KPIs (Key Performance Indicators) are indispensable for modern managers. But how do you use KPIs effectively to steer your accounting firm? And what role does Power BI play in this? Jacob den Houting, Certified Public Accountant and director at Fortes Milestones, discusses the most important KPIs for accounting firms.
The business model as a starting point
Before formulating KPIs, it is important to look at your organization’s business model. For accounting firms, it’s all about available capacity, or man hours. Your most important assets are employees and clients. Even if the traditional business model changes, hours remain the core. KPIs should therefore always align with available and realized hours, preferably monitored against budget, prior period and last year.
10 essential KPIs for accountants
1. Total capacity
Available capacity in man hours, per FTE and total per year. Normally this is around 1,800 hours per full-time employee per year, taking into account vacations, vacations and sick leave. This basis forms the calculation of capacity utilization.
2. Void
Gaps in scheduling depress profitability. Report on voids and undeclared hours per employee to keep a grip on time utilization.
3. Scheduled capacity and available hours
Ongoing visibility into hours yet to be scheduled helps balance workload and customer satisfaction and prevents accrued margin from disappearing.
4. Realized hourly rate
Analyze the average realized hourly rate per employee and per job. This provides insight into returns, especially for fixed price agreements.
5. Chargebacks
Chargebacks at the job level can depress the bottom line even if billable hours are realized as planned. Analyze these to make adjustments.
6. Turnover per employee
A key indicator of efficiency and competitiveness. High turnover per employee indicates efficiency or a high price level – and is the basis for strategic choices.
7. Leverage
The ratio of partners to employees or between billable and support functions. Higher leverage means more profit per partner and lower overhead.
8. Sick Leave
For accounting firms, where revenue is directly tied to man-hours, this is a crucial KPI. Take into account maternity and special leave. Short-term absenteeism can also provide insight into employee satisfaction.
9. Non-declarable hours
Meetings, management tasks and sales activities are productive but non-declarable hours. Set standards for each employee and monitor compliance.
10. Vacation and overtime balance
Unused vacation hours and accrued overtime affect revenue and annual results. Keep track of these KPIs to accurately track the financial picture.
Using KPIs more broadly
In addition to production-oriented KPIs, you can also formulate specific KPIs for other departments, such as tax and payroll departments (e.g., number of paychecks per employee). There is also a need for financial KPIs such as open receivables, average collection period, working capital development and employee turnover.
Reliable data is key
All KPIs are only valuable if your basic data are properly recorded. You achieve this by automating your processes with scheduling, hours, accounting and payroll software. With
Curious?
At Fortes Milestones, we have years of experience building Power BI dashboards and data models for accounting firms. Want to know what this could look like for your organization and how to implement it? Contact us with no obligation, we would be happy to help you get started.