Accountants write off an average of £186,523 of work per firm every year

Rob Nixon
Rob Nixon

Many UK accountancy practices are writing off the price of an average house every year. Findings from new a new Benchmark Study into how firms operate, suggests the UK accountancy profession seems to enjoy writing work off

According to Rob Nixon, the author of two best-selling books about accountants, the average write off before billing was 18%. Averaged across the 103 accounting firms surveyed, that adds up to nearly £20million written off annually – or £186,523 per firm.

Evidence of the profession’s love affair with chargeable time is revealed in a survey produced by Panalitix, global developers of business advisory software and content for accountants.

Accountants were asked nine key questions probing the performance of their firms. To Rob Nixon, Panalitix CEO and a successful entrepreneur who has been building and managing innovative businesses in the Accounting space for 21 years, they are the 9 critical, strategic questions every firm needs to address if they want to increase profit, capacity and growth.


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Those nine questions fall under 3 categories

  • Profit improvement
  • Creating capacity
  • Growing Revenue

Rob Nixon is on a quest to get UK accountants to rethink the ‘holy grail’ of chargeable time. He sees the continual drive for more productive time as one of the worst ways to drive profitability. It is “counter intuitive’ to success because it promotes inefficiency and time padding. The promotion of chargeable hours puts undue pressure on a team and creates a bad conversation with clients.

He maintains that if a firm is pricing in arrears then they’re effectively saying to the team go slower, find some more work in the job that the client may or may not need and over engineer the job. Effectively the firm is putting more time on the clock.

“I found some firms in the UK survey actually ‘budgeted’ for write offs in their annual / job planning process. They expect to fail before they start. Why not budget for ‘write ons’ and plan to succeed?”

From his work with accountant firms world-wide, he believes the top 3 ways to create profit are:

  1. Eliminating write offs
  2. Pricing up front
  3. Value pricing

One sure fire solution to eliminate write-offs, is to change from traditional time in arrears/chargeable time models. Effective, immediate change can achieved in five clear steps

  1. You commit to scoping and pricing every piece of work in advance and communicating this with clients in writing and the client signs off on it
  2. The price is based on value and not based on a charge rate system
  3. You have an ‘hours budget’ only on each job – not a pounds budget
  4. You get super-efficient with every client job and take time out of the job – reducing the chargeable time
  5. You stick to the scope of works only – everything else is outside of scope and needs to be communicated with the client before proceeding

Promoting chargeable time means firms are selling themselves as a ‘labour hire’ business. That is not the business they’re in. Realistically they are selling intellectual property; selling what they know. Not selling labour.

Another key area where UK accountant firms can improve productivity, efficiency, and capacity, Rob believes is cloud accounting.

Globally, there is a massive push for the SME market to transition from their desktop accounting software to an alternative cloud based accounting application.

Current data show that:

  • 35% of New Zealand SME’s
  • 20% of Australian SME’s
  • 10% of UK SME’s
  • 5% of USA SME’s and
  • 2% of Canadian SME’s

Have already made the switch to cloud based accounting applications.

To Rob, modern dynamic business owners demand real time information not only to make critical strategic decisions, but also to stay competitive. It is essential for accountants to adapt and evolve their service offerings, or else risk a significant decline in revenues and profit over the coming years.

  • As accounting systems provide real time information, Accountants are not required to provide as much data integrity services.
  • Accountants are no longer required to re-key financial information from one source to another and consequently spend up to 60% less time on preparing annual accounts.
  • Clients are aware of such cost savings and their willingness to pay fees for less non-value added services is reducing at a rapid rate.
  • This creates a market for the new savvy, nimble, marketing orientated Accountant who can promote and deliver value added advisory services to a marketplace that really does value the service.
  • Regulators are improving the flow of financial information in terms of lodgement interfaces whereby SME cloud based accounting applications will be able to send financial data directly from the cloud, bypassing the traditional accountant
  • This results in the annual compliance ‘bread and butter’ services becoming commoditised and Accountants facing severe fee pressures from clients and prospects.

If accountants want to remain relevant to their clients, there are four things they need to start planning immediately.

  1. Embrace and promote cloud technology
  2. Transition to a ‘price up-front’ business model and enhance internal efficiencies
  3. Train their teams in soft skills such as relationship building, customer service, finding opportunities and sales skills
  4. Transition to offering their clients value added services using real time financial information: information that actively makes a difference to the client’s business.

He concludes “With the new levels of real time data cloud accounting delivers, accountants can become real time accountants and business advisors; not a redundant data accountant. Dynamic businesses want a real time accountants.”