7 steps to run a smart, profitable, and efficient professional services business

If inefficient processes are holding your accounting or professional services business back from maximizing revenue and profitability, it’s time to consider whether there’s a smarter way to run your business. Here are seven practical steps for fast-tracking your revenue, cash flow, and efficiency, based on advice from leading experts and business owners.

1. Clearly define your services, pricing, and packaging. 
    

2. Re-evaluate your billing model. 
    

3. Shift to upfront client payments. 
    

4. Transition to recurring revenue. 
    

5. Engage clients with a clear scope of work. 
    

6. Get paid when the scope changes. 
    

7. Automate time-consuming processes. 

By adopting this proven 7-step playbook, you’ll be able to transform your firm’s efficiency and profitability and run the smartest business.

1. Clearly define your services, pricing, and packaging

Many professional services businesses are using outdated ways to price and package services. Yet strategic pricing and packaging can significantly enhance your firm’s profitability and operational efficiency. As a previous Ignition blog, A clear-cut way to price and package your services, highlights, effective pricing strategies start by clearly defining and breaking down your services into detailed components. Once you’ve identified the services you’re offering, only then can you determine the value and put a price on each of those services. 

What’s more, establishing the value of your services is the foundation for building pricing packaging strategies. This is where a three-option pricing system comes in, enabling your business to offer predefined service packages to clients.

Three-option pricing means communication and clarity with clients are better; there's no room for guessing.

Clients understand exactly what they’re getting, when, and for how much, which improves communication and sets clear expectations. 

Providing options also allows you to upsell packages to highly valuable clients you want to serve and acts as a pricing strategy to eliminate customers with whom you no longer wish to work.

Using a platform such as Ignition allows you to easily build your service library and create predefined service packages using proposal options – a huge time-saver for your business that also helps improve your bottom line.

2. Re-evaluate your billing model

Holding on to traditional billing models is another common culprit that can hinder efficiency and profitability for service-based businesses. Billing by the hour, manually tracking billable hours, billing after you’ve completed the work, chasing clients for payments – these are all entrenched habits that drain your resources and your profits.  

As Michael Ly, Reconciled co-founder and CEO, highlights in his case study, accounting and professional services firms need to move away from traditional time-and-material billing to value-based billing. 

"Shifting out of that mindset, where you're no longer billing just for hours spent – you’re actually billing for value – that's going to be a big shift still for many firms," he says.

“But this shift allows firms to better quantify the value they provide to clients and ensures clients understand and appreciate the services they receive.”

Updating old billing models is key to managing your firm’s revenue. This includes rethinking how you bill and get paid – for example, shifting from billing upon completion to billing upfront or taking a deposit before the work begins.  

When re-evaluating your billing practices, it’s important to have a billing and payments solution that can help you successfully navigate this transition. Ignition’s flexible billing options mean you can bill hourly or use fixed fees, apply one-off or recurring fees, take upfront payments or deposits, and more.

3. Shift to upfront client payments

It’s no surprise that many service-based businesses suffer from cash flow issues if they’re stuck using outdated billing practices. 

Even if your business isn’t ready to make the leap from hourly to fixed-fee billing, you can still implement billing processes that will guarantee you’ll get paid. Just like when signing up for a gym membership, accounting or professional services businesses can collect payment details upfront when clients sign a proposal using a tool such as Ignition. This puts you, rather than your clients, in control of the payment process and allows you to collect the payment automatically when the invoice is due.

Dan Gertrudes, CEO of GrowthLab Financial, says capturing payment details upfront and automating client payments has significantly reduced his firm’s accounts receivable (AR).

“Back then [before Ignition], I had about 60 days’ worth of AR. Today, our AR is no more than twenty thousand bucks, which is less than 5% of our monthly revenue.”

Once you’re comfortable securing client payment details, the next step is to transition to upfront payments, before the work even begins. If your initial reaction is, ‘My clients simply won’t sign up for that,’ you’ll be surprised to hear that they’re often more accepting than you think.

Carla Caldwell, Founder and CEO of Candella Accounting & Advisory Services and Caldwell Consulting, says transitioning to upfront payments has revolutionized Candella’s cash flow. 

“I'm now paid upfront at the beginning of the month for the work that we're going to do,” says Carla. “So I don't have to worry, ‘Am I going to make payroll this month?’ I've already been paid for the payroll, so that's all taken care of month after month.” 

4. Transition to recurring revenue

If your business is stuck on a roller-coaster revenue recycle, it may be time to transition to recurring revenue or diversify your revenue streams to protect your cash flow year-round. For accounting and tax firm owners in particular, this presents an opportunity to adopt subscription-based billing and offer client advisory services (CAS). 

Take Dawn Brolin, CPA, CFE, and CEO of The Designated Motivator and Powerful Accounting, as an example. Transitioning from the once-a-year tax return grind to year-round tax advisory services and subscription pricing using Ignition has been a game changer for her and her team. 

"I'm saving at least two weeks just because I've switched to my subscription pricing,” Dawn says.

“I don't bill people by the hour. I don't take on work that requires hourly billing. So, if you think about it, I've already saved two weeks just in my billing process."

Similarly, Marcus Dillon, CPA and President of Dillon Business Advisors (DBA), says transitioning from a traditional accounting practice to a more comprehensive CAS model has opened up new revenue streams for his firm. DBA now offers Essential, Premier, and Elite core packages for CAS. 

"We accept clients only in one of those offerings now,” says Marcus. “Our monthly recurring CAS revenue has increased 60% since April 2022, when we started using Ignition.”

5. Engage clients with a clear scope of work

One of the fastest ways for accounting and professional services businesses to lose out on revenue and profits is by not having a clearly defined scope of work when engaging clients. You’re not only missing out on an opportunity to communicate your firm’s true value, but also introducing ambiguity to the client relationship. Clients don’t know exactly what they’re paying for, and your staff members are unclear on the services they should be delivering – exposing your business to scope creep. 

When sending clients your proposal or engagement letter, it’s vital to include the scope, frequency, and pricing for the services you’re offering, alongside your payment terms, so everyone is on the same page from day one.

Carla Caldwell highlights that adopting a tool such as Ignition to engage clients has enabled her firm to master scope creep.

“We spell out very clearly what is included in our engagements in Ignition when we send [an engagement letter] out to clients,” she says.

“So, it's very clear and very obvious to everybody on our team, so they know what's included. It clears up confusion, misunderstandings … all of that. But it also helps the client understand that this is included, and this is not included.”

Luckily, Ignition enables you to templatize proposals and engagement letters, meaning it takes only minutes to create proposals that provide clients with complete clarity on the scope of services.

6. Get paid when the scope changes

Even if your business is diligent in engaging clients with a clear scope of work, chances are that you’re not charging them for all the ad hoc services you’re providing. It’s all too easy to assist clients with a ‘quick favor’ or spend time on the phone giving advice you probably should be charging for. Ultimately, it all adds up and means you and your staff are working, at least in part, for free. In fact, Ignition’s State of client engagement study found that unrecovered out-of-scope work is costing US accounting firms $76,000 on average each year. 

The solution? Refer back to your original signed client agreement to remind clients what is or isn’t in scope, and charge them for additional services appropriately.

Thankfully, Ignition makes it easy to adjust the price, quantity, or billing of agreed services within an existing proposal, or you can bill for any ad hoc or out-of-scope work using the instant bill feature. 

7. Automate time-consuming processes

Once your firm has redefined its approach to pricing and packaging, engaging clients, billing, and payment collection, it’s time to tackle the biggest challenge holding many accounting and professional services businesses back – administrative burden. Automating manual client engagement, billing, and payment processes is the key to scaling your business, and your revenue, more efficiently. This is where Ignition’s automation capabilities and advanced integrations come in.  

As Michael Ly highlights, clients don't care how long it takes you to do their proposals; they want your expertise and advice.

"When you think about the type of work that's bombarding most accounting firm owners still – especially small firms – most are stuck in administrative tasks that provide very little to no value to their firm,” he says. “And tools like Ignition and others that help automate those tasks free up time to focus on actual value-added work for your clients." 

GrowthLab’s Dan Gertrudes agrees that automation has changed the game for his firm’s operations, creating significant time savings and dramatically improving team efficiency.

"Before Ignition, our team worked 80-hour weeks during tax season,” he says. “After Ignition, they're doing 40-hour weeks."

For time-poor business owners like Tiffany W Davis, PA, MSM, CEO, and President of Washington & Co Inc., automating payment processes has also given her a bit of her life back. “So, now, when I'm out on a Saturday with my son, Ignition is ensuring there's a payment coming in for somebody that has something due on that Saturday,” she says. “Automation is the way to go. If you're not automating, you're wasting so much time.”

Taking stock of your current processes is the first step to helping you identify the biggest efficiency gains for your business. You can then evaluate the best technology platforms to automate the way you run your business and help unlock more revenue.