Best Cost Reduction Practices to Maximize Profit for CPA & Accounting Firms
Profit making and increasing the profit graph is not just a primary aspect of any business, but it is also a necessity to survive and grow. Many CPA and accounting firms make a mistake in calculating profit even if the formula is extremely simple: increased revenue and reduced expenses reflect your profit.
But, some companies consider that increasing headcount in the office and increased clientele of outsourced accounting services reflect the profit. Remember, if your number of clients and manpower increase altogether, which may mean that your revenue and expenses are increasing together, then the percentage of increased profit might be negligible.
To become one of the profitable CPA and accounting firms, you have to focus on increasing revenue by gaining more business from the same customers or onboarding new clients, plus, reducing expenses by following best practices.
You must be a master in your field and you must be offering the best accounting and bookkeeping outsourcing services, but you might not still know the top techniques of maximizing profit while doing less. To help you with the best practices of cost reduction to capitalize more on your profit, we have collated the top 5 recommendations from leading CPA and accounting firms across the globe.
How CPA firms can reduce costs and increase profit?
1. Take advantage of technology
Many accounting and CPA firms use the wrong techniques to reduce expenses. For example, using manual techniques and legacy systems like a spreadsheet or cheap accounting firms to save money over accounting software; these are some common approaches used by these companies to cut costs. The common mindset behind this is that companies want to save on the license cost of the software to increase profit as the number of clients is small.
The better practice is to use the best accounting software and automate possible jobs for all clients that invest in your accounting outsourcing services. This will increase efficiency, so you can retain your clients and up-sell more accounting services. On the other hand, it will also save your time to invest in meeting more prospects and increasing clientele to increase overall profit.
2. Focus on high profit-making services
An accounting or CPA firm can provide several accounting services. Many of them have a strategy to onboard all clients that are coming their way to increase revenue. But, it is necessary to check the value per client before taking on projects.
For example, if your bookkeeping outsourcing services are making a lower profit for your firm compared to tax return preparation and filing services, then you need to focus on increasing clients for high-value services and stop taking projects of the bookkeeping outsourcing services. This is just an example. You might also make more from bookkeeping services than tax return filing. Focus on more profit-making with less investment by selecting clients.
Learn to say no to the clients that make you more occupied and give the same fee as compared to other clients that are less demanding.
All these small yet vital and challenging decisions can make your accounting firm more profit-generating.
3. Do not remove services that can attract more clients
Take decisions mindfully. When you read, remove low-value outsourced accounting services from your list, it does not mean removing services that can be your stepping stone to getting a more profitable business from the same client. Financial service outsourcing is a risky part of many businesses, and they might not be ready to use accounting outsourcing services for all their accounting needs. You have to gain their trust first. Thus, the accounting services, even if they are low value at the beginning, need to be kept in your offering list if they make money for you later on.
4. Outsource non-core functions
Outsourcing non-core functions, such as bookkeeping or payroll processing, can be an effective cost-reduction strategy. By outsourcing these tasks, CPA and accounting firms can reduce the need for in-house staff, office space, and equipment. Outsourcing can also be a more cost-effective option, as it allows firms to take advantage of specialized services from providers that have economies of scale.
5. Hire experts for all jobs
If you are thinking of being a one man/woman army to make your CPA or accounting business more profitable with minimal investment, then think again. If you will be trying to do everything, you will end up leaving yourself exhausted or tangled among just a few clients. Thus, you must look for profit making options to delegate jobs to the experts. For example, you can partner with a CPA firm offering outsourced accounting services at cheaper rates than yours. For example, hiring an outsourcing company from India can reduce your accounting expenses by up to 75%.
Contact us to know how a certified accounting company from India can help you reduce expenses.
You can outsource your accounting, lead generation, and other financial projects to experts to reduce expenses and handle more clients and focus on relationship building to retain customers and gain more business and profit.
6. Utilize project management tools
Project management tools can help CPA and accounting firms optimize their workflows and minimize project overruns. By streamlining project management, firms can reduce the amount of time and resources needed to complete projects, which can help lower costs. Additionally, project management tools can help to ensure that projects are completed on time and on budget, which can reduce the risk of costly errors or rework.
7. Adopt a value-based pricing model
Many CPA and accounting firms still use the same old pricing technique of quoting hourly rates to clients. However, all clients in 2022 are not willing to pay hourly rates due to doubts or arguments about productivity and the time an accounting activity may take. Thus, using the same model of hourly pricing may cause you to lose some important clients.
Your company must use a value-based pricing model for outsourced accounting services to onboard more clients and delight them. The meaning of value-based pricing indicates the cost of the value generated for a client with your accurate accounting and bookkeeping services. This can win more clients as you are charging for value generation and not time spent.
You can also continue with the hourly model along with value-based pricing models to offer both options and let your clients choose what they prefer while investing in accounting outsourcing services or bookkeeping outsourcing services.
The accounting and finance industry is one of the most competitive industries that often cause hardship for CPA and accounting firms to sustain and flourish. But, with the right technique and strategy, it is possible to increase profit making exponentially or even rapidly.
Along with offering the best-outsourced accounting services, CPA firms also need to focus on reducing expenses, retaining clients, increasing upselling, enhancing efficiency, adding value for customers, etc. to constantly increase profit.
Luckily, technology tools, expert recommendations, and the best CPA firms for partnering for bookkeeping and accounting outsourcing services can help in reducing expenses and increasing revenue to achieve the ultimate goal of increased profit.
We, at CapActix, have certified accounting professionals that can help you reduce expenses by up to 75% so you can leverage high ROI. Our team will also provide you with the best recommendations and suggestions to help you become one of the fastest-growing accounting or CPA firms.
Contact us at +1 201-778-0509 or reach out at [email protected]