5 ways to maintain your profit margin even when you are busy
1. Know in detail what it costs to run your practice
I know that most people reading this will be accountants. However, we as a profession suffer as much as other professionals from the cobbler’s children effect. For example, how late did you leave it to file your own tax return? We advise our own clients to have an in-depth knowledge of their cost of sales, fixed and variable costs, and their overheads that their business occurs. However, and here is the crunch, do you know these figures for your own business? If not (and you wouldn’t be the only one), it is time to get really close to the details of your own business. Only when you are this close to the minutiae of your own practice, can you take decisions on how to charge out each different service line or fixed price package and still maintain your profit margin.
2. Increase your fee level for busy periods
If you are going to have to incur higher costs for completing a tax return of a client in January, then shouldn’t you pass this increased cost onto the client? Whilst this may feel unpalatable, another way of doing this is giving clients who are organised and commit to getting their data to you in good time and outside of your busy period a discount on their fees. It is amazing how many clients when faced with a higher fee will be able to be more organised about their financial affairs.
3. Avoid overtime by using flexible resource such as freelancers or an outsourcing company
Paying out overtime to be able to service the work in your busy times can be very expensive. It can also decimate your profit margin in your busy times of the year. A great way to avoid paying out overtime to your staff is to have a flexible resource which you can turn on and off at will. This could be working with some freelance staff or using the services of an Accounts outsourcing company such as ourselves. We offer fixed price fees so you always know exactly what it will cost to send work to us to deliver for you.
4. Ask staff to take overtime as time off in lieu
I know that some staff don’t pay overtime and just expect that staff to work until the work is done. Even if that means your staff are working absolutely stupid hours at times. Given the current scarcity of good quality accounting staff across the UK, not paying for overtime for your staff could be a short-sighted decision. Offering staff time off in lieu for agreed overtime is a way of still acknowledging your staff’s extra commitment, whilst not incurring a hit to your profit margin in busy times.
5. Price correctly
If you knew you were making a loss on a particular service or client, what would you do? Or, more to the point, do you actually know if you are making a profit on individual clients and individual services? (See point number 1) If you are making a loss, is it because it gives you other non-financial benefits? The best way, and I know this is common sense, to make a profit, even when you are busy, is to have priced up the work correctly in the first place. If you find that you are making a loss on a particular client then you have a few choices:
Now that the SATR silly season is over, it is time to get close to the numbers in your own business. When you have control over your own numbers you can then take the right decisions to maintain your profit margin, even when you are busy.