Last month I examined the results of the last KATO survey which revealed many independent firms anticipated a downturn in the economy and are worried about the effects this will have on their businesses. What we now need to do is to examine the issues from this point: What must the partners do to maintain financial performance?
With compliance service fee income being generally price led, this will be the first area where firms feel the pinch as clients become more demanding and may ask for a re-quote or competitive pitch for their work. Does the practice have a methodology for dealing with a pitch situation which is universally known and applied in the firm? If not, an agreed process should be put in place.
Greater attention must be given to the basics of job budgeting and job planning: improving turnaround times and ensuring that partners and staff are all working at the correct level with proper delegation in place. Examine the accounting and audit methodology used and the extent to which too much work is being undertaken. The objective is to keep staff utilisation high and management information systems should allow partners or senior managers to keep on top of the situation.
And don’t forget that cash is king. Faster job turnaround leads to earlier billing and speedier cash collection and both these processes should be closely monitored.
When it comes to added value services, firms need to conduct a thorough examination of their client base with particular emphasis on those that may be at risk themselves if the economy continues to slide. The objective is to identify what their clients need and then ensure that they are in a position to provide it.
Almost all businesses will be affected by the current economic situation and will need sound management advice.
In the current climate, business recovery and insolvency are counter cyclical and those firms that already provide these services should be gearing up for a major marketing exercise in this area. Those without the necessary expertise should look at developing relationships with larger practices or specialist insolvency practitioners.
Clients will also be seeking mitigation of their tax liabilities, and there is a clear link between tax planning and financial services for wealth management. In the past few years, many firms have realised the income generation potential of financial services and either developed their own operation in house, or forged links with IFAs and should now be heavily promoting this service to relevant clients.
At a time when many firms might shelve growth and development plans in favour of a survival strategy, good housekeeping should be top of the agenda, along with a determination to identify and exploit every opportunity for offering added value services.
Phil Shohet is a director of Kato Consultancy
