{"id":52101,"date":"2017-06-19t05:01:05","date_gmt":"2017-06-19t09:01:05","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=52101"},"modified":"2017-06-30t09:19:34","modified_gmt":"2017-06-30t13:19:34","slug":"accountants-bizarre-habits","status":"publish","type":"post","link":"\/\/www.g005e.com\/2017\/06\/19\/accountants-bizarre-habits\/","title":{"rendered":"the bizarre habits of accountants"},"content":{"rendered":"
<\/a>eight crazy assumptions destroying tax and accounting firms. by rob nixon<\/i><\/p>\n i am convinced that the inventor of the current profit model of an accounting practice was not very good at strategy or business development.<\/p>\n more on strategy: <\/b>the final critical traits: how do your tires look?<\/a> | 4 more critical traits: be your best you<\/a> | 12 traits of a better you<\/a> | why old pricing models are unethical<\/a> | 8 ways to improve firm profits<\/a> | 17 killer questions for prospects<\/a> i am certain that the creators of this model had charity in mind. i am also convinced that the current model will bring in a decent income \u2013 and maybe a reasonable lifestyle if you are frugal\u00a0\u2013 but it will not make you wealthy.<\/p>\n now that i have your attention, let me share with you what is right and wrong with the traditional model.<\/p>\n the current model just does not add up \u2013 it\u2019s flawed from the start. take a look at how the vast majority of accounting practices around the world make a profit.<\/p>\n most partners of most accounting practices earn $200,000 to $400,000 per year. however, that\u2019s before taxation and working capital. you can build a reasonable lifestyle but it won\u2019t make you wealthy!<\/p>\n this model truly is bizarre. the success of the revenue model is predicated on\u2026<\/p>\n what wrong with all that, you say?<\/p>\n the entire model is based on labor for hire and that is not what you sell. you sell what you know; you sell intellectual capital turned into intellectual property, which is disguised as letters, reports, statements of advice, meetings and recommendations.<\/p>\n you do not sell labor \u2013 yet that is what your business model says you sell.<\/p><\/blockquote>\n around the world at various partner retreats (why they are called retreats is beyond me \u2013 i thought you were supposed to be advancing at these things, not retreating) i am sure at pontification time the following discussions have taken place\u2026<\/p>\n partner a: <\/strong>\u201cif we could only find another five qualified accountants and get 1,250 hours out of each of them at an average charge rate of $200 net of 10 percent write-offs then we could grow our revenue by $1.25 million.\u201d<\/p>\n partner b: <\/strong>\u201cor another way to do this is to try to squeeze more productivity out of our current 15 accountants, from 1,200 hours to 1,400 hours, and increase their charge rates from an average of $150 to $165. that would increase our profit by $45,000.\u201d<\/p>\n partner c: <\/strong>\u201ci think we need to reduce our write-offs from 15 percent down to 5 percent. we have been targeting 15 percent for years \u2013 why don\u2019t we target 5 percent write-offs? we have been writing off $300,000 and the new target would only be $100,000.\u201d<\/p>\n partner d: <\/strong>\u201cbut what about our labor and overhead costs? we were planning to give the team a 5 percent pay increase this year \u2013 one of them even asked me for 20 percent for goodness sake \u2013 why don\u2019t we just give them a 3 percent increase? our it costs are out of control; i think if we spend some time renegotiating our contract we could save at least $15,000 per year.\u201d<\/p>\n what is wrong with the discussion?<\/p>\n another bizarre habit that accountants get involved in is writing off. write-offs (discounting before billing) occur in three distinct areas:<\/p>\n i visited a six-partner firm in melbourne once. they had fees charged to wip of $9.7 million and write-offs of $2.6 million. net fees billed of $7.1 million. they wrote off nearly 27 percent, or another way to look at it they set fire to a luxury home every year \u2013 and that would have been more enjoyable. anyway, i asked the six partners if they budgeted for write-offs. yes we do, they said. what\u2019s your budgeted number? 25 percent, they proudly stated. i said, “well, you nearly hit it.”<\/p>\n bizarre behavior \u2013 budgeting for write-offs. what would happen if you budgeted for write-ons? you might hit it.<\/p>\n so if you budget for write-offs, expect to get them.<\/p><\/blockquote>\n if you use time and rate as your billing method expect to get them, and if you have gutless partners at the time of billing expect to get them. you get what you expect.<\/p>\n a client comes to you for business advice. the client specifically wants some ideas on how much they should charge their customers for a new product. with as much sage advice as you can muster you say,<\/p>\n \u201cwhat you should do is work out how much time it will take to make the product. then work out a charge rate for each person who is making the product. you work out the charge rate by taking the annual salary and dividing by the time they are at work for the year \u2013 say 1,687 hours \u2013 then multiply that number by four times and you have a charge rate. multiply the time taken by the charge rate and you have the price for the product. that\u2019s what we do here and it has worked for decades.\u201d<\/p>\n your client says, \u201ci haven\u2019t made the product yet.\u201d it doesn\u2019t matter, you say: \u201cfollow the magic formula and it will lead you to the correct price.\u201d<\/p>\n or what about this way to set a price:<\/p>\n let\u2019s say (gentlemen) you want to buy a suit. you go to your favorite tailor on savile row in london. you enter the shop and the following dialogue takes place:<\/p>\n you:<\/strong> \u201chow much for a suit?\u201d<\/p>\n tailor:<\/strong> \u201cthat depends.\u201d<\/p>\n you:<\/strong> \u201cdepends on what?\u201d<\/p>\n tailor:<\/strong> \u201cit depends on the type of fabric i use to make the suit.\u201d<\/p>\n you:<\/strong> \u201cokay, i\u2019ll select that one there \u2013 how much for the suit?\u201d<\/p>\n tailor:<\/strong> \u201cthat depends.\u201d<\/p>\n you:<\/strong> \u201cdepends on what?\u201d<\/p>\n tailor:<\/strong> \u201cit depends on how much of the fabric we use for your suit (under breath \u2013 fatso)<\/em>.\u201d<\/p>\n you:<\/strong> \u201cokay, measure me up \u2013 i\u2019m a 42-inch chest and a 30-inch waist (yeah right)<\/em>.\u201d<\/p>\n you:<\/strong> \u201cnow how much for the suit?\u201d<\/p>\n tailor:<\/strong> \u201cthat depends.\u201d<\/p>\n you:<\/strong> (getting frustrated) \u201cdepends on what?\u201d<\/p>\n tailor:<\/strong> \u201cit depends on the quality of the thread, volume of buttons and patches that we use.\u201d<\/p>\n you:<\/strong> \u201cokay, i\u2019ll go with these ones. right then, now how much for the suit?\u201d<\/p>\n tailor:<\/strong> \u201cthat depends.\u201d<\/p>\n you:<\/strong> (getting mad now) \u201cdepends on what?\u201d<\/p>\n tailor:<\/strong> \u201cwell, it depends on how much time it takes me to make it for you.\u201d<\/p>\n you:<\/strong> \u201cyou mean to tell me that the longer you take the more i will have to pay?\u201d<\/p>\n tailor:<\/strong> \u201cprecisely, sir.\u201d<\/p>\n and that is how accounting practices work out the price: time x rate + disbursements. that is no way to price a product.<\/p>\n bizarre behavior. the only way to set a price is to have the marketplace (clients) set the price. you just test different packaging and price every project up front. the price for intellectual property is based on just two factors:<\/p>\n you will know that the price is wrong when your client says yes, without hesitation. if your clients keep saying yes then the price is wrong.<\/p>\n since may 1994 i have been working exclusively with accounting firms and i am constantly bemused at what the owners (partners) of the firms do with their time. if i visit a four-partner firm, i will ask their roles:<\/p>\n the first partner says, \u201ci am the marketing partner.\u201d<\/p>\n the second one says, \u201ci am the it partner.\u201d<\/p>\n the third one says, \u201ci am the hr partner.\u201d<\/p>\n and the fourth one so proudly says, \u201cand i am the operations partner.\u201d<\/p>\n yet not one of them knows diddly-squat (technical term for very little) about these four important topics.<\/p>\n have a look at how partners (you) spend their time. keep a time log of everything you do. when the time log starts to repeat itself, stop keeping the log. go back over the list and work out the highest dollar productive activity that you do and highlight that one. then work out the second and third highest dollar productive activity. get rid of the rest. they\u2019ll mainly be administration tasks. delegate them, don\u2019t do them and get focused on three only.<\/p>\n partners should only be doing three key things:<\/p>\n everything else is administration. hire a business manager to do it \u2013 not you.<\/p>\n partner meetings can be interesting and bizarre things to watch. as well as looking over the previous month\u2019s numbers and chastising whatever underperformance needs chastising they get into discussions on costs and petty details. i have seen partners debate (kid you not) what color the receptionist\u2019s chair needs to be and which model to select for him\/her: \u201ci saw a chair that would be perfect at the wholesale office store for $99. it was $23 cheaper than where we normally buy chairs.\u201d<\/p>\n majoring on the minors and management by committee. bizarre. can someone (not the committee) please make a decision? empower people and trust them.<\/p>\n also at partner meetings, the topic of marketing may come up (by the marketing partner no less) and there may be a seminar to invite clients to. \u201cnone of my clients will be interested,\u201d says one of the partners. \u201ci think i have five or six only that may want to go,\u201d says another.<\/p>\n i have even met partners who debate whether they should send the electronic newsletter to some clients: \u201cthey\u2019ll never read it.\u201d<\/p>\n how bizarre. pre-judging what clients will buy, how they will act, what they will respond to and what they are interested in. i think pre-judging has to be one of the most arrogant activities around. for the sake of your clients, stop pre-judging. let your clients know about everything you do and see who responds. simple.<\/p>\n i remember a three-partner firm joined one of my coachingclub programs (group coaching method that creates outstanding results \u2013 when the clients follow the advice) and their lockup (wip and debtors combined) was running at around $900,000. for a $2 million firm this was out of control. there was around $750,000 in wip and $150,000 in debtors. by the time we met again, the wip balance was down $50,000 and debtors were around $125,000. good result i said \u2013 how did you do it? answer \u2013 one of the partners decided to write off $650,000! i hit the roof. before even giving it a chance to be collected it was written off. i hasten to say, that partnership no longer exists. bizarre behaviour.<\/p>\n by the time we met again, the wip balance was down $50,000 and debtors were around $125,000. good result, i said \u2013 how did you do it? answer \u2013 one of the partners decided to write off $650,000! i hit the roof. before even giving it a chance to be collected it was written off. i hasten to say, that partnership no longer exists. bizarre behavior.<\/p>\n","protected":false},"excerpt":{"rendered":" pre-judging client responses? budgeting for write-offs? if you see your firm in any of this, stop.<\/strong>
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\nexclusively for pro members. <\/span><\/strong>log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/p><\/blockquote>\nthe bizarre habits<\/h3>\n
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write-offs<\/h3>\n
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pricing methods<\/h3>\n
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partner habits<\/h3>\n
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\nby rob nixon<\/em><\/p>\n","protected":false},"author":1840,"featured_media":49750,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[3120,9],"tags":[],"class_list":["post-52101","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pro-member-exclusive","category-strategy"],"acf":[],"yoast_head":"\n