Accounting firms provide a critical amount of support to other organizations. Among various financial services provided, retirement planning, estate planning, accounting, taxation and investment are the most important ones.
Being professional services providing business, it becomes all the more imperative for such firms to identify their key performance indicators and issues that can impact the overall profitability and reputation of the firm.
Their operations essentially involve maintaining a great deal of accuracy and respecting the client's confidentiality. Growing competition, complex projects, billing calculations, performance based compensation are other issues to ponder about. Accounting firms rely heavily on their talent pool. It is very necessary to develop a dedicated and diligent workforce. They are not only responsible for delivering the results but also can help the firm in striking a long lasting relationship with clients. Their compensation, thus, also becomes a central area of concern. Compensation is usually linked to performance. However, quantifying performance is a daunting task in itself. Next area that managers end up spending a lot of time is on billings. Over bidding and under bidding, both can be harmful for the reputation of the firm. An accurate estimate of the billing range should be determined for different projects. Billing decides the profitability of the firm and thus needs to be decided with utmost care. Quality of
work is another area that reflects heavily on the image of the firm. Regular clients contribute the major chunk of their fee revenues. Plus, existing clients can bring in new referrals as well. In short, quality helps in retaining old projects and attracting new ones. Along with quality, deliveries are critical too which means that solutions should be provided strictly on time. Faltering would mean that the workforce is incapable of handling the assigned tasks efficiently or lacks knowledge.
Keeping all these points in mind, accounting firms have to work towards innovating and updating themselves in terms of knowledge and technology. They should also strive towards reducing customer complaints, overheads, and administration costs, while at the same time try to maximize the utilization rates. Lat but not the least, training for employees is an area that cannot be ignored. There might be projects which require the individual employees or teams to go through a refresher training course or a new-skills training course.
Meeting such high performance standards and managing the associated tasks requires such firms to prepare a checklist of essential KPIs. Some KPIs particular to accounting firms can be job turnaround time, utilization rates, billing estimates, fee revenues, training hours etc. Using KPIs, service based accounting firms quantify various parameters which would otherwise remain immeasurable. Balance scorecards can be implemented to address issues like quality, costs and time- the three most important attributes in an accounting firm. Thus, KPIs and balanced scorecards can help address the performance and management issues of accounting firms in a suitable manner.