/how-partner-and-staff-actions-impact-profits\/","title":{"rendered":"how partner and staff actions impact profits"},"content":{"rendered":"

\"seniorbusinessman5others_a-31774-629\"<\/a>six specific examples, plus benchmarking norms.<\/strong><\/p>\n

by marc rosenberg<\/span><\/i>
\nhow to bring in new partners<\/span><\/i><\/a><\/p>\n

these four metrics are key to any analysis of cpa firm profitability.<\/p>\n

    \n
  1. fees per equity partner.<\/strong> the firm\u2019s billings divided by the number of equity partners. this is one of the ways we measure leverage. the more billings each partner can manage, the higher the firm\u2019s profit margin.<\/li>\n<\/ol>\n
    \n

    more: <\/b>the business side of cpa firms<\/span><\/a> | <\/span>public accounting as a business, 101<\/span><\/a> | <\/span>16 steps to creating a partnership path<\/span><\/a> | <\/span>six ways new partners differ from managers<\/span><\/a> | <\/span>the four essentials for every new partner<\/span><\/a><\/p>\n

    \"goprocpa.com\"exclusively for pro members. <\/span><\/strong>log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/p><\/blockquote>\n

    on average, partners do 10-15 percent of all work performed for clients; the remaining 85-90 percent is performed by staff under the partners\u2019 supervision. the higher the percentage of client work the partners perform, the harder it is for them to find the time to build their client base and help the firm achieve a high fees-per-partner ratio. to manage a large client base properly, partners need to delegate as much of the client work as possible to staff.<\/p>\n

    <\/p>\n

      \n
    1. fees per person.<\/strong> this is another leverage metric. the \u201cperson\u201d part of the calculation is every employee in the firm, including administrative people. firm head count is measured in full-time equivalents (ftes). someone who works 1,000 hours a year is considered a 0.5 fte. one who works 1,200 hours a year is a 0.6 fte. no one can ever be more than a 1.0 fte, regardless of how many overtime hours they work.<\/li>\n
    2. staff-partner ratio.<\/strong> this leverage metric is the number of professional staff (all client service staff who are not equity partners) divided by the number of equity partners.<\/li>\n
    3. billing rates.<\/strong> the rates assigned to each person in the firm that are multiplied by charge hours to arrive at billings.<\/li>\n<\/ol>\n

      many years ago, a great and very successful managing partner told me that the key to cpa firm profitability is \u201cleverage and rates,\u201d epitomized by these four metrics.<\/p>\n

      a typical cpa firm income statement<\/strong><\/p>\n\n\n\n\n\n\n\n\n
      <\/td>\namount<\/strong><\/td>\npercentage of net fees<\/strong><\/td>\n<\/tr>\n
      gross fees<\/td>\n$5,000,000<\/td>\n<\/td>\n<\/tr>\n
      write-offs<\/td>\n500,000<\/u><\/td>\n<\/td>\n<\/tr>\n
      net fees or billings<\/td>\n4,500,000<\/td>\n100.0%<\/td>\n<\/tr>\n
      expenses:<\/p>\n

      staff salaries and benefits<\/p>\n

      overhead expenses*<\/p>\n

      total expenses<\/td>\n

      		 <\/p>\n

      2,000,000<\/p>\n

      1,000,000<\/u><\/p>\n

      3,000,000<\/u><\/td>\n

      		 <\/p>\n

      44.4%<\/p>\n

      22.2%<\/u><\/p>\n

      66.6%<\/u><\/td>\n<\/tr>\n

      total income to the equity partners<\/td>\n$1,500,000<\/u><\/td>\n33.4%<\/u><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

       <\/p>\n

      * rent, office supplies, marketing, insurance, training, it costs, etc.<\/p>\n

      examples of how various actions impact a cpa firm\u2019s profits<\/h3>\n

      assume a firm with eight partners and 28 professional staff.<\/p>\n

        \n
      1. everyone in the firm records only one extra billable hour per week. <\/strong>notice i said \u201crecords,\u201d not \u201cworks\u201d an extra hour. both partners and staff perform hundreds, if not thousands, of hours on client work that are recorded as nonbillable time instead of billable time. why? it could be sloppiness in keeping track of time. or perhaps someone feels guilty about spending too much time on a task. maybe a manager spends a couple of hours training a staff person on a client engagement and makes a unilateral judgment that the time shouldn\u2019t be billed to the client. in many cases, this extra time can<\/strong> be billed to the client. but if the time never makes it to the billings records, it will never be billed.<\/li>\n<\/ol>\n