As an accountant, you know that cash is the life blood of any business. But very often we are so busy advising our clients on their cash position that we forget about our own practice. This is why we asked Heather Townsend, author and founder of The Accountants Millionaires’ Club to share what has worked for her clients and club members when it comes to improving their accountancy firm’s cash flow.
1. Implement a fee increase
Whilst it may not feel like it at the time, the easiest and quickest way to improve your cash flow is to implement a fee increase. When Kinder Pocock implemented a fee increase for their practice their profits went up by 119% and their monthly recurring fees via Direct Debit increased by 60%. They only lost 3 clients in the process.
2. Take on a short-term loan
No-one knows what is around the corner. Maybe your best client has gone bust and left you with a hole in your cash flow? Or perhaps you want to hire in extra resource but don’t quite have the cash flow to justify it yet? Whilst we are often talking about your clients accessing our credit facilities, what about using iwoca for your own practice? iwoca offers credit facilities of up to £150,000 with a decision in minutes plus the ability to draw down wherever necessary. This can be used for anything such as buying equipment such as a new laptop, helping out with the costs of an office move, or a VAT bill. In fact, some accountants have actually tested iwoca out for their own practice before recommending them to their Clients.
3. Move your clients to paying in monthly instalments via direct debit
Many accountants are still held hostage by accepting payment for compliance work AFTER the work has been done. This means your cash flow is at the mercy of when your clients decide to bring their accounts in. This means that low billing months such as February and August can cause major cash flow holes. The more you can encourage your clients to spread their payments for their annual compliance requirements, the smoother your cash flow over the course of the year.
4. Ditch your unprofitable clients so you can take on more profitable clients
If your practice is good at winning clients it pays to ditch your unprofitable clients. The space that will be freed up by the unprofitable clients will quickly be filled up by new profitable Clients.
5. Change your payment terms to 7 or 14 days
Sometimes it’s the simple things that really make a difference. We often get so caught up in helping our clients that we forget to look at what is going on within our own practice. Just as you would tell your clients not to become a line of credit for their customers, it’s the same for you and your practice.
6. Identify quick and easy ways to generate passive income.
Most accountants’ client portfolios are full of potential. There are always opportunities to make a targeted referral to a trusted supplier and receive a commission split or introducer fee from the supplier. For example, if you refer a client to iwoca and they are approved for a loan, you get 5% on whatever the client draws down on. It’s an easy and nice extra source of revenue. Just in case you are wondering, iwoca will ask you to invoice them as soon as your client draws down on the funds.
7. Ditch any redundant software subscriptions or services that you are just not using
Whilst the monthly costs for licences such as client software subscriptions may be small, the odd £20 here and there a month can all add up. How many client software subscriptions or licences are you paying for that you now don’t need? It’s not just the client software subscriptions, it’s also your practice’s software subscriptions. It’s all too easy to have good intentions to use a piece of software but then never quite get around to it. It’s not just the software subscriptions; what are you paying out for that you are just not using? A paid monthly newsletter service that you send out to clients? Where could you easily downgrade your account without losing any key functionality? What have you bought to test and pilot but never quite properly integrated? Or decided against using? These are all things which can normally be cancelled without any material impact and instantly increase your monthly cash flow.
Heather Townsend is the author and founder of The Accountants Millionaires’ Club.