Top 5 Tips for Improving Profitability

Top 5 Tips for Improving Profitability Presented by: Mike SturgessChairmanSWAT UK Limited

Contents • How to grow the business • Pricing for profit • Improving productivity • Increasing recoveries • Reducing lockup Top 5 Tips for Improving Profitability

Acquisitions Acquisitions still make sense if you can... • Drop fees in with no additional overheads • Cross-sell to client base • But usually takes 3 years • Fills a hole in your service offering Top 5 Tips for Improving Profitability

Cross-selling to clients • Score your whole firm on cross-selling • 1 = only sell if clients specifically asks for a service • 10 = every client offered every relevant service • What is your current score? • What would you like that score to be? • If you achieved this improvement what fees would it generate? 4 - 5 7 - 8 £10k per principal per point Top 5 Tips for Improving Profitability

Compliance v non-compliance Compliance 70% Top 5 Tips for Improving Profitability Non-compliance 30%

Common non-compliance fees • Payroll services – preparing the weekly or monthly payroll • Management accounts • Quasi-FD role • Cash flow forecasts and projections • ... and now probate Top 5 Tips for Improving Profitability • Tax planning • Financial planning services • Corporate finance activities • Fees protection insurance • Outsourcing

Client referral programme • Manage client referrals • Actively ask 10% of clients seen each month • Create a formal client reward system Top 5 Tips for Improving Profitability

Quote for a new client • Prospective new client • Turnover £4m+ • Sage Line 50 detailed monthly management accounts – assume no book-keeping issues • Prepare and file statutory accounts and corporation tax return • Attend quarterly main board meetings • Pre-year end tax planning meeting Top 5 Tips for Improving Profitability

Pricing • Average pricing differential quoted by partners is + or - 25% • Maximum suggested: + or - 50% • Create systems to avoid this • Pricing wizard / fixed price model • Second review of prices • One-year only price if guessing! Top 5 Tips for Improving Profitability

Remember ... • 37 hours x 52 weeks = 1924 hours • After holidays, bank holidays, sickness and training • = 1665 available hours Top 5 Tips for Improving Profitability

Productivity Top 5 Tips for Improving Profitability

Principal productivity Top 5 Tips for Improving Profitability

Increasing productivity • Use 6 minute units • Record time in real time • Meetings with yourself • Set productivity targets • Non-chargeable time must be authorised and explained • Control non-chargeable time Top 5 Tips for Improving Profitability

Contents • How to grow the business • Pricing for profit • Improving productivity • Increasing recoveries • Reducing lockup Pg 1 Top 5 Tips for Improving Profitability

Increasing recoverability • 100% recovery is poor! • Work on your pricing • Round up, not down. • Formal approval for 10% write-offs. • Set budgets on all jobs. • Set proper working standards in the office. Top 5 Tips for Improving Profitability

Work-in-progress • Clients rarely pay if you haven’t raised a bill • Use standard billing paragraphs • Delegate the billing • Identify the top ten or twenty WIP clients • Set WIP standards by partner and manager • Use direct debits wherever possible • Money in advance for urgent work • Check books & records before starting work Top 5 Tips for Improving Profitability

Debtors • Use red paper or write in red ink for the ‘final demand’ • Do not make threats that you are not prepared to carry out • Delegate the raising of the follow-up letters and chasing debtors • Consider using a discounting scheme Top 5 Tips for Improving Profitability

Discounting: Inv 4 June 14 On ‘clock’ / fixed fee: £1,800 Add 1/9 (£200) and bill client £2,000 VAT on £1,800* £315 £2,315 If paid by 18 June, deduct £200, leaving £2,115. Otherwise, strictly 30 days net *From 1 April 15 VAT will be due on the actual consideration paid Top 5 Tips for Improving Profitability

Debtors • Charge interest on overdue accounts Top 5 Tips for Improving Profitability

Discounting: Inv 4 June 14 On ‘clock’ / fixed fee: £1,800 Add 1/9 (£200) and bill client £2,000 VAT on £1,800* £315 £2,315 If paid by 18 June, deduct £200, leaving £2,115. Otherwise, strictly 30 days net. Interest will be charged at 1.5% per month (APR 19.57%) *From 1 April 15 VAT will be due on the actual consideration paid Top 5 Tips for Improving Profitability

Debtors • Consider using MasterCard and Visa Top 5 Tips for Improving Profitability

Discounting: Inv 4 June 14 On ‘clock’ / fixed fee: £1,800 Add 1/9 (£200) and bill client £2,000 VAT on £1,800* £315 £2,315 Payment by MasterCard or Visa accepted. If paid by 18 June, deduct £200, leaving £2,115. Otherwise, strictly 30 days net. Interest will be charged at 1.5% per month (APR 19.57%) *From 1 April 15 VAT will be due on the actual consideration paid Top 5 Tips for Improving Profitability

Debtors • Include your terms of credit in your letter of engagement • Discuss payment methods with clients • Offer a menu approach • Clients should not be surprised by the amount of a fee note • Notify clients in advance of changes ... Top 5 Tips for Improving Profitability

Top 5 Tips for Improving Profitability

Controlling lockup • If all else fails ... • Partners’ capital must match same partner’s lockup! • No billing? • No cash collection? • No drawings! Top 5 Tips for Improving Profitability

Top 5 Tips for Improving Profitability Was presented by: Mike SturgessChairmanSWAT UK Limited

Top 5 Tips for Improving Profitability