Top 10 KPIs to Assess for Accounting Firm Growth

Knowing what matters most is important to where you begin any journey in a world where we can measure anything. For most accounting firms, data has been a consistent struggle.

As many firms look at where to start their journey, they’re turning to dashboards. Before you can build a dashboard, though, you need to know what you want to measure. Here are the Top 10 metrics accounting firms should pay attention to.

1. 1. Year-over-year profitability by industry and practice group segment. Looking at this data historically can help you determine what is growing and what is declining or stagnant. This is an important KPI to monitor as firms look to transition leadership, invest in expansion, or just have a better line of sight on what is working. This will often include revenue and realization (the most common profitability measure for firms that track time by the hour).
   2. New client growth. It should go without saying many firms want to measure new client growth. This should be a number tracked through your pipeline and/or cross-referenced against new clients set up in your system. It will help you understand how well you’re hitting your goals and support capacity planning in your firm. It should also give you a predictive line of sight on how much business you’re bringing in and, potentially, how much you need to replace if you are tracking recurring work versus one-time projects. This data will come from both practice management and your pipeline.
   3. Average price per engagement. Many firms have minimum prices but don’t always have a way to enforce how well they’re doing in meeting those easily. One of our favorite metrics to track is the average price per engagement. This number can help you with growth planning as you move forward. Ideally, for most firms, the price per engagement should be going up as a whole. This is important to look at by line of business and industry. This data will most commonly come from time and billing, and a more predictive estimate could come from your pipeline system.
   4. Average hourly rate per engagement. Similar to the average price per engagement, this metric can help you determine how profitable you are across all engagements. Many firms are adopting this to help evaluate success and profitability across their different departments. Pull this from your practice management system and plan to look at it by line of business and industry in addition to staff level. This can be a vital profitability metric for firms that don’t necessarily bill by the hour. It’s also becoming a management metric for some individuals.
   5. Attrition. Regardless of what any firm says, they always lose business. Clients pass or move on; businesses close; other things happen. It’s not anyone’s fault, and it’s not because you don’t provide good service, but there’s no way firms can keep 100% of everything they do each year. This is one of the most important numbers to measure to set accurate growth goals. Many firms don’t evaluate how much business they are losing; they simply guess. This isn’t easy to do in many systems, but it is possible to do with more accuracy than most firms currently do. This metric will help you identify how much business you need to replace on an annual basis for any one-time work you’re doing and to understand your natural attrition.
   6. New versus actual revenue compared to goal. When it comes to predictive analytics, understanding how you’re doing against your goals helps you see whether you will hit them. All of that should feed into budget, hiring, and capacity planning strategies. Firms should understand where their organization is, and the firm as a whole should know if it is ahead or behind. The only way to do this is to track new versus actual revenue compared to goal. Much of this information will come from a combination of systems, your pipeline, CRM and/or practice management system.
   7. Cross-selling. A good portion of growth for accounting firms can come from existing clients. In fact, this is an area many firms tend to pay less attention to than they should. Tracking expanded services with existing clients isn’t always easy, but it is possible to do. In addition to pipeline data, many firms use their software to track new jobs or engagements. Depending on your language, this can become important to encouraging cross-selling and establishing accountability to ensure services identified with clients are executed. This becomes a critical part of client experience for firms that have consulting or advisory services they want to expand. Inovautus Consulting’s Growth Outlook Survey for 2022 showed a direct correlation between tracking cross-sold services and higher growth rates.
   8. Managed business and overall growth. One of the intersections between operations and growth for most accounting firms is related to capacity planning. You must know how much business your team can manage. This metric will help with capacity planning and give you a line of sight on your growth plan. The No. 1 challenge we often hear is that firms can’t grow because they don’t have the people to accomplish their growth goals. Instead, think about how you can get the information to help fuel the capacity planning your organization needs as you continue to grow. It shouldn’t be an afterthought. The two should be working together.
   9. Lead conversions. Knowing what’s working and what’s not is critical to your growth. When it comes to marketing and sales efforts, the best way to do this is to understand what’s driving lead conversions and what’s working to build the top of your funnel. In today’s market, most B2B buyers spend a lot of time online. So an important metric to understand is how marketing influences those touchpoints. It’s not one lead source or channel, such as a referral, that gets the credit today. Marketing activities should have some level of attribution, and you should understand what types of interactions convert people into the sales process. Clients choose multiple channels to connect with your firm, whether by phone, your website, or a chatbot on your site. You need to understand some of these metrics in the software you’re using to conduct these activities to better understand what’s helping to convert and what’s not. If it’s not helping refine it or move away from it.
   10. Client services. Last up, and certainly not the least important. One of the things firms have struggled with for years is understanding what services they’re selling to each client. They’ve relied heavily on time and billing data instead of client engagements and how they’re engaging with your content to gain a line of sight on what services their clients have purchased and which ones they haven’t. This is a critical metric to understand how deep you’re actually going with clients. As you look at their growth, put metrics in place that allow you to measure this. This most commonly will come through a combination of how you set up some of your systems and jobs, then integrate that into your CRM and marketing software.

There are a lot of other metrics you can track, but we find these can give you a lot of insightful information. Contact us today to learn more about how we help firms put some of these metrics in place.