Perfecting Your Small Firm Practice
Going paperless is a good first step toward increasing productivity and cutting costs for small firms. But it’s just a first step. Besides flushing the paper out of your firm’s processes, a practice management system can free up time and energy for growing your business.
By Bob Taylor
Practice management isn’t just a good idea. It’s the future. Smaller accounting firms, those with less resources and limited budgets, that don’t manage their practice electronically will be hard pressed to survive. Their costs will be too high for them to compete.
To get a sense of how practice management software improves productivity and cuts costs, take a look around your office and identify areas where you’re frittering away time and money - areas where practice management software can stop the losses.
Paper is the worst culprit. Government studies have shown that it takes an average of 3½ to 4 minutes to retrieve a paper document, and roughly the same amount of time to re-file it. But that’s just a small part of the problem. Another study shows that the typical business executive spends an average of three hours a month looking for lost and mislaid documents – and that a large percentage of lost documents are never found. There are also the costs of faxing documents, duplicating them, and storing them away in file cabinets or even in warehouses. Each individual cost is small but they accumulate over weeks and months to thousands of dollars. Paper handling also eats up time that could be better used serving clients or marketing the business.
In any profession where hourly costs are important, controlling and accelerating workflow is critical to success. Anytime staffers are unsure of what to do or are focusing on the wrong priorities, the firm is losing money. With a good practice management system, the firm can assign tasks to staffers, set due dates and keep track of pending and completed projects. Monitoring workload and workflow provides a huge boost to productivity. It’s also a morale builder.
If your firm is dealing with tax and compliance issues or mortgages and investment instruments, a good calendaring function can be a lifesaver. Your clients cannot afford for you to miss a deadline. An electronic calendar alerts those responsible when project due dates are approaching. If a deadline changes, the change is entered once and corrects across the system, ensuring that everyone is working from the same calendar.
Failure to account for time and expenses accurately can also be a big money loser. It’s easy to overlook the fractions of hours. Similarly, when the firm’s record of expenses consists of a pile of paper invoices, receipts and statements, mistakes and oversights are inevitable. Practice management software can help ensure that all billable time is accounted for. Also, by capturing expense information as soon as it arrives in the office, such software enables the firm to have a much clearer sense of its financial position and profitability. Getting expense data into the system quickly also eliminates the problem of lost and mislaid receipts and invoices. Of course, when it’s time to prepare client invoices and mail them out, most of the work is already done.
Perhaps the biggest obstacle to building your firm is lack of time. Ask yourself: Who’s preparing our marketing materials for new potential clients? Who’s selling current clients on new services? Because the firm is bogged down by paperwork and sluggish workflow, it’s impossible for principals to devote much, if any, time to marketing the firm. Think about all the small business owners who hire bookkeepers to do the payroll. The chances are you can do their payroll better and cheaper, but they’ll never know that unless you can make time to talk with them.
Good practice management software can create the time necessary for marketing. More than that, it can help create the Customer Relationship Management tools necessary for a strong sales effort. Such software enables the firm to enter an enormous amount of customer data into the system – everything from birthdays to comments on long-term planning. With this kind of information, your marketing program can address each client’s specific concerns while strengthening your overall relationship with him or her through birthday cards and other personal notes.
If your firm is afflicted with too much paper and too little organization, the bitterest loss may come when you try to sell the practice and retire. The business broker you bring in to handle the deal will take one look at all of the file cabinets and paper documents and tell you that the practice is not transferable. You may know a great deal about each of your clients, but unfortunately, most of that information is locked up in your head. So, instead of selling your practice and riding off into the sunset, you sell the practice and then stay on for another year or so to introduce your clients to the new owner and ensure a smooth transition. Not the kind of retirement you envisioned?
With all the detriment of relying on paper, why are so many small firms still paperbound? Discussions with dozens of accounting firm owners and managers have uncovered a number of barriers to implementing practice management software. The biggest is cost. Many accountants think that implementing a practice management system will simply be an additional cost. In actuality, such systems generally pay for themselves within a few months through measurable gains in productivity and reductions in paper handling costs. There are also gains that are not easily quantifiable, such as the time you free up to work on sales and marketing campaigns.
My experience in helping accounting firms improve their practice finds that for a small firm (for example, with three to ten people) the cost of implementing electronic practice management software is roughly equivalent to the cost of a new car – and that the ROI (return on investment) in the first year is roughly equivalent to two new cars.
This is my experience. So, how can you determine the costs and savings for your own firm? Sophisticated practice management software providers develop their own ROI formulas to help you pin down all of the costs of relying on a paper-based system, including expenses you may have overlooked. These ROI calculators then help you compare these costs with the expenses of installing and maintaining an electronic practice management system. If your firm’s ROI calculations tell you that it’s time to start shopping for a practice management system, here are some tips to ensure that the software you select will meet your needs:
- Make sure that the system will capture and store all types of paper documents used in your practice, including charts and graphs – and check to see what scanning equipment the system requires. Some systems may require expensive non-standard scanners.
- Be sure that the system will work with your current filing system. Some software requires you to use a proprietary filing system. The danger here is that you can get locked into the proprietary software, making it costly to switch later if you see something better.
- If you’re using Word, Excel or other Microsoft® Office programs, make sure that the system you select is built on a Microsoft platform. Stick with what you know; it will speed up the learning process.
- One of the leading tax software packages works only with PDF documents and won’t accept Word or Excel. Unless your firm does nothing but tax, look for software that can cover your entire practice and adapt to the way you work.
- The big difference in going paperless is that everyone will be viewing documents on a screen instead of in a pile on their desk. They’ll have to learn how to use the system’s icons and other features. The bottom line is that some systems are much easier to learn and work with than others. It pays to take a few test runs before buying.
- About 80 percent of what happens in accounting is the same right across the profession. It’s the 20 percent that’s unique to your business that you have to be concerned about. You probably won’t develop many custom fields, but make sure the software is still customizable enough to meet your unique needs.
- Most vendors can provide tech support via email and telephone. A few now offer “remote service.” This means that their tech people can actually hook up to your system from their remote location to resolve an issue. This is much quicker and more reliable than having the tech person try to lead you through the steps over the telephone. So, be sure you know what tech support programs are available.
- Make sure the system has a calendaring function that works the way you work. It’s particularly important that any changes or corrections to dates and deadlines correct automatically for all staff involved.
If you’re looking for practice management software that will help you grow your business, make sure it can accurately capture contact information and make that information readily available. Also, if you expect to build your practice, make sure your system can grow with your firm.
A final piece of advice: After you install your new practice management system, don’t overwhelm yourself trying to load all of your data into it right away. Instead, prioritize which documents are critical for the system right now, and which to leave in files for later.
About Author:
Bob Taylor is General Manager of Advantage Business Solutions, developer of eFileKeeper document and practice management software. To contact him, call 800-550-3510 or email him at taylor.bob@keepersolutions.com. For more information on eFileKeeper’s ROI calculator, visit www.efilekeeper.com.
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