There are tools today that make managing your accounting or bookkeeping business easier than ever. Advances in technology make integrating the various workflows (such as time tracking, invoicing, and file sharing) in your organization seamless. However, despite these technological advances, there are still pitfalls that can derail your operations. This article will cover several practices to avoid when searching for and setting up your practice management solution.
What is practice management and how has it evolved?
Practice management is a set of tools that organizes and automates many of the functions of your business. Back in the day, these tools were manual and disjointed. For example, accountants at a practice may have logged their hours on timesheets. Next, the billing department would have taken those timesheets and created invoices for each client. Then, an office professional would have mailed the invoice to the client, who would in turn mail back a check. As you can see, the entire practice was very manual.
The advent of software and eventually cloud-based software made things easier and more connected. Instead of only having physical access to files at the office, team members could share and access files from anywhere. Logging time, invoicing clients and sharing private data can now be done digitally.
The world changed further with the COVID-19 pandemic and the shift to teams working remotely. This required teams and clients to collaborate and communicate in a new way while rarely seeing each other.
Here are some of the most common practice management mistakes to avoid.
Not Logging Hours Properly
Tracking employee time should be pretty simple. Team members record their hours either manually, in an Excel document, or automatically with timekeeping software. Then, management reviews the time and bills clients accordingly. However, it’s not always that straightforward, as mistakes can happen.
For example, data entry errors can occur where the hours logged don’t equal a full day or week. Additionally, the timesheet submitted by the employee may not contain enough information about the nature of the work completed, the client, whether it was billable, and so on.
From a management perspective, the timesheets and employee time, in general, may not be reviewed effectively.
A centralized timekeeping system will help avoid this mistake. On the employee side, there can be checks that prompt a team member who has entered insufficient information or made data entry errors. From the management side, there are features that will allow you to manage and review time effectively. For example, you can know who is working on which projects or clients in real-time. This allows you to deploy resources effectively and shift them as needed. Additionally, you can create alerts for your employees if a timesheet hasn’t been submitted on time, hours haven’t been billed to clients, and so on.
Using Email to Store and Share Files
It’s tempting to just send a client or coworker a file directly over email. However, this is not always the best practice, especially when handling sensitive financial information. Using a personal email account or even a business account without sufficient security can leave you susceptible to hackers and other bad actors.
In addition to sharing files in an unsafe manner, many organizations do not know how to handle long-term storage of those files. Many times, files are saved on local computers, physical external drives, or unsecured networks that leave these businesses vulnerable to attack or theft.
A secure file-sharing portal can help avoid these risks. Secure file sharing is the process of sharing files privately and safely. Different users within and outside the company can share files in a method that protects them from unauthorized users. Many times, encryption is used and only authorized users can decode the encryption.
Not Being Consistent with File Organization and Templates
Many businesses manage files ‘on the fly’, meaning they save files for each client as they come in without regard to version control, file hierarchy or naming conventions. Additionally, they may create templates for each client independently, resulting in ‘reinventing the wheel’ for each new client. The reasons for this aren’t nefarious: Accountants are simply busy, and in the heat of the moment need to act quickly. However, it is still an issue since time is often wasted finding files or setting up new templates.
A practice management solution can help by setting up consistent file hierarchies and naming conventions that make it easy to apply to new clients. Additionally, templates can be securely and centrally saved so it’s easy to create new files as needed.
Not Reviewing and Benchmarking Against Past Work
Many times, managers go through the steps of tracking time and other metrics relevant to efficiency and profitability. There is a lot of good, useful data generated during this process. However, the data just accumulates over time with no real analysis completed to measure performance.
Good practice management software solutions allow you to not only track and generate data, but also analyze effectively. Managers can measure current performance against budgets, prior periods and industry standards. Key performance indicators such as realization rate, utilization rate, client lifetime value and retention rate are just a few benchmarks that good software can report on. For example, reporting may indicate that the realization rate (the percent of billable hours worked that can be billed to the client) has declined since last year. This may prompt you to re-allocate employees to different projects or change up employee training to educate your team on maximizing billable time.
While technological advances have certainly made it easier to manage your business, there are still mistakes that must be avoided. The pitfalls listed above are only a handful of potential issues you may face. Therefore, it is vital that you select good Accounting Practice Management Software to help manage your business and mitigate the risk of making mistakes. Fewer mistakes means better execution and, in the long run, happier clients and a more successful business.