Top Tax Season Metrics to Assess Post Tax Season

Management consultant Peter Drucker once famously said, “What gets measured gets managed.” In other words, you have to track something if you want to change it. Imagine trying to meet a monetary savings goal without knowing how much money you are bringing in, or driving a car (legally!) without knowing how fast you’re going. It’s certainly possible, but it’s going to be a lot more difficult than it would be with the right measurements.

Your accounting firm is the same way. Many of us get caught up in a whirlwind of deadlines and documents around tax season, putting all of our resources towards pleasing clients. While this is no doubt important, tax season also provides some valuable data that we should use to assess our internal performance.

Below are some of the most important metrics from your tax season. These can provide an at-a-glance understanding of several elements of your business.

Utilization rate

This metric defines the amount of time your team spends working specifically on billable tasks compared to the overall amount of hours they’ve worked. There is an easy three-step formula to calculate the utilization rate:

• Find the total number of hours an employee works per week
• Calculate the number of billable hours an employee works per week
• Divide the hours spent on client work by the total number of hours worked in a week

An excessively low utilization rate usually means that your team is getting bogged down with non-client tasks. Things like managing their time and billing via timesheets, locating the proper forms and templates, and finding contact information for clients can all slow down your employees from completing their most important work.

Billable hours

The amount of hours your team works is a straightforward metric that helps you answer one critical yet often vague question: how busy are you? Ideally, you’ll have a benchmark number of hours your team typically works in a tax season.

The good thing about this metric is it doesn’t take any other calculations or work to analyze. If the number is too low, you might consider marketing campaigns to bring in more clients. If it’s high, you might not need to change anything – but your team may also be working long hours under a lot of pressure, which can lead to mistakes and burnout.

Contacts per project

This metric may not seem directly related to the firm’s bottom line, but it has a big impact on your internal operations. As you know, a tax accountant can’t complete their work without input from their client. Your client needs to provide key documents, forms and signatures so that you can get everything filed by the right deadlines.

Unfortunately, some clients are more cooperative about this than others. Checking in on how many times you or your team has to reach out to a client to get what they need is a great way to see if there are any inefficiencies with your communication process.

The number of contacts per project can also help you identify your more challenging clients so that you can either take steps to help them improve communication or discontinue your work relationship. Checking on your contact frequency can also help determine whether or not you should use some sort of client collaboration software.

Revenue per client

You should understand this metric for each specific client – it’s not enough to simply have an average amount of revenue per client, because that doesn’t provide enough information to make adjustments to individual accounts. Instead, take a deep dive into each client and their profile. Identify any areas where you think a company would be a good fit for services beyond tax accounting. It’s much easier to sell services to someone who’s already done business with your firm, and knowing your revenue per client will keep you in the loop on the best opportunities for cross-selling.

Don’t let tax season data go to waste

It’s probably been a stressful few months, but don’t let the challenges of tax season prevent you from reaping the many opportunities it brings to improve your business. Understanding your metrics is the first step to making your firm more efficient, increasing client satisfaction, and growing revenue in a way that’s sustainable for you and your team.