How to Identify Your Firm’s Most Profitable Clients

Clients who consume the most time and demand the highest level of service tend to produce the lowest profits (unless you can make them pay more).

With Financial Cents’ reporting tools, you can see how much resources your team invests into each client’s projects and the revenue.

Here’s how accounting and bookkeeping firms use it to make data-driven decisions that drive efficiency, profits, and long-term growth. 👇

Step-by-Step Guide:

Step 3: Adjust Resources and Prices to Maximize Profits

It’s easier to be underpaid for your services when you charge a fixed fee than in other pricing strategies.

To address this, you can use these profitability data to:

• Adjust your prices to account for out-of-scope tasks and get paid for any additional time spent on client projects.
• Ensure your team doesn’t work more than a client’s fee deserves.

It helps to remember at this point that the client may stop working with you if you insist on renegotiating the fees. But then, that would save you hours of unprofitable engagements, allowing you to spend more time on clients that bring better returns on investment.

Why Identifying Your Most Profitable Clients is a Game Changer

As you try to do the most work and make the most money possible with the limited time and human resources you have, knowing who is worth your investment helps you set your priorities right.

This enables your team to:

• Prioritize Clients that Help Your Firm Grow
  
  Identifying which clients contribute the most to your bottom line helps you to reduce wasted time and resources spent on unprofitable clients.
  
  This allows you to focus on clients that are—financially—worth your time and resources.
  
  With Financial Cents’ Effective Hourly Rate feature, you get the insights you need to know who these high-value clients are to serve them better and build long-term relationships with them.
• Work Out a Way to Adjust Your Rates
  
  Visibility into the clients keeping your firm stuck enables you to renegotiate their rates and ensure your team is adequately compensated.
  
  If necessary, you can stop working for them altogether. It’ll free you up to take on clients that are more profitable.
• Understand Your Ideal Client Profile
  
  The effective hourly rate report is also useful for finding the similarities between the clients that pay well without stressing your team.
  
  That could be the clients that bring high-volume projects a few times a year or the small businesses with small, but multiple and consistent projects. But you can’t tell until you have the data to analyze your client base.
  
  With these insights, you can channel your marketing efforts toward the type of clients that make the most sense for your firm.
• Create More Value to Generate More Revenue
  
  Knowing how much your firm gets out of serving clients helps you understand the strategic opportunities to increase your firm’s service offerings, add more value, and make more money.

The Back Office Stars team bills their clients on a fixed fee basis, but they acknowledge that projects can easily take more resources than expected.

That is why they wanted a practice management solution that would enable them to identify where they are losing money to address it as soon as possible.

Thanks to Financial Cents, they didn’t search too long.

Use Financial Cents Insights to Focus on the Clients that Drive Firm Growth

About 80% of your profits will come from 20% of your clients (going by the Pareto Principle). The more of the 80% unprofitable clients you can lose or renegotiate fees with, the better your firm’s revenue is going to be.

Financial Cents automatically compares time spent on client projects with the revenue generated to analyze your client’s profitability, helping you renegotiate client engagements, improve efficiency, and maximize profits.

If you’re ready to stop wasting your productive resources on unprofitable clients, start your 14-day free trial today.