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6 Practice Management Workflows Every Accounting Firm Should Master

Carl Coe
Posted by Carl Coe on Oct 13, 2021 11:24:02 AM

The more efficiently a firm and its employees can work, the more profitable they will be. This is why having good systems and workflows in place is essential for success.

In this article, we will cover some foundational elements for understanding good workflows and identify some of the key workflows you need to run your accounting practice.

What are Practice Management Workflows?

Practice Management Workflows are the steps that a firm defines to ensure all work gets done in the right order. These workflows are intended to make life easier for repetitive processes that the firm performs and to keep the work “flowing” smoothly through every step.

A few examples include:

  • Sending proposals to prospective clients
  • Invoicing clients and processing payments
  • Storing and organizing audit workpapers and other important client documents
  • Tracking employee time each day

And many more...

How Standardized Workflows Create Efficiency and Reliability

Think of these workflows as an assembly line in a factory. An effective manufacturing system exists when there is a standardized process for each step along the way that is repeated for each product manufactured. Each step in the process leads seamlessly into the next process.

Even though your firm does not manufacture products, the same logic of the assembly line can apply. If your firm has inefficient processes, such as tracking time with pen and paper or tracking due dates in massive spreadsheets, it leads to wasted time and avoidable errors. These issues compound as you get further through the workflows.

When there is one system that seamlessly tracks, stores and manages processes, the workflows of the firm hum along efficiently. When your firm’s employees can spend their efforts on revenue-generating activities instead of administrative tasks, the firm will be more profitable.

Management of Workflows – Large Firms vs. Small Firms

Many large accounting firms already have their workflows worked out. They have systems in place that will allow them to collect, store, and manage data from their business activities. Given the volume of clients and number of employees, a small improvement of a workflow has a large impact on profits.

For many smaller firms, however, the current solution is to cobble together a bunch of processes that typically do not integrate well with one another. If a firm does not have proper workflows in place, they are typically doing one or more of the following:

  • Maintaining to-do lists on a pad of paper
  • Creating complicated Excel sheets to manage client information and other tasks, which often leads to errors
  • “Reinventing the wheel” each time a task is completed for a new client

These manual efforts often end up costing the firm time and money.

6 Essential Practice Management Workflows for Accountants 

Whether you use a pen and paper, a spreadsheet, or an accounting practice management software, every firm needs good workflows. 

While there are many we could include in this list, the following six workflows are essential for efficient practice management. 


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.

Topics: Practice Management


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