6 Practice Management Workflows Every Accounting Firm Should Master

1. Gathering Documents - At many smaller firms, client and firm documents are saved on local machines or in random folders on the network, making them difficult to track down and susceptible to security threats. A better workflow allows users to upload documents to a centralized shared drive where other authorized users can view and edit the files.  Ideally, users could invite other people to access these files via encrypted direct links instead of needing to enter a username and password.

2. File Organization - Many accountants (and other professionals) save client documents on the fly as they are received. Since each employee works on specific clients, this often leads to inconsistent folder structure and file hierarchies. Developing consistent naming conventions for files and folders so that they can be easily found at a firm-wide level is a good practice that leads to a more streamlined file and folder hierarchy.

3. Invoicing and Payments - Cash is king. So having a solid process in place to generate invoices, send them to clients and receive payments is vital. The more efficient this workflow is, the more time firm staff (such as the office manager) can dedicate to more valuable tasks. The following workflow improvements also make the client’s life easier, making it easier to work with you and improving client satisfaction.

• Generating invoices: Leveraging client information from previous invoices to generate new invoices is a good way to reduce manual efforts. Information such as mailing address and customized memos should auto-fill on new invoices.
• Sending invoices:  The firm’s billing department should have the ability to email a pdf version of the invoice directly to the client. This step alone will reduce the receipt cycle by several days by bypassing snail mail.
• Receiving payments: The client should have the option to pay electronically via credit card, ACH, and other options. This will also reduce the receipt cycle. Once an invoice is paid, the billing department should be able to apply the payment to the client’s open invoice automatically.

4. Project and Due-Date Management - Managing all projects and due dates in one centralized place is a good way to streamline client engagements. Each team member should be able to view and or/edit files and leave comments for others. With a solid due date management software, the subsequent task can be initiated and its owner notified automatically when each task is completed. This functionality alone can save many firms hundreds of hours per year. 

5. Time Tracking - The ability to capture employee time may be the most important workflow for an accounting firm.  Since employees generate revenue, the way they spend their time is the largest driver of firm profitability.  Below are some of the benefits of being able to track time effectively.

• Consistent and Centralized Time Entry: It is hard to believe, but at some firms, employees track their time in Excel spreadsheets. Or even worse, on notepads. A better solution is developing one method where all employees log their time in the exact same way. These time entries should then go into the same centralized system and be integrated with billing information to provide higher-level reports, i.e., realization by client, profit by employee, etc.
• Easier Reporting: Tracking employee time in one centralized database gives firm leadership access to tons of useful data. First and foremost, time can be tracked by employee and by client. There are many key performance indicators (KPIs) that can be calculated with the data collected from time tracking.  These KPIs include utilization rate, work in progress, and realization rate.
• Seamless Transition to Billing: Workflows supported by software that pull time-entry data directly into invoices save valuable time each month. Each employee will have their unique billable rate in the system.

6. Knowing Your Key Metrics - Knowing which reports to generate each month and how to generate them will make it easier to stay informed about your most important metrics. Some of these critical financial metrics include:

• Monthly Recurring Revenue: Shows the firm’s current and expected future monthly revenue.
• Write Up/Write Down Rates: The gap between hours billed and hours worked.
• Accounts Receivable Aging: Shows which clients have outstanding invoices due and how long they have been overdue.
• Client Profitability: Calculates which clients generate the most profit on revenue earned.
• Retention Rate: Shows what percentage of your clients continue working with you over a set period of time.
• Client Lifetime Value: Shows the average total value of your clients over the time they work with you.

What are the Next Steps to Improve Your Firm’s Workflows?

Now that the benefits of practice management workflows have been laid out, what can a firm do to move forward?

First, firm leadership should meet and identify all of the firm's core workflows. Special emphasis should be placed on the areas where the most manual time is spent. These are the pain points that are costing the firm time and money.

Next, ask yourself if your current workflows are supporting or hindering your team’s ability to get things done. If not, it may be time to upgrade the workflows themselves or how you manage and maintain your workflows. Generally, an all-in-one practice management software solution is the easiest way for your firm to improve profitability and efficiency in the flow of work through a firm while contributing to significant time savings and efficiency gains.

Download a free copy of The Workflow Toolkit here.