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Practice Support Services Top tips on practice management

Practice Support Services Top tips on practice management. John O’Donnell 6 December 2011. John O’Donnell. Graham Bale. The PSS Team. Catherine Woodthorpe. Top tips. Practice profitability Practice management Risk management Strategy for 2012. Practice profitability.

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Practice Support Services Top tips on practice management

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  1. Practice Support ServicesTop tips on practice management John O’Donnell 6 December 2011

  2. John O’Donnell Graham Bale The PSS Team • Catherine Woodthorpe

  3. Top tips • Practice profitability • Practice management • Risk management • Strategy for 2012

  4. Practice profitability

  5. Problem to overcome • Lock-up • Work in progress plus debtors • Problematic issue • Varies significantly • Barrier

  6. Billing bases • Historical charge-out rates based on hourly fees • Issues • Bad debts • Lag in payment • Cash-flow disadvantage • Overdraft • Client relationship issues

  7. Alternative bases • Fixed fee • Useful for basic compliance services • Cost estimation easy • Standing orders or direct debits • Advantages • Clients pay regularly • Firm receives funds regularly • Mutual cash-flow advantage

  8. Things to consider • Menu of charges • Different cost for same service based on different levels of transactions, complications, etc • Make sure you take all into account before quoting • Include annual meeting with the client • Consider retaining hourly fees for more complex and non-routine work

  9. Maximisation of fees • Contractual terms • Ensure that the terms clarify the work to be done on fixed fee • Base fee on provision of information • complete and • on time (to your pre-agreed deadline) • Clarification of scope • For ad hoc work have separate bespoke engagement terms and make sure the client understands that this is not included in the fixed fee

  10. Collecting over-runs • Improvement of billing efficiency • Fee £1000 • Inefficient client • Fee £1000 • Additional cost £ 150 • Total £1150 • Actions • Tell client before doing additional work • Client aware • Make sure staff know they need to tell you immediately a problem is apparent

  11. Setting reasonable charge-out rates • Charge-out rates vary considerably • Use them as reasonable target • Focus on under-achievement • Ask why • Is it your fault or the client’s? • And how can it be better managed in future? • Leading to • Better use of the staff you have to do more work and improve fee income

  12. Addressing under-recoveries • Bill the fee • Write-off under-recovery • If you retain it • Do not carry the balance forward • Carrying it forward will distort next year’s results (and this year’s!)

  13. Optimise recovery • How can you optimise recovery? • Many ways • Charge an element before starting work • Good for poor payers • Good for larger clients with work spanning some while • Bill fees once £x of recoverable wip • Standing orders • Direct debits • Credit card • Standard firm’s procedure makes implementation easier

  14. Should you keep time records? • Benefits of moving to fixed fees is no need to retain them • (so long as your engagement terms are drafted correctly) • But • How can you be sure your fixed fees are correctly calculated without a point of reference • And how can you periodically check? • How can you assess staff efficiency? • Do you pay staff a bonus? If so, how will you measure it? • What about the partner-level ad hoc work?

  15. Credit control • Should be process in place • Mechanistic • When to raise fees? • Not month end – raise as soon as possible • Credit control pre-set timings • Bill plus a period • Reminder • Second reminder • Credit control phone call

  16. Credit control • Credit controller to have a script • Then take action • Partner override of credit control process to be avoided (or justified)

  17. Practice management

  18. Expanding the business • Set partners and senior employees key performance indicators (KPIs) • Include • recoverability • billing and cash collection • Generation of new business • Be careful not to compromise quality and professional standards (including ethics)

  19. Expanding the business • Set budgeted chargeable hours for staff to recover • Clarify and agree how these will be measured • Ensure a reasonable measurement tool is in place • What if staff achieve their target? • Incentivisation • Bonus?

  20. Acquisition / merger • Dealt with separately

  21. Differentiation • Brand • Presentations • Web presence • Client perception • Positive first impressions • Corporate colours • Corporate logos • Messages to clients • Layout of correspondence

  22. Pareto analysis • 80:20 principle • Analysis of client base to clarify clients for whom you want and are able to provide more services • Questions to ask • Take action based on answers

  23. Focus on markets • Specialism • What areas could you focus on? • What interests you? • Where do you have experience/interest/specialism? • What are specialist markets?

  24. Risk management

  25. Professional indemnity insurance (PII) • Requirements – icaew.com/regulations • Cover must be with participating insurer • Can have excess of up to £30,000 per partner • If licensed for DPB and undertaking insurance mediation work (typically certain fee protection insurance) additional requirements

  26. PII • Excess PI above required level (secondary cover) can be with non-participating insurer • Consider risks your firm may be exposed to eg (but not restricted to): • High value or complex tax computations • Strategic tax advice • Complex tax solutions • Audit of high value or judgemental balances • Based on these, is your PII at a sufficient level?

  27. Engagement terms • Review them regularly • Are they up to date? • Ensure that they reflect what you do for your clients • Update changes to services you provide • Prevent ‘scope-creep’ • Consider merits of limiting liability • Take advice as necessary

  28. Strategy for 2012

  29. Strategy for 2012 • Do you have a strategy? • Valuable to take time to consider plans for the future • Make it a formal document • When? • When you have time to reflect • Enjoin your partners • Include your senior staff • And inform everyone of the key messages

  30. What to consider • Gaining referrals from current clients • Ensuring that you recover the RPI increase in fees to clients • Communicate why you are raising your fees • Consider introduction of standing orders/direct debits

  31. Practice Support Services • Practice Support Services team is Catherine Woodthorpe, Graham Bale and John O’Donnell • Services explained on next slide • Confidential and exempt from duty to report misconduct • To find out more or to book a coaching session: • call +44 (0)1908 248 250 or • email practice.services@icaew.com

  32. Practice Support Services • Audit • Clarified ISA coaching • Audit compliance reviews • Solicitors Accounts Rules reviews • Bespoke coaching and compliance reviews • Practice assurance and DPB compliance reviews • Consultancy • Practice management • Practice succession planning • Anti-money laundering coaching • Ad hoc consultancy

  33. Q & A

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