Productive priorities

BRW's survey of the Top 100 Accounting Firms highlights different attitudes and approaches to productivity.

By Andrew Heathcote
BRW. 25 November 2004

Productivity is a constant but commonly misunderstood challenge for accounting firms. In its research into the Top 100 firms, BRW has found the biggest priorities of the country's most productive firms. Each provides pointers to what makes a successful firm and where the best performers spend their time and money.

The main priorities are marketing, raising profitability through internal efficiencies, finding staff, client service and developing new services. The table on page 71 lists the proportion of firms that rank each area among their top four priorities, and separates the most and least productive of the Top 100 - on a fees-per-person basis - to indicate how priorities differ between good and very good firms.

The managing director and sole practitioner of the Sydney firm Bell Partners Accountants and Business Advisors, Anthony Bell, runs the most productive firm in the country, on a revenue-per-partner basis. He recently returned from London and the United States. "I went there to find out about the best accounting firms in the world, their services and the products they offer," Bell says. He agrees that productivity is integral to running a successful accounting firm but believes that is not always understood by accountants in this country.

A partner and chairman of Forsythes, Hugh McKensey, has been working in the accounting profession for so long that he describes himself as a "bit of a dinosaur". (Forsythes is the only regional firm to rank in the top 10 most productive firms, which appeared in BRW in July.) For most of his career, McKensey assessed productivity in terms of chargeable hours but says he now looks at it very differently. "At the end of the day, productivity is a measure of the outcome you have achieved against the outcome you expected," he says.

McKensey says he was forced to reassess the way he looked at productivity two to three years ago by the young accountants who had joined his firm. Their work habits forced the firm to take a more holistic approach to how it assesses productivity and take into account factors such as work quality and client satisfaction. (In the BRW Top 100 Accounting Firms, Forsythes was the top country firm and the 10th most productive.)

Occupational advisers agree that one simple gauge is insufficient for firms to accurately assess whether they are operating productively. Rob Nixon, a director of Business First, a practice-management consultancy, says there are five key performance indicators that provide a good starting point for assessing productivity: time charged, write-offs, work-in-progress days, debtor days, and the average hourly rate billed.

"The vast majority of firms measure productivity in terms of time charged," Nixon says. "Consequently, firms often focus on having a high volume of charged time but that can cause inefficiencies. If partners have the drum out wanting more chargeable time, then time sheets are fudged and write-offs occur."

The managing partner of the New South Wales division of Deloitte, John Meacock, says non-traditional productivity measures have become crucial to running a successful practice. Deloitte and the other Big Four firms dominate the most-productive list. "We apply the usual productivity measures around chargeability and so forth but we also spend a lot of time on customer satisfaction surveys to make sure we are solving our clients' issues," Meacock says. "I think that is the key non-financial productivity measure and it is one we look very closely at."

Monitoring is one thing, but what are the country's best accounting firms doing to improve productivity? Sixty-six per cent of respondents to the BRW Top 100 survey say marketing is one of their four main strategies. Marketing is an important part of running a successful accounting practice but few successful firms see reliance on advertisements as the best way to go about it.

Anthony Bell says "effective" marketing can provide important insights into productivity. "The best marketing is word of mouth. It can act as a barometer. If you are getting new work from referrals, you know you must be doing something right by existing clients. The problem with more traditional types of marketing is that you might get new work but it does not say much about the quality of your work if someone has just read an advertisement or signboard."

Nixon of Business Fitness says 99% of all new clients to an accounting firm come from referrals. "But there are very few firms that have a referral program in place as a marketing initiative," he says. "So most of the money that firms spend on marketing is ineffective because they have not developed a process to get referrals. Accountants are pretty lousy marketers, but they should be very good at it because they are the last trusted advisers on the planet."

A director of the practice management firm FMRC Business Development, Andrew Geddes, says there are several things accountants can do to make sure they are referred new work from existing clients. "You have to profile yourself," he says. "You should be seen with your good clients at their events. You can also run a breakfast club and invite 12 clients to breakfast once a month and provide specialist education activities. Marketing accounting services is not about putting an ad in the Yellow Pages. It is about relationship development, profiling and positioning."

Geddes says the reputation gained with good clients comes from whether accountants are accessible, timely, understandable and willing to take initiative. To this end, having the right staff is crucial. Good staff are always hard to find but the task for accounting firms is becoming even tougher. The Commonwealth Department of Employment and Workplace Relations recently put accountants on the list of immigrants' occupations in demand.

McKensey of Forsythes says his firm has the most luck with staff recruited straight from university. "The best ones are those we get from the beginning that have had the chance to grow and develop in our culture," he says. "Staff are becoming increasingly important. People used to be part of the equation. In my view they are now all of the equation."

People issues

Of the respondents to BRW's survey, 65% of the more productive firms plan to make staff a top priority, compared with 50% of the less productive firms. The general manager of CCH Benchmarking, Ian Brown, who assisted in the collation and analysis of the productivity trends of the Top 100 firms, says it could be argued that the "highly productive practices better understand the importance of their people and so put more focus generally on people issues".

Bell says he likes to be on the side of caution when it comes to staff numbers. "In terms of our talent management, I tend to overstaff and keep more people on than necessary," he says. "We have had a growth rate that is pretty high so I would rather make sure quality assurance is high. You don't want staff to be stressed or for clients to say you are too busy when they are trying to reach you on the phone. Reducing overheads and other costs are things we constantly look at but we can take on added expenses with staff because we keep costs low in other areas, such as marketing."

Bell also believes it is becoming increasingly important to offer a range of services to clients. "To be productive you have to offer a total solution stream. We are finding a real pattern where clients want to engage our firm in a number of areas."

Of the Top 100 respondents, 56% of the most productive firms say they are focusing on developing new products for clients, compared with only 29% of those in the bottom half of the list. This gap is bigger than in any of the other priority areas.

Brown of CCH Benchmarking says this suggests that the highly productive firms "seem to be willing to explore new areas for clients as a way of growing the top line".

Geddes says offering new services is an important part of "deepening a relationship with clients". This is most effectively achieved by putting staff into teams that offer a variety of skills. Geddes believes it is often more appropriate to assess the productivity of a team rather than individuals. "A group might be a partner, a client service manager and a few accountants. Within that work group I suggest weekly production meetings where key performance indicators are assessed collectively. What we are talking about is open-book management; the setting of profit and production targets within the group and then meeting once a week to see if they are being met."

The chairman of CPA Australia's public practice committee and a director of the Canberra accounting firm Everalls DFK, John Mann, says quality assurance is an area where several firms can improve the way they operate. "Many smaller firms don't have documentation in relation to procedures. The how-we-do-it-here concept. At a lot of firms this won't be written down but it is far more effective when it is and available to all staff. Access through an intranet is a good way of doing it because they won't have to waste time asking someone else."

BRW