1. The Keys to Profitability, Accountability & Efficiency Changing How the Work Gets Done

2. Keys to Profitability Profession wide issues Firm staffing & operation Individual accountability & efficiency

3. PCPS Top Issues Partner accountability/unity Bringing in new clients Retention of current clients Fee Pressure/Pricing of services Developing a succession plan Source: AICPA 2011

4. Challenges of the Profession Demographics Technology Value & Relevance

5. AICPA Demographics Source: AICPA 2009

6. AICPA Demographics

7. Current Demographics CPAs Non-CPAs MenWomen Men

8. Firm of the Future CPAs Non CPAs

9. Technology Ownership Strategic partners Process driven Unintended consequences

10. “And we missed it.” Samuel J. Palmisano, Chairman of the Board, IBM

11. Relevance & Value Reliable information – Financial statements – Quality Value – Better Decisions Current information Positive outcomes – Cost savings

12. National Survey 2010 Career Development Survey – INSIDE Public Accounting – Over 1800 responses – Well being & work research

13. Average Profit Margins © INSIDE Public Accounting 2011 Used with permission

14. Pricing and Margins Pricing trends – Have not kept up with expenses – Realization issues (Real %?) – More fixed fees – Client expectations not always managed

15. Firm Staffing & Operations Personnel Costs Passive management Realization/efficiency Utilization Processes & procedures

16. Salary & Benefit Costs Average personnel costs as a percentage of net revenues – 2007 44.7%* – 2008 45.4% * – 2009 46.8% * – 2010 46.4 %* – 2011 45.1%* Many firms now 50%+ * © INSIDE Public Accounting 2011 Used with permission

17. Salary Trends © INSIDE Public Accounting 2011 Used with permission

18. Average Pay per Professional © INSIDE Public Accounting 2011 Used with permission

19. 5 Year Trends © INSIDE Public Accounting 2011 Used with permission

20. False Reporting Over 60%!

21. Salary Strategy Reverse upward delegation – Unintended consequences – Don’t allow people to work below their level – Higher level personnel must leverage – Utilization levels need to increase

22. What tasks are you doing that you shouldn’t be doing? Scanning Admin duties Setting up files Making copies Inputting 1099s Typing letters Write up work Payroll reports Chasing client info Data entry Data imports Filing PDF docs Ordering supplies Deliveries Filing Bank reconciliations

23. Firm of the Future CPAs Core Non-CPAs Non-Core

24. Passive Management & Client Service After the fact monitoring – Charge time/Budgets – Accountability/Profitability – Credit & A/R Inefficient processes & systems Reactive client service

25. Active Management Continuous budgeting and reporting Partner & staff accountability plans Manage – Margins – Leverage – Scheduling/utilization

26. Client Expectations Manage client expectations about fees – Better engagement letters Bilateral Time sensitive – Stop quoting fee ranges

27. Change Orders Develop a firm wide standardized change order process – Starting and stopping work – Failure to prepare – Errors in records – Records not ready at time specified

28. Credit Strategy Stop extending excessive credit Firm wide credit policy Payment arrangements – Scheduled payments – Budget payment plans – Deposits

29. Utilization Overall utilization averages about 52% Declining for some years Significant competition for our time

30. False Reporting Over 60%!

31. Utilization Strategy Plan Block out time to work exclusively Schedule every week Reconcile actual hours worked to the schedule

32. Pay Structures Pay when services are needed – Is the 40 hour work week a thing of the past? – Pay for time needed? – Core vs. non-core positions

33. Processes Lagging Over 60%

34. Files not Consistent Over 72%

35. “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency”. Bill Gates

36. Reactive Client Service Service centered – Task oriented – Deadline driven – “Have to” services – “Emergency room” processes

37. Reactive Client Service Not managing client expectations – Timing of work – Fees – Delivery – Value – Scope – Risk

38. Individual Accountability Engagement Coaching Accountability Success

40. Gallup Q12™ 12 questions to measure strong feelings of employee engagement Source Gallup Consulting 2010

41. Decreased Staff Engagement Due to after the fact: – Job management – Feedback – Career coaching

42. Limited Guidance Expectations are not clear Budget overruns are more likely Over 60%

43. Unrealistic Expectations Lack of creditability Less accountability Less optimism Over 60%

44. Involuntary Overtime Over 60%

45. Personal Plans on Hold Over 70%

46. Insufficient Feedback

47. Confusion About Advancement

48. Rating of Motivators

49. Management/Staff Engagement Strategy Annual plans Career Development Coaching Focused on success

50. Copyright ©2012 Steve Erickson LLC

51. Implementation Change process – Simplified – Incremental – Positive – Sustainable

52. Copyright © 2012 Steve Erickson LLC Accounting Firm Profit Improvement Model TM