How to future-proof your practice against rising costs
Now is the time to take steps to shore up your accounting or bookkeeping practice for the future.
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Grow and strengthen your business through a downturn
We’ve entered an age of uncertainty with businesses navigating a post-pandemic global economy characterised by rising costs and slower growth. Australia’s rising inflation has already seen nearly half of businesses experience increases in their operating costs. GDP is expected to slow to 1.75% over the next two years.
Australia’s small business owners are looking to their accountant or bookkeeper to help them through these headwinds. Forward-thinking practice leaders are well positioned to seize this opportunity to strengthen these client relationships.
This ebook provides a guide to growing your firm through a downturn. We’ve focused on four key areas: efficiency, pricing, scalability, and client retention. This step-by-step guide provides simple and practical ways to future-proof and strengthen your accounting or bookkeeping practice against rising costs, so you can emerge stronger than ever.Chapter 1: Efficiency
Driving business efficiency using automation
One way for accountants and bookkeepers to respond to rising costs is to look at where their firm could be more efficient and the tasks they could potentially automate.
Automation is one of the most important aspects of driving efficiency in your business. This is where technology applications are used and human input is reduced. Identifying which areas to automate is a critical step.
Find opportunities to improve business efficiencies
Emma Crawford-Falekaono, Managing Director, EMEA at Ignition, says assessing operations is something that firms can do on a regular basis to ensure ‘good hygiene’ when it comes to efficiencies. This includes areas such as cash flow planning, workforce planning, budgeting, team alignment, and business KPIs, as well as automating wherever possible.
“When it comes to assessing any kind of automation, I always say to start with a ‘voice of customer’ exercise. Go out and identify the top three reasons your customers are your customers, whether that’s your services, your relationships, your prices, or something else,” Emma Crawford-Falekaono says.
“That will give you direction for any operational changes and help you focus on what you want to achieve. From there, you can start making a process map to identify and prioritise the areas that you want to look at before going to the deep scoping phase of what tools fit,” she says.
For example, when GrowthLab Financial was faced with growing costs, founder Dan Gertrudes focused on improving overall processes and workflows. This involved removing bottlenecks in business workflow to better use staff time and resources as well as improve client engagement and satisfaction. New systems also help the firm run more efficiently, such as managing working capital and streamlining billing.
You can use GrowthLab’s focus on improving processes and workflows as a framework within your own firm to help save time, increase client focus and lead to greater client satisfaction in your firm.
Find out how Ignition could deliver efficiencies for your firm. Watch the demo.
Using technology to optimise business processes
A good way to find additional efficiencies in your firm is to look at where cloud-based technology could improve workflows, helping to save time and increase client focus, says Jennie Moore, Ignition’s Partnerships Manager.
“It’s about keeping your own firm healthy before you go and help somebody else. Make sure your own business is running with as much technology as possible, so that you can focus on your customers,” Jennie Moore says.
Technology has the capacity to automate processes in your firm, including:
Engagement letters and client onboarding.
Invoicing and payments.
Client management and task management, from assigning tasks to sending friendly reminders.
Gathering insights on key business metrics.
To help understand the time-savings customers make using their platform, Ignition, which is the world’s first client engagement and commerce platform, recently partnered with research agency YouGov. The firm surveyed hundreds of decision makers in accounting and bookkeeping firms for Ignition’s 2022 State of client engagement report.
The research found that Ignition customers save on average over 18 hours per week engaging clients, managing scope changes, and billing, collecting and reconciling payments.
Implementing changes to processes and workflows
When it comes to vetting technology, firms can look to their peers for reviews and information or tap into social media groups, says Rebecca Mihalic, Head of Accounting at Ignition. Otherwise, use an expert who specialises in accounting practice management.
To ensure smooth and effective implementation, try assigning an internal champion for each project and clearly document processes along the way. “It’s change management – bringing everyone along so they understand what’s happening and how it will impact them,” Rebecca Mihalic says.
Chapter 2: Pricing
A fresh approach to pricing
Reviewing your prices is one obvious way of addressing rising business costs.
There are several factors to consider when looking at whether pricing models are still fit for purpose for an individual firm, including:
The rising costs of doing business (such as increased labor costs).
Additional efficiencies in work or processes, which mean that tasks take less time. Firms may benefit from a model that focuses on the value they provide over the time they spend.
Need for additional cash flow and revenue predictability, which can benefit from different pricing models.
Additional service offerings which may benefit from being priced differently.
Underpricing services compared to competitors.
For example, Dan Gertrudes from GrowthLab Financial put in place better workflow processes which have reduced the effort and the hours required for a piece of work. This has prepared him for customers asking for price concessions.
“I can confidently turn to my customer and happily say I can reduce the price, but still maintain my gross margins on the downside,” he explains.
What to charge for services: popular pricing models
From here, it may be a case of the firm increasing its prices by a certain percentage to help account for inflation, or looking at a whole new pricing structure.
There are different models of pricing, which can suit different types of firms and services, and the market in which firms operate. Some common ones include:
Time-based pricing
Time-based pricing is often the standard approach to pricing at many accounting firms, making it simple and easy for clients to understand. Its limitations include that it values time taken over the value of the task performed. It can make it more difficult for firms to predict cash flow and earnings, and for clients to know how much they will be charged. However, hourly pricing can be useful for some firms, particularly for ad-hoc or out-of-scope work.
Fixed fee pricing
Fixed fee pricing is just that – charging a set fee to clients for the work the accountant or bookkeeper delivers. This can be advantageous if an accountant has the tendency to write down or underestimate the amount they charge clients when doing hourly billing.
Rebecca Mihalic, Head of Accounting at Ignition says an approach to calculating fixed fee pricing can look like this:
Look at the cost of delivery. This has changed a lot for accountants, particularly with increases in labor costs – usually a firm’s biggest expenditure. Then add any other direct costs to this.
Attribute the ongoing costs of business to a job, service or a piece of work. Firms can do this on a percentage or hourly basis. This then helps firms quantify how much it costs to produce a job.
Then, decide how much profit the firm wants to make. Price the work according to the desired profit minus the ongoing costs.
Tiered pricing
Tiered pricing can also be an option for accountants and bookkeepers, allowing you to offer various pricing plans, such as Essential, Premium, and Standard, so you can attract clients with different requirements or showcase special offers you may want to promote.
One way to approach this is to find the best price point for your service, create two other tiers – one lower with considerably less inclusions (bare minimum) and one at a higher price point with additional services, such as bookkeeping or advisory services. The aim is to encourage the client to select the middle package (often referred to as the ‘Goldilocks effect’) – the one you ideally want them to choose.
Value-based pricing
In part, this strategy involves pricing a service based on its worth to the customer – or the client’s willingness to pay. Harvard Business School Online uses the ‘The value stick’ approach to describe how this could be approached by firms wishing to use this model. Having a deep understanding of your clients’ needs and motivations can help you determine if this is the best strategy for your business.
Subscription-based pricing
Subscription-based pricing allows clients to subscribe to services for a specific period of time for a set price. This provides firms with predictable recurring revenue in times of economic uncertainty.
Predictable revenue enables firms to plan for the future and avoid big peaks and troughs in their cash flow. However, it is important to define the scope of the services and have flexibility to offer additional services outside the subscription and avoid unagreed out of scope work (also known as ‘scope creep’).
Other models
Other models include ‘cost-plus pricing’ which involves adding a fixed percentage to costs and ‘competition-based pricing’, which involves comparing a firm’s offering to competitors. Some firms may opt for a ‘hybrid pricing model’ to allow for an added degree of flexibility to tackle out-of-scope requests and additional services. In some cases, a firm may have a core pricing model based on fixed fees and rely on time-based hourly billing for ad hoc requests.
Find out how Ignition works with your pricing model. Watch our online demo.
How to talk pricing with clients
Communicating price increases to clients can be daunting, especially at a time of rising cost pressures. In fact, Ignition’s 2022 State of client engagement report shows that almost every accountant and bookkeeper experiences awkward conversations with clients on a regular basis, including about price.
Jennie Moore, Ignition’s Partnerships Manager says it’s important firms give thought to how to approach pricing discussions. She says that when discussing price changes, clients often appreciate predictability, such as clear pricing for different services. Within this, it’s possible to incorporate flexibility – presenting different options based on what customers may need.
At the same time, accountants and bookkeepers can make conversations easier by approaching discussions early and setting out a clear scope of work that is included within a price. This will create a feeling of consistency, help customers understand the value they are receiving and set expectations on both sides.
“Most issues that arise from changing pricing are when the clients’ and accountants’ expectations don't match. It’s about having a conversation early and being transparent about the changes and how they benefit the client. Then, making sure you have a clear scope of what is included and the value added,” says Emma Crawford-Falekaono, Managing Director, EMEA at Ignition.
Remaining flexible and avoiding unagreed out of scope work
Emma Crawford-Falekaono says firms must be flexible enough to modify pricing even within fixed pricing and subscription models – such as having hourly rates for additional services.
“What happens, for example, if you help your clients with a new government grant and that work’s not in your original pricing package?” she says.
It’s for this reason that moving away from time-based pricing still requires keeping timesheets. Timesheets are also important for avoiding ‘scope creep’, which is a huge problem for accounting firms. The 2022 State of client engagement report shows that unrecovered fees for out-of-scope work costs accountants and bookkeepers tens of thousands every year in lost revenue.
“You still need to know whether or not you're profitable, what your team's doing, and make sure that you're billing for all the work and capturing out-of-scope items,” says Rebecca Mihalic.
A firm’s ability to address scope creep with clients comes back to strong relationships, systems and processes. This includes having documentation in place, such as an engagement letter, which sets out clear expectations and deliverables and even provides for out-of-scope work. That way, if a client makes a request that isn’t in the agreement, it’s easier to politely but firmly address it with them right away, then confirm it in writing or via another engagement letter – and then bill for the additional work.
Meanwhile, strong client relationships can make those difficult conversations easier. “When you have created really good client engagement, it gives you the ability to pause and reset pricing expectations,” says Rebeccca Mihalic.
Chapter 3: Scalability
How to grow your accounting business
Small to medium-sized enterprises are already relying on accountants and bookkeepers to be their trusted advisors. So, the next few years present an opportunity to create additional revenue streams and increase client loyalty by helping SMEs through uncertain times.
“During an economic downturn, there are two ways to manage risk, both of which firms need to balance against each other. The first is doubling down on your strongest revenue streams. The other is to diversify your revenue streams,” says Emma Crawford-Falekaono, Managing Director, EMEA at Ignition.
Four steps to expanding services and diversifying revenue streams
Step 1. Work out how you want to grow
Building an accounting practice during a time of uncertainty involves varying degrees of risk. Ignition’s Partnerships Manager Jennie Moore says it’s about how firms offer additional services to clients – especially at a time when there is less room for error due to volatility.
One way is to grow fast with a lot of clients at a lower fee. The other is to look at leveraging technology so you can invest more time with customers and deliver higher value services over the long term.
“Your firm needs to consider if it wants to scale based on volume or value. If it's growing based on value, the key is relationships, communication, and working with the automation to bring up the red flags and inefficiencies. If it’s based on volume, it’s about competing on price,” Jennie Moore says.
Step 2: Look to existing clients
“It can be easier to sell more services to people you’re already working with, so one way to start is by looking at your client base to identify a potentially profitable service you’d like to offer,” says Rebecca Mihalic, Head of Accounting at Ignition.
This includes examining what clients need, and the value the firm can create for these clients by offering a particular service.
For example, according to CPA Australia’s survey of consumers and SMEs, some services that SMEs would like their accountant to offer include:
Financial planning and advice services.
Business advisory.
Consumer credit / mortgage broking services.
Audit and assurances services.
Taxation services.
Breaking down business advisory further, some of the services here can include
business analysis and strategy, cost analysis and reduction, cash flow analysis and forecasting, and debt consolidation. Then there’s asset protection services, including structural advice such as trusts and tax planning, risk assessment, disaster planning and recovery, pension planning and insurance.
Step 3: Scope the opportunity
Before launching an additional service, it can help to do a client scoping exercise first. “Put together information on what the service is and why you’re providing it; the pricing, and when it starts,” Rebecca Mihalic says.
“Then, try launching a targeted marketing campaign using something simple like Mailchimp to find out whether your clients are open to it. That way, you know if it’s a great opportunity that your firm is geared up to provide.”
Another option is to offer your loyal clients an exclusive offer or preview of your new service. This can be a great way to gather initial feedback and allows you to test the waters with your existing client base, which will also help to validate your new product or service offering.
Step 4: Upskill staff
Firms may also need to consider upskilling staff, so the ability to offer additional services is spread across the team rather than concentrated among a few. “Educate your team so it doesn’t end up just being the partners and managers that do the additional work,” says Rebecca Mihalic.
Another option here is to enter a strategic partnership with a firm offering complementary services such as investment advisors.
Chapter 4: Client retention
Increasing client retention and improving client experience
When setting themselves up for the future, accountants and bookkeepers can also look at the benefits of a clear and well thought-out client retention strategy. According to sales and marketing platform HubSpot, returning clients not only spend more, they also refer friends and family, which is of course, a key source of new business for accountants and bookkeepers. In fact, research has found that a 5% increase in customer retention can increase company profit by more than 25%.
“Retention is about caring. If you don't care about retention, you're going to be fishing an awful lot in a red ocean,” says Ignition’s Partnerships manager Jennie Moore.
Retention and customer engagement is a process that is factored in across the client journey, starting at proposals and engagements, then to onboarding, then revisited regularly after that. Essentially, it’s about making sure the accountant is always delivering the services they have promised.
“Staying close to your customer makes sense at all times but particularly in this environment. It’s not something that you switch on and off. If you have the ability to understand customers’ changing needs, it means both preserving revenue and also the ability to offer additional services,” says Emma Crawford-Falekaono, Managing Director, EMEA at Ignition.
Create a seamless engagement process
A successful engagement strategy can include a focus on systems and processes to improve the client experience.
“There's a whole range of automation that can be set up which will remove any points of friction. Every time you make something easier for your client, they're going to sign off on it quicker, ” says Rebecca Mihalic, Head of Accounting at Ignition.
“Having an integrated engagement process to help manage your workflow is important because it means that you never forget tasks and deliver what you say you’re going to deliver,” she adds.
These digital tools can be used at each stage of the customer journey, including:
Proposal. A solid proposal clearly presents clients with service options, which helps get the relationship off to a good start. Proposals can be digitised, allowing clients to sign online faster and with a clear audit trail.
Client engagement and onboarding. An engagement letter lays out key information such as services, pricing and billing frequency. By formalising an engagement with clients, it’s an opportunity to be clear about the scope of the services you will deliver, and when. This is also the time to set the groundwork and expectations for good client communication, finding out how they would like to be communicated with, and via which channels.
Service delivery. Tools to ensure workflow solutions and practice management are as efficient as possible will ensure you deliver exactly what you have promised. For example, a system to help keep track of client information can help, while customer relationship management software (CRM) stores client information and any updates or changes. CRMs can also perform functions such as scheduling follow-up calls to enhance customer relations and data analysis to help provide a more personalised service.
Re-engagement. Retention and customer engagement isn't a set-and-forget strategy that’s done once at the beginning of the relationship and never again. In fact, it can be beneficial to have a defined time of year to assess the services you’re providing, whether or not these are still appropriate, and if the needs of the client have changed.
For example, this process could take place during tax planning, when you’re assessing clients’ performance in the course of your work anyway. It’s an ideal time to discuss where they might need extra help, or if there are services they no longer need.
A high-level customer experience that keeps customers coming back can set a firm up to weather uncertain times ahead.
Over to you
With costs of business rising, now is the time to take steps to shore up your accounting or bookkeeping practice for the future. Learn how Ignition can help deliver efficiencies in your firm. From empowering streamlined workflows to automating time consuming processes such as engagement letters and payments, we free you up to focus on what really matters – your clients. Want to find out more? Watch our online demo.
