Art of Accounting: 30 essential areas of managing a practice

February 8, 2021 12:05 PM

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In a previous column I mentioned that I could rattle off 30 essential areas of managing a practice, and a few people emailed me to know what they are. I previously posted such a list and decided that it was time to update it, so here are the 30 I was referring to.

Managing a practice is a separate business by itself and needs the care and attention you give to the professional services part of your practice. Imagine an office (yeah, imagine an office, well, someday we’ll be back in the office) without staples or paper clips. Right now we are working from home. Think back to the early days when you had to stock up on paper, toner and maybe a better chair and a lamp. These are things we take for granted, but someone has to do it. Anyway, everything is important, but some things are more important than others. Here is a list of essential areas that need to be managed to make your practice run well. They’re the most critical issues in running a CPA firm. Obviously some are more important than others, but they are all important and need to be considered.

Firm position in marketplace

What makes it different and better and what is its USP (Unique Selling Proposition)?

Getting, retaining, training and developing staff

This includes mentoring, career guidance, work-life balance management, diversity and inclusion, and growth opportunities.

Virtual staffing

What processes can be done outside of the office or with outsourced vendors? With the pandemic, this has become almost universal in the profession, but not all firms stayed with this model when they reopened their offices, but virtual work appears to be the model going forward.

Tax season workload compression

Shift work to pre-tax season and less busy periods, using AI, part-timers and interns.

Team building

Staff needs to work together, share knowledge and collaborate in each other’s performance and growth.

Time management

This includes scheduling, project management, budgeting, the role of time sheets and their analysis.

Pricing, billing and collecting

Actually these are three separate functions, each of major importance. Pricing is also a “marketing” function.

Client retention

Too many times we take clients for granted while putting maximum efforts into obtaining new clients. Keeping clients happy needs focus. Our clients pay our salaries.

Client service

This is how we make our money. We need to do the right things at the right times the right way and have them done on time. Our staff and every partner needs to buy into the concept of providing nothing less than superior service.

Developing new services

The needs of our clients are growing, and we need to keep up with them. Yesterday’s and today’s services will no longer be adequate tomorrow. We need to grow our capabilities at least a little bit quicker than our clients’ needs.

Selling existing clients additional services

This is low-hanging fruit. We need to identify clients’ needs and show them how we can provide solutions to help them grow and be more profitable.

Getting new clients and practice development

This is a perpetual issue. Marketing has to be geared toward this. Some firms are hiring sales people. We hired a full-time sales person in 1993 and it worked. Actually I did pretty much everything on this list, but if I wrote about it, it would become a book instead of a short column with this listing, so I will leave this off with that one personal comment.

Virtual client service and relationships

The pandemic has changed personal interactions and our profession has pretty much adapted to it, but I think we need to get even better at this.

Keeping ahead of clients who can obtain their real-time data by pushing a button

We need to be available to interpret the data, help clients integrate it into their business model and planning, and be quick about this. See my column from two weeks ago for some ideas.

Social media presence and use and networking

This is a necessity. Skills are needed and someone needs to shepherd them. New networking ways need to be utilized and worked on in the virtual world.

Culture and branding (and design)

These are three separate things and are all important. Culture should probably be a separate item.

Succession issues or merging or selling a practice

Nothing is forever. Even if you intend to work until you drop, your family will either have to dispose of your practice or the files, and maybe get rid of your lease. Make some arrangements.

Expand by buying or merging

What is your goal? If it is for accelerated growth, then this is an important strategy.

Provide for practice continuation if you’re a sole proprietor or a buy-sell arrangement if there’s more than one owner

Legalities make life easier for your survivors and yourself if you become suddenly disabled.

Partner interactions or self-assessment if single owner

These are two completely different things for two different groups. Getting along with partners is very important, but understanding your role in the firm is even more important. Also, firms need a leader and a strong managing partner. Not everyone might get along with everyone else. (It would be great if they did, but it’s a business. Co-existing might be good enough, but it isn’t as much fun.) If you are a solo, then you need to develop ways to self-assess yourself, your practice and how it is functioning. It’s hard stuff, but necessary.

Keeping current despite information overload

The Tax Cuts and Jobs Act, and last year’s tax changes, loans and grants were very challenging, but it’s necessary to be up to date on the changes. Taking a day off from this can have you work much harder at catching up and remaining current.

Intellectual property and information management

If someone in the practice learns something new, there has to be a way for it to be shared or for everyone else to know about it.

Technology

If you need to be told about the importance of technology, then it is too late for you and you have a problem.

Infrastructure and office details

This includes your office structure, back office, administrative functions and your firm’s accounting and bookkeeping.

Systems and procedures

Every firm has a system, but it might not always be the right system or the system everyone follows. Systems need continuous improvement and strengthening. This requires deliberate effort.

Risk and crisis management

Anticipate and be prepared for what can go wrong.

Quality control

There can be no compromise on the quality of the work, oversight and adherence to your firm’s systems. Firms that are peer reviewed must follow all of the interim period inspections and internal reviews.

Profitability, cash flow and overhead costs

You must make money. Expenses, overhead and payroll have to be managed and budgets should be prepared. I also suggest a five-year projection.

Strategic and long-term growth planning

You likely advise all of your business clients to strategically plan for the future. You also need to do this for your practice. It is not a luxury but a necessity.

Creating wealth outside of the practice

You need to be able to take funds out of your business and build wealth independent from the practice. If not, then you are not making enough and this needs to be fixed forthwith.

There might be others, and if you think of one, email your comment to me. One thought I had to illustrate this is to have a 30-piece jigsaw puzzle made with one item for each piece, but with one piece short. The puzzle would look pretty good when finished, but it would not be complete. That’s how I think of these 30 functions. They are all essential, though not all of equal importance, but without everything being handled properly, you will always be missing something.

Last week I offered to provide my 142 tax season checklists. If you haven’t received it yet, here is a link or email me at GoodiesFromEd@withum.com and put “checklists” in the subject line.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People list. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 743-4582 or emendlowitz@withum.com.