How Staff Impact CPA Firm Profits – If They Only Knew!

A pet peeve is a particular or recurring source of irritation.

One of mine is CPA firms’ near total lack of interest in formally educating their staff on how their firm works: how it gets clients, how success is measured and how firms make profits.

When the employees of any organization understand how they fit in and how their work impacts the firm’s success, they  work with more enthusiasm and commitment, which increases their productivity.

Here are a two ways that staff can make a direct and substantial impact on the firm’s profits:

Bring in a small client.  Imagine a firm with 8 partners and 36 professional staff.  If only half of the staff brought in one $5,000 client per year, the present value of the profit stream to the firm would be a cool $300,000 (you accountants out there will have to read our monograph How CPA Firms Work: The Business of Public Accounting to see the computation).  Now, I realize that it’s a lot easier to create this $300,000 by doing a “what if” on a spreadsheet than actually procuring the new client.  But it’s done every day and there’s no reason why it can’t happen at your firm.

The cool thing is that firms don’t expect the staff person to close the $5,000 client.  All the staff need to do is identify someone they know with client potential and set up a meeting with a partner to meet the contact.

Increase technical knowledge.  One reason partners work way too many billable hours is that often the staff lack the required knowledge to handle technically demanding work. Think about this. Staff typically work 2,250 hours a year with 1,500 billable, so 750 hours are non-billable.  If you back out vacations, holidays, CPE, firm meetings and a little admin time, that still leaves 300-400 hours that could be spent on billable work that goes idle.  But if the staff were trained to do more higher level work, they could be more billable without working more total hours.

So, if staff could identify technical areas in the firm that they would enjoy, and get the training in those areas, they would make themselves more useful to the firm.  If every staff person could utilize this increased knowledge to generate just one more billable hour per week, the firm’s profits would increase by 4%.

Why should staff care about helping the firm make more money?  Very simply, profitable, growing, successful firms are more fun to work at.  When the partners earn more, they plow a generous portion of it back into the firm with higher staff salaries and bonuses, better training, cutting edge technology and more.  And with the increased growth and profitability comes new, exciting clients and more advancement opportunities.

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To train your staff in the workings of the typical CPA firm, take advantage of our liberal quantity discounts to purchase multiple copies of How CPA Firms Work: The Business of Public Accounting for your interns and new hires.