Recovery rate is one of the most important metrics for your accountancy firm. This guide will explain how you can increase your firm's recovery rate (and profitability) by streamlining workflows.
You’ve probably heard that recovery rate can affect your firm’s bottom line. As most accountancy firms charge by the hour, recovery rate is one of those metrics you want to watch closely. This, in the simplest terms, is the amount of billable time worked by your team and has a big impact on your firm’s earning potential.
Accountants love billable hours…. right?!
As accounting firms use a business model which relies on time = money, monitoring your team’s billable hours is super important. We all know there are only so many hours in a day. And because there’s a direct link between your team's resource capacity and your firm's profitability, you’ll be interested in learning how to increase that recovery rate, your billable hours, and the firm’s profitability.
It all boils down to improving recoverability… but how?
If you’re at a point where you’re struggling to delegate work, maintain consistent quality, and drive productivity across the team, the starting point should be to improve recovery rate. A question I often get asked is how to do that.
One easy way to improve your recovery rate is to cut down on time spent on low-value admin work. This can be done by streamlining workflows and processes and will help you increase the team’s overall productivity and work output. At the end of the day, that gives your firm the bandwidth to take on more clients.
Read on to learn how to increase your firm's recovery rate by streamlining workflows, cutting down on unnecessary work, and reducing time spent on low-value admin tasks.
The benefits of tracking recovery
The obvious benefit of tracking the recovery rate of your firm is that you can identify opportunities for improvement. Data is power, and understanding your firm’s current recovery rate will provide you with a foundation to build upon. This will also give you an idea of how drastic your improvements need to be; if your firm's recovery rate is lower than 100% for some services, you’ll likely need to revamp your entire workflow. If it’s higher than 100%, you’ll only need to make optimisations.
Recovery rate, as a simple metric, provides a wealth of information about your firm’s profitability and productivity, including:
- Whether too much time is spent on unbillable hours
- A consistently low recovery rate shows that your team is overworked
- A low recovery rate indicates that higher billable work is needed
- Tracking usage for each type of service and team member type (partner accountant, auditor, accounts payable specialist, etc.) will help you plan for future hires
- A recovery rate of less than 100% is a clear indicator for scope creep and poor planning
- Tying recovery rate to profits can help you identify the most profitable areas of service for your firm
Potential for increased profitability
An improved recovery rate has the potential to increase profitability. And how do you do that? The answer lies in creating well-defined workflows for effective teamwork. Simply put, a "workflow" is the sequence of steps through which work is completed. This will help simplify work, making it easier to complete more work in less time. Thanks to technology, there are tools available that are dedicated to creating accountancy workflows.
Understand areas of improvement in teams
No matter how high your recovery rate is, I recommend that you continuously assess your operational efficiency.
For example, you could track how many team member hours it takes to complete specific accounts payable tasks that you provide regularly. If the time fluctuates and increases from time to time, it indicates inefficiency; the sooner you create a streamlined workflow, the greater your recoverability will be.
Designing better pricing models
Every service business is constrained by time. You only have 24 hours in a day, no matter how efficient you are.
Most team members work between 1600 and 1800 hours per year when you exclude sick leave, vacation time, and public holidays. But not all of those can be considered billable hours for your firm. "Non-billable hours" for your company can include time for training, pro bono work, business development, and team-building activities, which need to be excluded from your available hours.
If a team member worked a total of 55 hours last week and you were only able to bill clients for 45 hours of work, their recovery rate would be 82%. As you can see, the recovery rate impacts all aspects of your firm's operations. Tracking it will give you in-depth insight into your agency's operations and where it can be improved.
Remember that the amount of billable work you can extract from your team is still limited. It’s neither practical nor recommended to use all available resources. Knowing your recovery rate allows you to factor it into your pricing models and billable rates (rather than thinking 100% of your hours are potentially billable when you now know they are not!)
How to streamline workflows to improve recovery
Detailed workflows can assist you in increasing your team's productivity and consistency. With the right tools , tasks can be automatically started based on key client dates, and internal target dates are used to ensure work is completed before compliance deadlines.
Here are some ways you can increase your recovery rate by streamlining workflows to improve your firm’s profitability:
Use standard operating procedures for consistent work output
Without standard operating procedures, your accountancy firm can risk experiencing inconsistency in your team’s work, which can lead to those uncomfortable client conversations. SOPs will help you grow faster, add value for clients and enable you to address workflow problems that are leading to a reduced recovery rate.
Automate your firm’s admin
Most accountants love spreadsheets. I get it. They can be super effective. But once you check out a dedicated accounting workflow software (like ours), you’ll quickly notice how intelligent software can make it much simpler to track deadlines and capacity.
The technology you use in your firm has the potential to drive automated processes that are powerful and translate to more potential billable hours. Practice management software, like Pixie, can offer templated workflows that help your firm more than traditional project management tools. You can use automation to create recurring jobs, auto-assign work to the team, request client statements, and remind them of important payment dates.
Implement software tools that increase consistency
Numerous software tools are available to assist in standardising task management, document creation, and many other repetitive tasks that cause inefficiencies and inaccuracies in accounting and bookkeeping firms.
When selecting the right tools for your firm, it is critical to work with software that supports your firm's approach to standardisation; these tools are there to simplify, not steer, that process. This means selecting tools that are appropriate for your requirements.
As long as you have a strategy to maximise consistency, you can always build on that solid foundation by using the best tools for your niche, existing tech stack, and workflows.
Use templates for emails and key documents
You know those emails your accountancy firm has to send every day? Using nifty templates helps improve your recovery rate too.
These could include:
- Proposal follow up-email template
- Onboarding email template
- Starting/finishing work email template
- Information request email template
- Feedback email template
- Review email template
- Referral email template
- Fee-review email template
Using a tool like Pixie for your firm means you can turn repeating tasks into templates with just a click. These templates can then be used on an ad hoc basis or set to recur automatically as workflows. Your recurring tasks will be generated automatically, and then you can set the recurrence of the workflows and let Pixie handle the rest.
Focus on team training to get things right the first time
As we’ve already discussed, a 100% recovery rate is neither advisable nor possible; some unbillable hours should be spent on individual training, mentorship, and certification.
Once you have identified underutilised team members, it might be the right time to increase their training to offer opportunities for career advancement. But giving them training in the first place is also essential to a firm’s success. Filling employees' professional knowledge gaps is critical to keeping them productive and fulfilled.
Did you know that, according to LinkedIn's Workforce Learning Report, 93% of employees would stay at their current company longer if they invested in their careers? That’s food for thought.
Streamline your firm’s workflows with Pixie for an improved recovery rate