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Art of Accounting: Write a ‘Christmas’ letter

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I received a few Christmas letters from friends updating me on their family’s year. They are all interesting and I enjoyed reading them. This got me thinking about a “Christmas” letter about your practice describing how you did professionally, what you wish you had done and what you now resolve to do next year.

Whether you are the CEO of a 1,000-person firm or a sole practitioner, you should consider preparing a year-end report of your business’ results, accomplishments and, if any, disappointments.

My suggestion is to spend a couple of hours and write it out. I feel this would be equally important if you are a solo or that 1,000-person firm CEO. As a solo, you have no one to answer to and probably no one to discuss anything of substance with about your practice. Further, if you are like most owners or partners of small firms, you spend all of your time working on your clients and minimal time at best working on your own business. Use these two or three hours to work on your business.

Keep in mind that you as the CEO are reporting to your board of directors and employees. If you’re a solo, then you are being forced to step out of a comfort zone to reflect how you did. Before I merged my firm with Withum, I did done this every year, starting when I was moonlighting many moons ago. There was much value received and I wholeheartedly recommend doing this.

Here are some of the things you should report on:

  • List your revenues and growth over the previous five years.
  • If you feel ambitious, prepare a projection for the next five years.
  • Break down the revenues by client services. List new services you’ve added and how you expect them to grow over the next five years.
  • Write a narrative of services you expect to add and how you will obtain clients for them.
  • If you use timesheets, determine the firmwide realization and also by your largest clients and client groupings, such as business and individual clients and/or by services.
  • If you can, also determine the realization by staff person. This will enable you to evaluate the effectiveness and profitability of your staff.
  • Write out a marketing plan.
  • Write a business plan as if you were starting your practice today in its present state.
  • Prepare a SWOT analysis.
  • Prepare a budget for next year. Will you net more than this past year? Are you following my rule about the adequacy of your fee structure — that you are making a living, funding your pension and have funds available for practice growth?
  • Determine your firm’s life cycle status, whether it’s rising, stable or falling.
  • List your five largest clients and compare them to five years ago and your expectations for five years from now.
  • On an individual basis, compare what you are doing to what you think you should be doing and your individual goals.

I have prepared a Word file of templates for firm self-assessment to use in the above analysis. The templates are for a one-page business plan, a marketing plan, a client service plan, a five-year projection, a SWOT analysis, and the life cycles of an organization, with instructions. Email me at GoodiesFromEd@withum.com and just say “Self-assessment template.”

Then write your “Christmas” letter.

Thank you for reading my columns and have a Happy New Year.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions.

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.

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