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 Firm Fitness “How Fit is Your Firm? ” An Effective Profit Improvement Process Firm Fitness “How Fit is Your Firm? ” An Effective Profit Improvement Process

Let’s “Check your Pulse” • How would you rate your firm? ___Superior Athlete – Let’s “Check your Pulse” • How would you rate your firm? ___Superior Athlete – In fact I’m an Olympian ___Weekend Warrior ___Couch Potato • Which best describes your implementation of best practices: ___I have implemented best practices in all areas of my firm and consistently adhere to them. ___I am consistently inconsistent in my implementation and application of best practices ___What are best practices? ? ? • Do you know where you stack up compared to others in your industry? ___Yes and I own the record ___ Yes and I am amazingly mediocre ___ Yes and I suck ___ No, I have no idea www. yoururl. com

Let’s “Check your Pulse” • How much time do you invest per week ON Let’s “Check your Pulse” • How much time do you invest per week ON your business? ___I wisely invest time each week moving my firm forward ___I work on it when I find time ___I am seeking non-profit status for my firm • Are you one of the 76% of business owners looking for a new accountant? ___No, I love my Accountant and he/she provides great advice ___My Accountant gets the job done, but not timely ___I am always last on my Accountants list • Would you buy your business today? ___Yes, for top dollar ___Maybe ___Hell No www. yoururl. com

Now that we’ve had some fun, HOW DO YOU STACK UP? Let’s take a Now that we’ve had some fun, HOW DO YOU STACK UP? Let’s take a look at some industry benchmarks and then at a specific case study. www. yoururl. com

Case Study • QBExpress asked a full service Accounting firm (CPA, Accounting, Bookkeeping, Tax Case Study • QBExpress asked a full service Accounting firm (CPA, Accounting, Bookkeeping, Tax and Consulting Services) to participate. • The Company Name has been changed, but this is a real firm that has been in business for 5 years. Gross Sales have been stagnant due to client turnover, billing issues, etc. They have: 3 partners who do most of the work 2 part-time employees • For our analysis, we looked at 5 key numbers: 1. Accounts Receivable Days to Collection 2. Sales Per Employee 3. Profit Per Employee 4. Net Profit before Taxes 5. Accounts Receivable as Part of Total Assets www. yoururl. com

Here is how they stack up Industry Accounts Receivable Days to Collection Sales Per Here is how they stack up Industry Accounts Receivable Days to Collection Sales Per Employee Profit Per Employee Net Profit before Taxes Accounts Receivable as Part of Total Assets Our Firm 40. 34 Days $133, 158 $27, 172 21. 32% 24. 21% 68. 02 Days $110, 593 $52, 455 47. 43% 47. 74% For this firm, A/R is a big problem. They have more than 50% higher Accounts Receivable Days to Collection and it is hurting cash flow. Some months they worry about paying both partners and staff. The other item to note, is that Accounts Receivable accounts for almost 50% of their total assets. How would you fix this firm? www. yoururl. com

Best Practices This firm, like all of you, knows about best practices. In fact Best Practices This firm, like all of you, knows about best practices. In fact most of you are sick of hearing about them and guess what? WE ARE TOO Business Consultants have been talking about why you should implement “Best Practices” for at least 2 decades and most of us still have not implemented them throughout our business. You attend a webinar or a conference, get excited, go back to office, get off track and lose momentum. One in 200 Accountants we poll state they have implemented best practices throughout their business and this holds true for your clients as well. Why is this relevant? www. yoururl. com

Top Reasons Accountants have not implemented best practices: I am too busy I don’t Top Reasons Accountants have not implemented best practices: I am too busy I don’t know where to start It is too overwhelming I don’t see the value I don’t have buy in from my staff What would you add to this list? www. yoururl. com

Here is what we all know we SHOULD BE DOING. Our clients know this Here is what we all know we SHOULD BE DOING. Our clients know this too… The most common “Best Practices”: Update or create a strategic business plan. Develop a clear and documented process and procedure for everything we do. Implement “Best in Class” cloud technology solutions to streamline operations, improve scalability and increase your bottom line. Recruit the best people, set team expectations, implement motivational team building strategies. Use accurate and up to date financial data to base decisions, create budgets, forecasts, etc. Implement best practice customer service strategies. Innovate products and services with a clearly defined strategy. Develop both a short and long term marketing strategy. The list goes on ……………. . OK, we all know this, but how many of you have actually done ALL of this in your business? AND, WHY NOT? www. yoururl. com

Because it is OVERWHELMING Figuring out a starting point, sorting technologies, putting your financial Because it is OVERWHELMING Figuring out a starting point, sorting technologies, putting your financial data to use in KPIs, etc. to improve company performance. It does not feel “DOABLE” for most of you. YOU ARE BUSY… We get that and can relate. The GOOD NEWS IS … We have your “DOABLE” solution www. yoururl. com

What If? What do you think would happen if we focused on just ONE What If? What do you think would happen if we focused on just ONE area of the business each month for 12 months and took 3 to 5 simple action steps per month. . . Let’s use Accounts Receivable as an example, a major problem area for many Accounting Firms and Small Businesses in General. Now, let’s say you established these three goals this month: Decrease Average Time to payment by 3 days Implement ACH or Credit Card Collections and look into automated billing solutions. Update or create an Accounts Receivable policy (using excellent samples so you don’t reinvent the wheel) www. yoururl. com

By focusing on three action steps, we hit these BEST PRACTICE “biggies”. We now By focusing on three action steps, we hit these BEST PRACTICE “biggies”. We now have: 01 Clearly defined and documented Accounts Receivable process and procedures 02 Clearly defined staff member roles and expectations for this area of your business. (You can even incentivize employees by providing a bonus to reduce days to collection, keeping them motivated to achieve goals. ) 03 Accurate Data driven information to measure and manage this aspect of your business 04 Improved customer relations as you gain control of collections 05 Improved cash flow to allocate resources to technology, marketing, product innovation, etc. 06 07 Best in Class technology solutions to streamline operations in this area of your business In-depth understanding of this aspect of your financial statements Does this seem doable? To update your policy and stick to it, decrease days to collection by 3 days, get setup to take credit cards and automate billing? www. yoururl. com

Not Quite? Feel like you need more guidance to accomplish these three steps? WE Not Quite? Feel like you need more guidance to accomplish these three steps? WE AGREE All business owners need a detailed and specific roadmap, a “systemized process” to tackle each aspect of the business, one DOABLE step at a time. That is why we are here today www. yoururl. com

Did you Know? By reducing AVERAGE TIME TO PAYMENT BY ONE DAY, a typical Did you Know? By reducing AVERAGE TIME TO PAYMENT BY ONE DAY, a typical company (with an average 15 -18% receivable) doing: 250 K in annual sales, would add $700. 00 PER ONE DAY DECREASE in Average Time to Payment to cash their flow 500 k in annual sales, would add $1400. 00 PER ONE DAY DECREASE in Average Time to Payment to cash their flow 1 M in annual sales, would add $2800 PER ONE DAY DECREASE in Average Time to Payment to cash their flow So for example, if you reduced your Average Time to Payment from 34 days to 31 in one month’s time, even a small company has added $2100 to cash flow. (Stats furnished by Profit. Cents) www. yoururl. com

What this means for our firm • At $400, 000 in annual revenue, for What this means for our firm • At $400, 000 in annual revenue, for each day they decrease the Average Days to Collection, they put approximately $1, 120 of cash flow into their firm. • They are 28 days higher than the average. If they were to become “average” they would create $31, 360 in cash flow. As their trusted advisor, what EXACT steps would you recommend they take? www. yoururl. com

More Interesting “Stuff” Let’s say you carry an average 15% Accounts Receivable balance. This More Interesting “Stuff” Let’s say you carry an average 15% Accounts Receivable balance. This translates to: • • • 250, 000 in annual revenue = 37, 500 in average receivables 500, 000 in annual revenue = 75, 000 in average receivables 1, 000 in annual revenue = 150, 000 in average receivables This means you have an Accounts Receivable Turnover Ratio of. 66 meaning you turn over your receivables every 54 to 55 days. www. yoururl. com

PIP (Profit Improvement Process) WOW FACT Cost of Carrying Receivables: According to the Harvard PIP (Profit Improvement Process) WOW FACT Cost of Carrying Receivables: According to the Harvard Business Review, here is an average of what receivables are costing a company: • 30 days – 1. 82 % • 60 days – 9. 20% • 90 days – 17. 74% • 120 days – 26. 71% PIP Quick Tip – Probability of Collection The Commercial Collection Agency Association handles about 80% of U. S. collection claims. Based on a survey of members, the probability of full collection on a delinquent account drops drastically with the length of delinquency. According to their survey, the probability of collection drops to: • 89. 9% after 1 month of delinquency • 81. 3% after 2 months of delinquency • 69% after 3 months of delinquency • 52. 1% after 6 months of delinquency • 22. 8% after 12 months of delinquency www. yoururl. com

How this Affects our Case Study Cost of Carrying Receivables A/R Amt. • 1 How this Affects our Case Study Cost of Carrying Receivables A/R Amt. • 1 -30 Days 14, 661 • 30 -60 Days 9, 389 • 61 -90 Days 9, 883 • 91 -120 Days 6, 315 • 120 + Days 31, 883 72, 131 Probability of Collection A/R Amt. • 1 -30 Days 14, 661 • 30 -60 Days 9, 389 • 61 -90 Days 9, 883 • 91 -120 Days 6, 315 • Over 120 Days 31, 883 • 180+ Days 27, 286 Totals 72, 131 Cost % Total Cost 0. 0182 0. 092 0. 1774 0. 2671 170. 88 909. 24 1, 120. 28 8, 515. 95 10, 716. 35 Collectability % 0. 899 0. 813 0. 69 0. 521 Net Realizable 14, 661. 00 8, 440. 71 8, 034. 88 4, 357. 35 16, 611. 04 6, 221. 27 44, 110. 24 28, 020. 76 + 10, 716. 35 = 38, 737. 11 www. yoururl. com

Summary of our Case Study • To carry those receivables, the cost to the Summary of our Case Study • To carry those receivables, the cost to the firm is 10, 716. 35 according to industry standards • What is even worse, the probability of collection means that they are likely to only collect 44, 110. 24 on 72, 131 • This translates into 38, 737. 11 in lost profit. You/your clients work too hard to throw that kind of money away. If we took this one step further, close to 10% of their billing is lost. Think this firm is unique? Hardly, we see this often in the accounting industry. www. yoururl. com

Question? Can you see how the firm in our case study could transform their Question? Can you see how the firm in our case study could transform their bottom line by taking a few simple action steps related to A/R? What steps would you advise them to take? How would you get them to follow through? Do you have a plan or system to help this company get fit? www. yoururl. com

Let’s look at a systemized process to help our Case Study solve this problem… Let’s look at a systemized process to help our Case Study solve this problem…

Accounts Receivable What if this firm took these 3 actions steps this month? : Accounts Receivable What if this firm took these 3 actions steps this month? : Create an Effective Accounts Receivable Policy or update an existing one. Get set up for automatic billing with ACH, CC, etc. and automate aspects of the Receivables process to save time and money. (See recommended solutions. ) Decrease the average time to payment by ____ days. What results do you think they would see? www. yoururl. com

The Potential Impact… • If our firm were to reduce Average Time to Collection The Potential Impact… • If our firm were to reduce Average Time to Collection by only 5 days this month, from 68 to 63 days, it would put approximately $5, 600 back in cash flow. • If they were to implement an A/R policy that prevented receivables from going past 90 days, it would save them $9, 636. 23 per year. • If an account never went over 90 days, it could save them 17, 229. 61 according to “Probability of Collection” studies. Think small action steps don’t make a difference? If they could get better at this ONE thing, they would put $32, 465. 84 of profit back on the books and into their pockets. www. yoururl. com

We think you understand our point… THE RIPPLE EFFECT One Small Change Can Have We think you understand our point… THE RIPPLE EFFECT One Small Change Can Have an Enormous Impact You DO NOT NEED to tackle every aspect of the business at once. In fact if you start down that path, you will likely not achieve your goal. The POWER of small steps consistently implemented over time will produce amazing results. • Could your firm benefit from implementing a few clearly defined “DOABLE” action steps this month? Could you help your clients do the same? • What kind of value do you think this would bring to your clients? • Are there more simple action steps like this example that can have a dramatic impact on the bottom line? YES. We have laid them out in a realistic 12 month action plan. www. yoururl. com

The Motivation Behind This Project • Change the statistic that 76% of business owners The Motivation Behind This Project • Change the statistic that 76% of business owners are looking for a new Accountant at any one time • Develop a systemized method of providing year round high value to clients • Create a high dollar year-round revenue stream for Accountants • Design a “DOABLE” system to help business owners improve company performance • SIMPLIFY AND SYSTEMIZE Monthly Consulting Services • SOLVE THE HUGE COMMUNICATION GAP BETWEEN ACCOUNTANTS AND BUSINESS OWNERS www. yoururl. com

Client: What do you consider to be the biggest problem areas in your business? Client: What do you consider to be the biggest problem areas in your business? We will work with you on one aspect of the business per month and provide guidance on how to implement a few “doable” action steps. In 12 months, you will have established best practices throughout your business and a much improved bottom line. Accounts Receivable Accounts Payable Inventory Payroll Expenses Budgeting Internal Controls Human Resources Revenue Analysis Pricing and Margins Analysis Financing and Debt Management Customer Relations Management It is critical to allow the client to establish the order. www. yoururl. com

Accounts Receivable There a multitude of things you can measure, lots of action steps Accounts Receivable There a multitude of things you can measure, lots of action steps you can take, but you need a starting point and process that will produce dramatic results to keep you/your client motivated. Account Age Current Past 30 days Past 60 days Past 90 days Past 120 days Past 365 days TOTAL Amount Outstanding Probability of Collection $ % $ % CAUTION – Do Not Over-Complicate the Process www. yoururl. com

Accounts Receivable Run these KPIs (Key Performance Indicators) Percentage of Invoices Paid on Time Accounts Receivable Run these KPIs (Key Performance Indicators) Percentage of Invoices Paid on Time _____% Percentage of Dollar Amount Paid on Time _____% Days in A/R (Average time to payment) _____ Days (The Average Time to Payment is the average number of days a customer invoice is outstanding before it is collected. ) Percentage of Bad Debt _____% (This calculation takes the amount of debt you have had to write-off divided by the total sales revenue. We like to track this percentage as we can quickly adjust to increases or decreases in uncollected invoices. ) We provide the simple formulas to run these KPIs in the workbook you will receive today www. yoururl. com

Best Practices OH I GET IT You are talking about the old 80/20 rule. Best Practices OH I GET IT You are talking about the old 80/20 rule. So if I help my client focus on only a few important things per month (the 20%), it could have an 80% impact on their business. Cool, THIS MAKES SENSE AND IS DOABLE Wow, my client will love this… www. yoururl. com

The “Take-Away” • In conclusion, every survey indicates business owners want and need this The “Take-Away” • In conclusion, every survey indicates business owners want and need this kind of structured guidance. The vast majority of accountants recognize this, but have not been able to consistently implement and offer this service because of the lack of systemized process. • All businesses, and that includes all Accounting and Bookkeeping firms, need doable and systemized procedures to implement best practices and improve company performance. • We have OVERCOMPLICATED a very simple deliverable. This is not rocket science. Do not over-think how to help your clients. Walk them through a few simple things each month for amazing results. This is DOABLE www. yoururl. com

Want to learn from other Accountants how to implement this high impact system right Want to learn from other Accountants how to implement this high impact system right now? Want to see it in action? Here’s our solution

Thanks for Attending We hope you will attend our other sessions to gain in-depth Thanks for Attending We hope you will attend our other sessions to gain in-depth understanding of how taking just a few action steps per month can make a huge difference in your firm. Stop by and see Darrell at our booth to see all 12 modules. Download our Slide. Show, Handouts, Checklists and More at http: //www. qbexpress. com/cloudfest The QBExpress Team www. yoururl. com