Improve your accounting firm’s profitability with these two reports 

Several factors influence the profitability of an accounting firm, such as pricing strategy, customer segmentation, and the impacts of an ever-changing business environment. While improving profitability might seem daunting, often a little effort can lead to significant improvements, especially if your accounting firm’s business software offers effective reporting capabilities.

Two of the most popular reports used to enhance profitability in accounting firms are Customer Profitability Report and Employee Profitability Report. With Koho PSA, you can view these through the “Invoicing by customer” and “Invoicing by employee” reports. They provide detailed insights into client-specific billing, the time spent on service delivery, the average hourly billing rate, and the gross margin obtained from each client, helping your accounting firm streamline its processes and turn profitability around.

Report 1: Customer Profitability

When assessing customer profitability, it is crucial to critically examine the amount of client work and the processes used in service delivery for that particular client. Even a small client can be highly profitable for your accounting firm if the work is handled smoothly and doesn’t disproportionately tie up resources. Conversely, a large client may be unprofitable due to chaotic materials or extensive investigative work. A client may also become unprofitable if additional work is not billed separately.

The gross margin percentage reveals the profitability of a client. With Koho PSA’s Invoicing by customer report, you can directly see the client’s billing and the costs associated with it. If the costs are unreasonable compared to the billing, the client is unprofitable.

Costs associated with a client can arise from:

• Work performed
• System costs
• Material or product costs
• Transaction costs
• Many other aspects related to the customer’s service

The report might reveal that a client billed monthly actually generates more work and costs than initially estimated. When this information is clearly presented in a single report, you gain a concrete basis for changing your client’s pricing.

Review the gross margins and discrepancies across potential accounting categories from the Invoicing by customer report. It’s beneficial to compare data over different time intervals to capture seasonal fluctuations. Also, check for any discrepancies among employees assigned to the client.

Segmenting clients for a comprehensive overview

Monitoring customer profitability is useful not only individually but also by segment. Examining different client segments often provides valuable insights into productization and the prioritization of your company’s target groups. Therefore, it’s important to ensure that the business software used by your accounting firm enables efficient client segmentation and thereby more comprehensive reporting.

Segmentation usually reveals cost-effective clients, but often the greatest benefit is obtained by identifying unproductive clients, service areas, or other segments. By clearly presenting this information, your accounting firm can change or streamline its operations. Sometimes, the best decision is simply to stop providing unprofitable services to clients.

In Koho PSA, you can segment not only clients but also employees through special groups.

Report 2: Employee Profitability

You can access employee efficiency metrics through Koho PSA’s Invoicing by employee report The company management can utilize it in several ways to develop operations:

Employee Billing Profitability
With this you can see the costs associated with an employee’s billing and the share of the gross margin. By comparing the differences in gross margins between, for example, two similar employees, you can identify better work processes, unprofitable work stages, or even skill gaps.

Profitability of Different Employee Groups
By segmenting users, you can examine department or team profitability instead of focusing on individual employees.

Optimal Hourly Billing Rates
The billing percentage can serve as an indicator for the target hourly billing rate.

Work Not Invoiced
Through the Invoicing by employee report, you can also address situations where an employee does not want to bill the client for all the work time.

It is extremely important that time tracking is as easy and straightforward as possible. When employees can effortlessly log their client work, you ensure that all billable work is accurately invoiced, plugging leaks. Doing unpaid work is generally not profitable.

A good business software provides comprehensive tools for enhancing profitability

When all the necessary information and operations are found in one centralized and well-functioning business software, you also get more versatile reports that help you make genuinely data-driven decisions.

To ensure effective data-driven management, it’s crucial to verify that your accounting firm’s business software can utilize data without time-consuming additional steps and present reports in an understandable format. A good business software also enables smooth integration with other software.

Koho PSA is designed to support accounting firms’ businesses, offering extensive reporting capabilities. If the data is in Koho PSA, you can also get it into a report. You can even create customized reports with Koho PSA, allowing you to delve deeply into various areas.

Would you like to learn more about the opportunities offered by Koho PSA? Schedule a demo, and we’ll help you make better decisions with high-quality, real-time data.