CPA Firm Economics 101
Marc Rosenberg, CPA / Mar 10, 2014
Here are just a few examples of what the curriculum would include:
CPA firms should be a high priced, low volume business. The accounting business is profoundly influenced by the laws of supply and demand. The supply of CPAs is greatly limited by the technical challenge of their work and the continual demand for their services makes them recession-proof. Firms need to understand this dynamic and price aggressively while being selective about the clients to whom they commit their scarce resources.
Staff should know how filling out a timesheet builds their career. Billable hours make money for the partners. Why should staff give a hoot? Because it’s a lot more fun working for a growing, profitable firm than one that’s stuck in the mud and struggling with the bottom line. When the partners make good money, they plow a generous portion of it back into the firm with higher salaries, better training, investments in cutting edge technology and more. Most importantly, the resulting growth creates fabulous advancement opportunities. Get your staff to love timesheets.
How realization, write-offs and work-in-process affect the firm. Time management is the single biggest factor in a CPA firm’s success because time is a scarce resource. Once it’s wasted, it can never be recovered. Here’s a typical example: of 50 hours worked on a project only 25 can be billed, either because the work was done incorrectly, an excessive amount of work was performed or the client’s weak systems required additional work. We call the 25 wasted hours a write-off of work-in-process, which sends realization plummeting. Perfection is unattainable. Nonetheless, staff need to understand how wasted time impacts the firm and how it can be minimized without scaring the you-know-what out of them.
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