10 ways to evaluate accounting firm performance

Are you evaluating your firm’s performance? Use the following metrics to see how your business measures up.

An accounting firm owner looking at their firm’s performance stats on a computer

Metrics that cut to the heart of client services

Service industries are all about clients. Are you making them happy? Are they making you profitable? You need metrics that cut to the heart of those questions. Here are some simple measures you can take to rate firm performance.

1. Are clients staying?

It’s important to maintain a healthy client base with consistent revenue. Watch these indicators to see how you’re doing:

  • The rate of increase or reduction in your total client base
  • How long clients stay with your firm
  • How often you acquire new clients
  • Why they leave
  • The strength of your client relationships

The expense of acquiring new clients dwarfs the cost of keeping old ones. Some sources say it costs between five and ten times as much. So while some turnover is unavoidable, you’ll want to keep it in check.

Do you know who your most profitable clients are? Make sure you look after them. You can improve retention by cross-selling other services to them and regularly reviewing your offerings to make sure you stay relevant to their business.

2. How happy are your clients?

Clients may be dissatisfied with an accounting firm long before they actually search for a new one. Surveys have suggested up to one in five clients are dissatisfied with their current accountant.

You can reduce the likelihood of dissatisfaction by developing a system to invite and track client feedback. Ask if they’re happy with the quality of work, the level of service and the loyalty you show them. Start with your key clients.

You can ask them face to face – some clients will like that approach – but use online surveys where you can. It makes it easier for respondents to be honest. And it’s honesty you need. Open yourself up to the process. Encourage clients to be candid. If there are problems out there, you’re better off knowing about them.

3. How do you find new business?

New business can come from many different sources, such as referrals, invitations to put forward a proposal (RFPs), networking, marketing or seminars. Keep track of where your new clients come from. It pays to know which sources are working and which aren’t. It’ll help fine tune your business development efforts.

Also, be clear about your firm’s strengths. If you’ve built up a lot of experience in a specific industry, say so in your marketing materials and on your website, so people can find you.

4. Are you making the most of your existing clients?

Could you be under-serving some of your clients? Think about their potential value compared to their current value. If there’s a gap, work out how to close it. Calculate the costs of moving clients to more profitable services. There might be some short-term pain but the investment could be worth it.

To find out where the profitability is in your firm, calculate the annualised revenue per client, per service. Some revenue streams will look good. Others might not. Once you know which types of clients and services make money, you’re better placed to set a strategic direction for the firm.

5. Do you monitor your clients’ needs?

It’s a good habit to check in with your clients regularly. It’s a common courtesy and a good way to reinforce the value of your services. Always make contact using your client’s preferred method. Some like in-person meetings, others would rather have phone calls, texts or use online chat.

Be sure to track all these communications so you can build on past conversations without repeating yourself. Regular, thoughtful contact improves client satisfaction and retention, and it makes it easier to upsell additional services. Set goals to have these sorts of big-picture talks periodically.

6. Do you update your services?

Make sure you’re offering the right services to your clients. Ask what they need. It shows you care about their business. It’s even better if you suggest what they might need, because that shows you not only care, but you also understand their business. Pick a client every week and call them to see if they need support with bookkeeping, payroll, or business consulting.

Besides offering new services, tell clients how you can improve existing interactions. New technologies constantly change how business is done. Tell them how those developments can improve accounting. You could offer virtual CFO services, for example. Your clients will be reassured that you’re on top of those sorts of trends.

Whenever you change your offering, make sure to communicate it well. Use blogs, newsletters, seminars and social media to bring your clients on the journey. But don’t forget to communicate personally, too. Not everyone has the time to follow your blog.

7. How responsive are you?

How long does it take your employees to follow up client requests? Each client will have different expectations. You should know what those expectations are and whether or not you’re meeting them.

Clients like things to be actioned quickly. It shows you take them seriously. Motivate your people to be responsive and make sure your internal processes don’t slow them down. Replace outdated systems and remove workflow bottlenecks. It could take your firm’s performance to the next level.

8. Do your clients work at your pace?

Responsiveness is a two-way street. Measure the time it takes clients to respond to your employee’s requests.

Your firm can only be as productive as your clients allow you to be. You might have to work two or three times harder to complete a piece of work with a difficult client – and that can really hurt profitability. If you have clients who slow you down and distract you from profitable work, it might be better to let them go.

9. Are your employees productive – or just busy?

Are you making the most effective use of your most valuable resource – your people? You probably don’t bill by the hour anymore, but it’s still worth measuring staff utilisation to health-check your business. It’ll show how your people are using time and will reveal if effort is being wasted on unproductive tasks. Who knows – a simple change in process could save hours of time and boost firm performance.

Remember, though, that utilisation rates will vary between employees. Partners can spend as little as 50 percent of time on billable work due to managerial and business development responsibilities.

10. Where’s the profit coming from?

All firms measure revenue and profit, and most have a projected growth target. Those numbers are only a crude measure of firm performance, however. To get a truer sense for your future, measure the projected and actual revenue growth of different parts of your business, such as:

  • individuals or teams within your firm
  • business groups or units in your firm
  • the segments or industry sectors you serve
  • your firm’s key service offerings

Being categorical in this way will help you identify where the potential lies in your firm, and which areas need rethinking. You may even consider reducing or dropping some services if they’re unprofitable or consistently trending downwards.

Keep evaluating firm performance to find growth opportunities

When you run an accounting business – and you see the books weekly – it’s easy to think you have a good handle on firm performance. But put intuition aside and try a formal review. Pull some of the numbers suggested here and take a deeper look. It’s good discipline and you might just be surprised at what you find.

If certain services or clients are working for you, nurture them. When they’re not, consider strategic change. It’s not complicated. It’s just a matter of making the time to do it. Reviewing firm performance using these simple metrics could be your first steps to renewed profitability.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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