Reduce lock up
Many accounting firms are encumbered with excessive lock up (debtors and WIP). Typically firms have over 25% of their annual gross income locked up in what I call ‘Toxic Lock Up’. This lock up restricts owners’ ability to access hard earned and tax paid capital. Furthermore lock up at these levels is toxic for two reasons:
- It holds partners back from offering additional services. Lock up is usually at its peak when financial statements and audits are being completed – and there is going to be a final account to be sent to the client which is also due for payment. Partners are normally more interested in finishing of the work and being paid rather than delving into yet further work.
- Your clients will also know that they may not have paid any interim fee and they are aware that a further final bill will shortly be on its way. Do they really wish to commit to further fees?
The additional fee potential: the fee flexibility potential
It is generally understood that clients have a potential bandwidth for further services provided the fee does not exceed 100% of the compliance fee. But, empirical evidence shows that accounting firms rarely generate fee income in excess of 10% of compliance income from additional services.
Releasing Lock Up
This consulting service starts with a one day off site meeting of all partners and any key managers who are involved in the billing process. After a 2-3 hour training programme it is over to the team to outwork the plan.
We will help you establish a monitoring system that will ensure that everyone remains committed.
Expect your lock up to fall significantly and to remain at much lower levels than has historically been the case.
Contact Mark and let’s start reducing your Toxic Lock Up. Releasing owner capital and releasing the power of your additional services. A win-win result for you and your clients.