Unlocking Hidden Profits: The Secret to Maximizing Client Margins

In this solo episode, Alyssa Lang covers the world of hidden profit leaks in bookkeeping and accounting firms, offering real strategies and actionable tips to fix inefficiencies and unlock true profitability. Alyssa shares how to implement tech, systems, and automation to scale their practice while also providing insights on using her client profitability tracker to ensure maximum profitability.

In this episode you’ll hear:

• What the most common profit leaks are in accounting firms
• What strategies to implement for effective rate increases
• How to identify inefficiencies in your workflow and streamline processes with documentation and automation
• Why understanding client profitability is essential

Resources mentioned in this episode:

⚙️ Zapier

💻 Client Profitability Calculator for Bookkeepers & Accountants

💻 Breakthrough for Bookkeepers & Accountants

💻 Kickoff with Asana for Bookkeepers & Accountants

🎙️ Listen to Episode 22: Mastering Time Tracking: Unleashing Efficiency and Finding the Perfect Hires for Your Bookkeeping and Accounting Firm

📝 Read the blog How to Use Clockify in Asana for Your Bookkeeping Practice

Thanks for listening. If this episode inspired you in some way, take a screenshot of you listening on your device and post it to your Instagram stories and tag me, @workflowqueen

For more information about the Conquering Workflows & Systems for Bookkeepers & Accountants Podcast or interest in our programs or mentoring visit our resources below:

Visit our website: workflowqueen.com

Check out our courses: workflowqueen.com/courses

Follow the Blog: workflowqueen.com/blog

Connect on LinkedIn: linkedin.com/in/alyssa-lang-wq

Connect on Instagram: instagram.com/workflowqueen

Connect on Facebook: Facebook.com/workflowqueen

Transcript

0:00

If you've ever felt like money is truly slipping through the cracks in your firm right now. Today's episode is for you. I'm going to be deep diving into one of the most important conversations you can have as a firm owner, which is uncovering and fixing those sneaky little profit leaks that are holding your firm back from undercharging, your clients to inefficient workflows. These profit leaks can make or break your bottom line, but here's the good news. When you know what to look for, you can fix these issues and unlock the true profitability of your firm. And don't worry, this isn't about doing more work. It's about really working smarter. Arter making strategic changes and maximizing the resources you already have. I'm sharing real strategies, actionable tips, and also practical examples you can use to plug these profit leaks today. And if you stick around, I'll tell you how to take these insights. Even further with my client profitability tracker, a tool that simplifies everything we're talking about into one clear, actionable system. Ready to boost your profits, save time and create a business that works for you. Let's get into it. Do you ever feel like if you had actionable systems in place that it can actually take your practice to the next level? Can you imagine the freedom you'd gain from finally getting everything out of your head and into a system that can help you move things on autopilot? Do you ever feel like you want to hire help for your practice, but you just don't know where to start? Trust me, I get it, and you're not alone, but it doesn't have to be this way. You're kick ass at doing the bookkeeping and accounting work. There's no doubt about that, but you struggle to maintain the systems and operations of your business. Am I right? Don't worry. That's where I come in. The workflow queen. I'm going to guide you on how to implement tech systems and automation in your practice so you can scale bigger, higher, better, and breakthrough to the next level. I can't wait to support you here on the conquering workflows and systems for bookkeepers and accountants podcast with your host, Alyssa Lange. Every single firm guys has hidden costs, expenses, and inefficiencies that are really truly draining your profits. And today's episode, we're uncovering the most common profit leaks in bookkeeping and accounting firms. And more importantly, to be honest is how to actually fix them. So whether you're undercharging your clients, you might be overspending on softwares and tools, or maybe you're just really inefficient in your workflows. This episode will help you plug those leaks and boost your bottom line. I honestly remember when I did a deep dive into my own numbers. I thought I had everything under control, but I was honestly. So shocked to see how much time and money I was losing on the smallest little inefficiencies. So one client in particular was actually costing, you know, more on my team hours and software than they're actually bringing in revenue. And that's when I really truly started to dig in deeper into my client data to really tell me and, and really helped me to understand and give me this eye opening results. Of just understanding how much money and time is going into our clients to make sure we are truly a profitable. So this really sounds familiar for work for you, then don't worry. You're not alone. Let's work through this together on today's episode. So why are profit leaks such a huge deal? Because they've truly eat away at your revenue without you even realizing it. And I think that's the big point is a lot of the times we are typically more avoidant of looking at the real numbers, the real data, the real information, because we truly fear seeing the reality of what things truly are so left unchecked. They can actually turn our business, our thriving business into one. That's barely scraping by. But the good news. Guys is once you know where to look, you can actually make quick impactful changes that dramatically improve your bottom line. This is all about taking back control and every dollar and every hour and make it count. So here's some four of the common mistakes that I actually see when it comes to profit leaks within firms, and really, truly how to fix it and how to truly address it. So number one is most people are undercharging their clients. So this typically happens because you might be setting your rates a little bit too low, especially initially. And you never really revisit them. So I see this often a lot in the accounting firm, especially in our breakthrough program. Uh, a lot of students who are like, man, I've been in business for like 3, 4, 5, 10 years. I've actually never done a price increase or I've only done it like once every three years. And so I see this a lot where like, it's okay guys, like give yourself some grace that this is how you kind of were prior to this moment, but now moving forward, we can make a better change in a better system to really roll out those price increases or even looking at, you know, if they actually need a rate adjustment or not. I do recommend that at least you are doing inflation raises every single year. So at least to the rate of inflation, And the, and then also if the scope has actually changed or you need to actually truly raise your rates because maybe the work has increased or the volume has increased, then you want to make sure to revisit that. So per our contract, Uh, for my firm, we are able to revisit this price increase every single quarter. However, we most likely aren't every quarter increasing our client's rates. It's just, that's in our contract stating that. We can review them, but typically once a year, we're usually raising the rates. Now, if the client is going out of scope, that's a different story. Here's a different way that we handle that on the backend. So one of the things like one of the tools that I absolutely love guys, especially if like you've just been avoidant for so long of looking at. What rates you have, are you actually profitable on your clients? So if you're not even really sure if you actually truly are profitable on your clients, that I have a brand new resource for you guys, it's super exciting because we actually just released this not too long ago. It's called the client profitability tracker. This is the exact resource that I use within my firm as well. And so essentially it helps you to pull a list of all of our clients. We look at all the direct costs, including like our software, any filing fees, anything like that. Plus all of our labor costs, how much we're paying each of our team members and who's working directly on the client's work. And so if you're looking for something like this, the beautiful part of this resource too, is it does come with an intro video that helps you to set your overall profit margin goals, your gross profit margin goal, plus your gross minimum profit margin goal as well. Because a lot of times I think a lot of people don't know how to work. That number backwards. Uh, nor, uh, It's a few, a lot of people in the industry, to be honest, like just avoid these numbers and avoid looking at this or saying like, I can just pull a quick PNL. There's so much more to it guys. And like just pulling up a simple P and L we actually need to go dive a little bit deeper. We also need to see what's kind of going on and really set those overall goals. And so if you're curious what my firm does, as far as like what our gross profit margin goal is for our clients, what our minimum is and our overall profit margin goal. Uh, for where we're we're striving for, then you want to check out the lovely resource. It is brand new and I'm super excited. So it's called a client profitability tracker. You can go to workflow queen.com backslash profit check, and I will go ahead and link that in the show notes as well. But this will be a really great resource for you guys to see what your profit margins are, and also to help you see if you're actually undercharging your clients. Especially as your team expands and as you grow. So if you're just really at this cap where you're like, oh my God, I can't do all this work myself. And this whole time you've been pricing based off of just being so low. You do need to reevaluate that in order to do those rate increases, to be able to afford the teams that we can step away from the company. So the second common profit leak that I see in the industry is overspending on tools or software. So you might be paying for a lot of tools for your clients that maybe they don't even care for. They don't even use, or maybe they're not bringing director ROI. When we're talking about overspending on tools and software guys, to make this really clear, we're talking about the direct cost per client. We're talking about. Let's just say that if you paid for keeper or Zenex per client, let's just say it's$10 per client that you add into it. Or maybe you're paying for Hubdoc or Dex. It's like $10 per client. Maybe you're paying for their accounting software. That's $50 a month per client. We're not talking about all the other software. We're not talking about like your project management system, your Gmail. It's only anything that you have to purchase at essentially you have to buy like a specific thing for a client is what we're talking about here. But the reason why I want to bring this up to you guys is I really want you to audit and understand at least what you're spending per client, as far as the software. Um, if they're making you efficient that I'm in full agreeance of this, because we do use a lot of software. So for my firm, our direct cost for clients, our accounting software, and we also pay for their receipt management software. Sometimes we pay for a two X, which is what we use for our e-commerce clients. And so it's really anything that we are paying for, like Xanax. We have to pay like per client. A fee. And so it's anything that's directly a direct software costs. And so I really do recommend that you look back and see how much you're actually spending on that. And so what we do is if you are going to be. You know, covering these costs for your clients. I do recommend that you at least build it into your pricing system. So we have like an internal calculator. That we use here and my firm and essentially in this calculator, we can build in that the Xenex fee, we can also build in the Hubdoc fee. We can build in the accounting software fee, we build those into the pricing. So that way we make sure that we're getting the ROI on that and that we're actually getting paid for that kind of stuff, too. So a couple of things that you can do to actually fix this. And I want you guys to go back and audit like, and this is why that client profitability tracker is so helpful. Because you can go back and see, okay, how much are we spending per software? And you would input input this into that spreadsheet that I provide in that little mini course. And essentially you just pull everything together and you can see over time, like, oh crap. Like I've actually been paying for more QBO, more. Things. And I realized for each direct client. And so I do recommend that you at least audit these tools and either consider passing the software costs onto the clients. Or like I said, build it into your pricing. Um, so I want you to just go back and list all the software expenses and decide which ones are truly necessary and see if maybe you want to pass it off. Or if maybe you do a price increase, you can. Um, make sure to price increase for that additional software costs in the longterm. So another thing that I see as a common profit leak within firms is inefficiencies in your workflow. And so this really comes from outdated processes or really a lack of automations, which can tend to create more bottlenecks. Um, and so one way that you can actually fix this is streamlining your workflow, documentation, all the processes, automating repetitive tasks and really analyzing team feedback. And so one thing I'd really encourage you guys to do is identify one bottleneck. If you don't know what a bottleneck is, essentially, a bottleneck is. The thing that's like stalling, the success, the thing that's making things move forward. Sometimes a lot of the times I see a lot of firms, the owners, the bottleneck, because you're getting in your own way. That can mean things like, um, you aren't taking the time to document your processes. You aren't trying to automate things. We use a tool called Zapier to actually help us automate stuff. And it's very helpful for us. And it's super supportive. But at the same time, I tell people all the time, if you don't even know how you manually do a process, don't try to automate it. Because like, you need to understand how for just case, if the automation doesn't work, how is someone going to do it? So I do encourage you to take the time to document your processes. It will make your team and yourself a lot faster. A lot of people are like Alyssa. Like I can just crank through these things. Absolutely. But if you don't slow down, stop and document your processes, when you hit that ceiling. And you no longer can serve the clients that you can. You're dropping the ball on everything. And now you got to bring someone on to help you. You want to make sure you can get that out of your brain and into someone else's hands. And so. We actually have a lot of like systems and templates and things that you can find in my kickoff with a sauna program. So I'll link it below and kickoff with the sauna is great because we actually give you like all of my onboarding stuff. Like it's the whole entire template, the project management side of things. It's how to set up your project management system. It's everything that you need in, in, in regards to that. Now, if you want to go beyond just your project management system, then breakthrough might be a better fit for you, which is where we really teach you how to document your core processes, where we really deep dive into decision trees and process maps and everything. You need to get things out of your brain plus covering all the systems in the business. Plus hiring your team members, re looking at your. Your offers and your structure on and all the things in between. So go check that out. I'll link that below in the show notes, but all in all, no matter what, whether you move forward within your art programs or not just re look at what you were spending your time on. And a lot of people say, well, I'm solo. You know, Alyssa, why do I need to document these things? I don't have a team. Even for myself, guys, I had a client who used a Wix to take payments and with Wix. It literally was such a nightmare because it was like literally a 45 step process. Every single time we went to go reconcile their stuff, we had to pull certain reports. We had, you know, do some manual calculations. We had to do all these things that. Oh my God. At the moment, I had like documented and made my life so much easier. So look back at what you're currently doing on a consistent basis. Um, to see what can you automate? What can you document? What can you make life easier for? So one of the other common profit leaks that I see in the industry, which is actually the last one they have listed for today is overworking certain clients. So what I mean by this guys is those high maintenance clients that actually eat up your time and your resources. You have got to figure out either a way to either let them go or increase them. We all have them. We've all dealt with them. We've all dealt with those clients who somehow some way convince. Vince us, why they need to get that work done for free. You've got to cut that shit. I'm so sorry. That sounds really harsh, but we are not running a charity. We have to make sure our business is profitable because you have goals. Plus it is a disservice to the client. If you don't charge them, like at the end of the day, guys, they're asking for a service. And here's one of the big things I see a lot of people do. I feel really bad for them because they don't make a lot of money or I hear a lot of, you know, it's just a little thing it's only gonna take me five minutes to do. It's not a big deal. That's great guys. If you decide to go beyond your scope, But if you do my recommendation for you is to just take a step back and say to the client. Hey, I'm happy to do it for this one-off instance for us to go. I don't know, onboard a new client, a new team member of yours inside of Gusto, your payroll system. Cool. We'll do it this one time, but I just want you to know in the future. That this service is actually $150 per. Employee that we're onboarding for you or whatever the case might be, guys. I can't tell you. I was literally looking at an email last night for one of our clients who. If you guys have ever noticed this, like you tend to see your clients like, be really confused as what, like a bookkeeping firm or consulting firm does versus what the tax strategist does. We get that a lot. And so a lot of times they just don't know what they don't know. So we have to gently remind them that like, unfortunately we don't go and change your healthcare benefits within Gusto. Like that's actually outside of scope of work. We don't do your payroll. We don't handle it. But then they always come back and say, but you have access to Gusto. So I'm confused as why you have access. Then we have to explain to them it's because we need the documentation to make sure that your records, your bookkeeping. Is balanced and that everything is working out. However, we do not maintain your, your benefits. We do not maintain your, your payroll. And we're very gentle and sweet about it, but I just literally sent this email last night. And usually right after that, I'm like, Hey. Um, you know, we're more than happy to take a look at this at our hourly rate. We can absolutely do that. Where if you want to add this on as a service, here's the fee and it's not nickel and diming people. I think I see that a lot in the industry relevance, like. A nickel and diming, and I feel really rude. It's not guys like if I go to Chipotle and ask for freaking guacamole, you think they're just going to be like, oh, I feel bad for her. I'm just gonna give it to her. I mean, that case has happened before. So. It was a really bad example, but you get what I'm saying. Like we expect that when we order an appetizer somewhere that that appetizer at the restaurant is going to cost us more money. So why is it not the same? You got to treat your business in the same way. Sometimes the clients just don't know. So you just need to make sure that you are very clear with them. This is outside the scope of work. We're happy to do it, but here here's a solution. And so a way to fix this is really to evaluate how much time you're spending per client using something like a time-tracking system. We use clockwise. I absolutely love pocket. I do recommend checking out. Um, I have a couple of podcast episodes where I've talked about time-tracking so I'll link those below and I do have some, um, Some blogs as well. Uh, covering this topic, if you want to check it out and I'll link them in the below show notes of how we kind of set up that structure and how we use it. But essentially, this is another really good reason why we love. Creating the client profitability tracker, because at the end of the day, It allows for us to be able to see how much time we're actually spending, but you need the time tracking data in less. And in order to know that at the end of the day, So I want to just quickly talk about some common objections that I'm going to hear from you guys. As you listen to this episode. Um, this happens a lot during some of the episodes sometimes. Things might come up for you. Fears might come up for you. So one big one is the fear of re. Um, re increases. Thinking that maybe you might lose all of your clients. But I just want you guys to know that's usually not the case. I can't tell you how many times, like in our offers module inside of breakthrough, we have our students go back and look at. All the time that they're spending, essentially they're using the client profitability tracker. To kind of really understand and see how much time you're spending on everything. And then they realize like, holy shit, like I'm losing so much money and then they have to go back and actually do the rate increase and then they kind of get stalled and this happens often and they stop. They don't do it. And the reason they don't do it is because they really fear that they're going to lose all their clients. I tell people this all the time, if you increased your rates across 10 of your clients, you might lose two. That's fine. But at the end of the day, you're going to lose two, but you're everyone else. All the other eight are gonna agree and increase their fees. You're now going to be making more money with now doing less. Um, but probably an increase that was probably much needed. So another objection that I see a lot is I don't have time for this. I don't have time to go back and look at my client's rates. And guys just start small. The tracker that I was mentioning to you guys, and I'll link below. Really simplifies this process. And even in a few minutes spent reviewing your numbers can really lead to big insights. Like I said, a lot of you guys are in avoidance stage where you avoid looking at these numbers, or you might just be looking at revenue and then just your team costs and not looking at everything else. Or you might just be looking at revenue, but you don't look at your direct costs. And whatever that looks like, or maybe you're just looking at the bottom line on your P and L something has to change. If this is an episode that you've gone this long listening to you, most likely have this issue within your firm. And so I recommend just start small. It doesn't have to be crazy. Just, just start looking at the reality and the facts of how much you're charging your clients. Another objection that I hear a lot is I'm afraid of losing clients. Has I raised those rates? Like I mentioned before, And guys just, just the data doesn't lie. And when you have the black and white data right in front of you, it actually. Gives you that confidence to actually increase your rates. And I think this is why like tools like the profitability tracker. Um, come in handy for me, or really re really facing the facts. Things like KPIs with the team, which are key performance indicators. When you start looking at data for what exactly it is, you actually tend to remove the emotions from it. And so this reality check really, truly will drive the success of your firm. Um, it for so long, even operating based off emotion and just getting things done and just like, go, go, go, go, go. I really encourage you to stop. Take a step back. Relax. Let's see what we can do. Let's reevaluate. It is the end of the year, which is a perfect time to start planning for the new year. Uh, seeing what's going on and seeing what's coming up for you, that we can fix and edit for the future. So if you're ready to really eliminate some of these profit leaks and really take control of your firm. Then the client profitability tracker is truly one of your next best steps. This tool really simplifies everything that we've discussed today and helps you make confident data driven decisions. You can go to workflow queen.com backslash profit check. I also drop that in the show notes as well. You can grab it today for $97 also includes an introduction video that will go through not only how to use the tracker, but also how to set your goals of your overall company profitability. Your gross goal profitability number and then, or your profit margin number, and also your minimum gross profit margin number. It's really going to help you if you just don't know. And you want to see what other firms are doing, what they're striving for in their numbers. And this is the exact program for you. I can't wait for you to turn this, all this stuff into clarity and start taking action. So today we covered how to identify and fix the four most common profit leaks, which are undercharging your clients over, spending on tools, inefficiencies in your workflows and overworking certain clients. These steps will not only improve your profitability, but also give you more confidence and clarity in your business. So next week, we're going to be deep diving into so many fun things, all around systems. And I cannot wait for you guys to hop into this lovely. Episode for next week. If you got any takeaways from today and you want to share them, come over on Instagram at workflow queen or com. Email our team@supportatworkflowqueen.com. I'm super excited. And I can't wait to hear about all the different successes that you guys have. Thank you so much.