Want to know how your accounting firm stacks up? Industry guru Rob Nixon has released his latest research findings for accounting firms in Australia and New Zealand. This includes 373 participating firms – making it the biggest study of its kind in Australasia.
Rob comments that the top firms are moving from “trusted advisor to trusted partner”. This is a subtle but significant shift and one I certainly applaud, especially in a time of economic uncertainty. Rob runs the coachingclub for accounting firms and the majority of the results involve those firms. In the coachingclub, Rob suggests five KPIs are mandatory to manage the success of a firm. These are: productivity, average hourly rate recovered, write ons, WIP days and debtor days. This is sensible stuff and after reviewing of the results I am pleased to note that accountants in Australasia are doing a good job with their firms. But there’s still room for improvement.
The number accountants will be most interested in is EBIT per director before directors salaries. The average was A$304,929, with the upper quartile reaching A$402,722. This is good, but could be better. The best performing result was a stunning A$1.7m.
Common traits for the better firms are:
- Higher productivity % for fee earners – average being 71% and the upper quartile 81%. If you can reduce the admin time for your fee earners, what they recover will be better. Makes sense really. That’s why Rob advocates the use of lower cost admin assistants.
- Lower productivity % for directors - this means the less billable work a director does the more successful a firm is.
- Large number of team members per director - with the average being 5 and the upper quartile 7. Leverage is always important. The best performing firm in the survey had a staggering 20 team members per director.
- Average hourly rate recovered is better - A$156 on average and A$176 for the upper quartile. I’m sure this has something to do with hourly rates, but also efficiency. I’ve seen some firms recovering A$200+ per hour on core compliance work by using efficient technology and processes.
- Net Profit % – for the average was 37%, but the upper quartile 47%. It seems that aside from labour, accountants still have a fairly low cost of operating. It would be interesting to know how much firms are spending on growth, including marketing, sales, adwords, websites etc. In my view the better performing firms invest in growth. They spend money on client retention and acquisition. They also have acquisition targets and make sales results a key part of the monthly board meeting.
You can read the full 2010 Accountants Benchmark Report here. Well done Rob, these results are useful for any accounting firm that wants to do better.