This is perhaps the most acute strategic challenge facing professional accountants like you. Most firms spend over 80% of staff time on core services like tax, accounting, audit and payroll. These are all either compliance services, or services that are considered commodity services by clients. That makes it very difficult for accountants to “price their way to success” by raising rates on those services. Moreover, the fees that you and your peers have traditionally been charging for these services have already set a precedent for the “right” fee for these services in the minds of your clients. That’s naturally going to be very hard to change.
So if greater profits aren’t achievable simply by changing our rates, what’s the alternative?
There are simple techniques that virtually every CPA firm—large or small—can use to make their practices significantly more profitable. And you can accomplish this growth without increasing your fees, or adding any clients or staff. What’s more, you’ll also become a better advisor and add more value to your clients’ businesses while you’re raising your bottom line.
To learn how, we have to draw from parallels in other industries.
Take the examples of Amazon Web Services (AWS), the largest Web hosting platform in the world, or Google Maps. These are astoundingly valuable servcies for consumers or, in the case of AWS, for web-based companies around the world. And yet, these services are inexpensive or even free – but still drive significant profitability for Amazon and Google. Why? Because those companies found ways to innovatively use the cloud to create exceptional value.
Accountants can do the same thing—build value for their practices by innovatively using the cloud.
Here are some ways to apply cloud innovation to boost your profits.
Transform your client accounting practice
The right cloud solutions can help accounting firms convert commodity accounting services into higher profits. Accounting is marred by numerous problems and inefficiencies for one simple reason: because it is led not by accountants, but rather by a “DIY” program sold directly to small businesses.
The solution: cloud-based professional systems that put accountants back in the driver’s seat. Using Accountant-Centric systems such as Accounting Power, CPA firms have turned Client Accounting Services into a highly profitable and sought-after service. And solutions with automated bank feeds can transform write-up from a low-margin, highly manual service to a reliable source of profits with up to 80% reduction in staff time.
Profit from payroll
The same principle of turning commodity into a competitive advantage also applies to payroll processing. Cloud-based payroll systems have made payroll processing highly profitable for accountants by giving them capabilities that only payroll service bureaus could previously afford—namely, high levels of automation.
The award-winning Payroll Relief system can perform direct deposit, tax payment, tax-form e-filing, and child support-related tasks automatically, on time, with 100% guaranteed accuracy. You can even eliminate data entry and check printing in your office. The result: over 60% of customers have experienced at least a 25% improvement in their payroll practice since switching to Payroll Relief.
To capitalize on these innovations, you have to discard hourly billing
We know many accountants won’t like to hear this, but hourly billing is totally irrational for accounting practices in the digital age. If you use cloud technology to perform accounting and payroll more efficiently, hourly billing actually punishes you financially for your innovation and efficiency! Instead, accountants should charge clients a fixed monthly fee for most services. You’ll earn the same amount (or more) from each client, all while using the cloud to complete that work in fewer staff hours.
And it’s easy to transition from hourly fees to a fixed fee, because given the choice, clients invariably prefer the greater certainty of a flat fee. Moving to a flat monthly fee model can help them better budget their monthly expenses and manage their cash flow. While their total yearly expenses would remain pretty much the same as before, switching to a fixed fee model is another way you provide extra convenience to them.