The Metrics of the Modern Accounting Practice Part 1 – What are you Measuring?

“If you cannot measure it, you cannot improve it” – Lord Kelvin

It always amazes me that most businesses don’t practice what they preach. Let’s face it, we’re all guilty of it. Let’s face it – if we were to be ‘advisors’ of our perfect selves we would have made our millions already…

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While at SBO we’re not perfect at measuring every aspect of our business, we think we’re ok at measuring the ones that matter.

The challenge for the modern firm is trying to understand which metrics are the most important ones for your business. We all know you can build KPIs for everything, but what’s important is selecting the key metrics you will use to measure the success of your business.

So what do we measure?

We run SBO as a Software as a Service (SaaS) business as we don’t see any difference in our models. Why? Let’s take a look at the key pricing characteristics of a SaaS business model –

  • Multiple price packages;
  • Recurring monthly charges;
  • No lock in contracts or minimum timeframes.

Although we adopt SaaS metrics, our foundations are still built on the more traditional ‘balanced scorecard’.

We stick to a small number of metrics that, when combined, give a comprehensive view of how our business is performing. Your goal is to select the few key metrics that will do the same for your business.

Here’s what we measure:

sbo-infographic-3 (3)

Customer

  • Net Promoter Score
  • Average response time to requests/queries- target 12 hours
  • Churn

People

  • Happiness Index ????????????

Processes

  • % of jobs completed on targeted time
  • # Error rate per month

Financial

  • Monthly Recurring Revenue
  • Cost Per Acquisition (CAC)
  • Average Revenue Per Customer
  • Average GP margin per customer
  • Customer Lifetime Value
  • Zero Debtors

You will note that most of the financial KPIs are lag indicators. Our lead indicators are primarily orientated around our sales and marketing function, which we’ll share in a separate post.

What about time-based metrics?

Although we’re a subscription based business, we still use timesheets. We use timesheets to capture the data on jobs, efficiency and CAC – not as a tool to measure performance of our firm or staff, at any level.

Furthermore, you will note none of our performance metrics are driven by or correlated to timesheets.

While it’s our view that the “full package monthly service cookie cutter” approach is not suitable for every firm, it’s where we see the future of the SME advisory/compliance profession. Even the Big 4 are experimenting with it.

The challenge for most mature firms is centred around how to fundamentally change the way their practice operates.

More on that in our next post.

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