Profitability – Protecting your Profits and Cash Flow through Covid-19
Due to the current Covid pandemic firms are focusing on profitability as well as cash flow. This is a timely reminder to review the essential ingredients to positive cash flow and sufficient profitability. This is not about maximising profits at any cost but merely ensuring your business is robust by having sufficient cash and profitability to reward everyone fairly.
A series of articles will follow to support this programme of profitability.
Essentially we need to focus on increasing sales rather than focusing on reducing costs. Most firms still rightly or wrongly calculate their sales as follows:
- Number of fee earners
- Chargeable hours
- Charge-out rate
- Percentage recoveries
- Percentage collected
Over the next few articles we plan to explain more on each of the 5 elements listed above but the single most influential item in the formula is the number of chargeable hours.
Essentially in order to maximise chargeable hours we need to:
- Set the standard (more of this later)
- Educate the team and ensure that everybody understands the difference between chargeable time and billable time (more of this later)
- Incentivise the team and reward them for good performance
- Provide a score carding mechanism so people know how they are doing
The next article on this will be released shortly as part of our commitment to training and supporting accountants in practice.
Whilst the marketing videos are themselves exclusively available to support and train 2020 Platinum Members, this has tempted a number of firms to become part of the 2020 clan – for more details click here.