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26Group Home » Blogs » Best Practice » Does your Accounting Practice plan to fail?

Does your Accounting Practice plan to fail?

October 6, 2011 By Andrew Robertson

We have all heard the saying – businesses don’t plan to fail, they fail to plan. And yet a large percentage of accounting practices do not have a written practice plan. This makes me shake my head in frustration.

There are really no legitimate excuses for not having a documented practice plan, in my view, as it is the ultimate mechanism for accountability in a practice. A good practice plan can align an accounting practice’s efforts behind common objectives and remove noise and clutter from decision making. A bad plan or no practice plan can do exactly the opposite and that’s just bad practice.

Here are some reasons I have personally heard from accountants about why they don’t have a written practice plan:

“If I had more time I’d write a plan, but I don’t”

I know this practice well. It’s not a bad practice with revenue of $1.7m. The Partners are jacks of all trades who have built the practice around themselves and their own likes/dislikes. Ego plays a big part in their decisions. In recent times they are doing less processing work in the practice and are focusing on “client relations”.They continue to dabble in day to day management but have not empowered the managers to manage the practice, nor the clients, although they pretend they have.

Employees have a “punch the clock” mentality. Culture is poor. When something goes wrong the partners play the blame game. They are not respected and deep down they know it. The practice has no plan or direction and makes minor tweaks on what has always been done. Costs are creeping up and client work is taking longer than ever to complete. In the past decade the financial performance of the practice has declined by approximately 22% and is continuing to fall further. The partner offers many excuses for this, none of which are their fault.

“We know exactly what we’re doing and don’t see the need to write it down”

This is a multi partner practice that employs 40 staff and has revenue of around $5m. It has been operating for 19 years. The obligations for running the practice are shared by all partners. There is no-one ultimately in charge. On the surface, the practice appears to operate smoothly.

However, when you look deeper the practice is quite dysfunctional with partner’s client matters impeding the establishment of good practices. Each partner member has a different approach, different practice areas that interest them and different sets of priorities. Rather than addressing these partners issues and instituting a formal practice planning process which will determine a single approach and set of priorities for the practice, they choose to work around the partners and client matters. No-one wants to rock the boat, although in private they are critical of each other.

Employees remain confused about what has to be done and what is important. So do the partners. Financial performance is sub-standard and the practice lurches from one crisis to the next.

We’re turning clients away already

This is a service practice that has revenue of around $2m. The practice has been trading for 11 years and has a growing client base. The partners are 66 & 55 years old and spend 65 hours per week in the practice. The practice provides a good level of service.

Revenue has been steady but has not really grown for more than five years. Average revenue per client is falling but the practice is doing more for every customer for less money. The practice has not innovated in any way in the past 10 years. Costs are increasing and profitability is falling.

The partners do not understand why as they believe they provide a good service. The older partner is hoping to retire but has not built a succession plan of any type. The other partner doesn’t really want to buy the other partner out and doesn’t think the senior people could do the job as well as him.

There are a lot of other reasons not listed above – here’s some more:

  • We’re not big enough
  • We’re not good with that vision, mission, marketing and selling stuff
  • We can’t afford the time or want to spend the money on a practice plan
  • It’s too much work
  • We had a practice plan before and it didn’t work

Do any of these sound familiar?

Every practice needs a practice plan. They need one for the same reasons that you need a road map to drive around Australia – that is, you will get lost! Sure it takes time, effort and some money but what other choice is there? Bumble around in the dark making excuses that you know the way?

Now let’s consider some specific obstacles that may come up that will force a practice to write a practice plan:

  • You want to sell the practice for more than a $ for $. Any potential buyer will want to understand the future prospects for the practice – a practice plan is the best way to communicate this.
  • You want to make fewer mistakes. You have made lots of mistakes and want to make less in the future.
  • You hit a road-block and don’t know what to do. A practice plan will force you to consider your way through the current problems.
  • You want to take control. You are tired of reacting to events thrust upon you and want to take charge of your future.

A practice plan provides a road map for getting you from where you are to where you want to be. It helps you to stay focused on your longer term objectives, rather than just dealing with day to day matters. It also forces you to deal with realities that you might otherwise ignore or defer (and which might become major problems later on).

A practice plan doesn’t need to be big or fancy and it certainly doesn’t need to be long. Above all else it just needs to be clear and well understood by everyone in an firm. In the end running a successful practice involves ensuring that you deal with the both the strategic matters that will create and protect your future and the day to day matters which will ensure your results. The practice plan is the glue between the two.

 

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About Andrew Robertson

After managing my own practice to become a proactive business services firm, I sold my share to pursue my calling of being a business advisor. Nowadays I coach other accountancy firms to improve profitability, strategic direction, internal efficiencies and morale.

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