Benchmarking involves comparing your accounting practice processes and performance metrics to the best accounting practices in the industry. From the benchmarking report’s we can learn from the ‘best’ or highest performing practices and under-stand the reasons why they perform so highly.
Typical KPIs that accounting practices benchmark include:
- Typical fees for standard services, e.g. standard salary tax return, BAS return, super fund audit, etc.
- WIP (Work in Progress) and debtor comparisons.
- Hourly charge out rates for the principals and all staffing categories.
- Annual fee income billed for the principals and all staffing categories.
- Average wage costs for the staffing categories.
- Average principal profit based on practice size.
- Breakup of practice fees revenue between compliance services, business advisory, and financial planning.
- Typical practice expenses and overheads. Occupancy costs for example normally average 7% of fee income.
The four steps in benchmarking an accounting practice involve firstly identifying problem areas. Secondly, purchasing a current benchmarking report. Thirdly, analysing the KPI’s and processes that produce superior performance. Fourthly, and most importantly, implementing new and improved business practises.
Rob Knights & Co is the market leader in providing key benchmarking information to the Australian accounting profession. They have been specialising in this for over four decades and released their first Charge Rates and Salaries Survey in June 1974. All practices should be benchmarking themselves against the top industry performers at least annually, and ideally six monthly.