IFAC - Practice Management

To help improve the management and operational efficiency of practices, especially small- and medium-sized accountancy practices (SMPs), this area is intended to help those managing practices to address opportunities and challenges; improve their competitiveness, profitability, and sustainability; enhance their expertise, competence, and efficiency; create an environment conducive to the provision of high-quality services; and showcase global best practices and latest practice management techniques. What Do We Mean By Practice Management? Practice management covers a wide array of topics, both operational and strategic, to do with running a successful accounting practice. Topics include marketing, networking, pricing, human resource management, practice development, merging or purchasing a practice, succession planning, compensation strategies, recruiting and retention, billing and collection, administration, leadership, and more. Not surprisingly, the theories, techniques, approaches, and tools of practice management share much in common with those in managing a business. Practice management will likely get more sophisticated as the practice grows. Why Is Practice Management Important? Effective management is essential to the success of any organization, accountancy practices included. In large part, it is about recognizing opportunities and taking advantage of them to the benefit of the organization. Practices, from those starting out to those winding down, are faced with a myriad of issues and concerns—and these issues and concerns get more acute as the market for professional accountancy services becomes increasingly sophisticated, competitive and global. For a practice to succeed in today’s competitive marketplace, it has to cope with and manage these issues. Practices are continually evolving, and their practice management needs constantly changing. To see how their needs are changing and what is driving practice profitability, see the results of our SMP Quick Poll, [http://www.ifac.org/publications-resources?publication-type=21&sourc...%20target=] which each time asks respondents to identify the biggest challenge they are facing as a small practice. Key Aspects of Practice Management Key aspects of practice management include the following: STRATEGY AND PLANNING—Practices need to build a strong foundation to ensure their success. A strong foundation starts with a clear strategy and a plan to execute it. PRACTICE MODELS—Practices will need to consider the best structure and model to use as well as determine profit sharing and decision making within the firm. BUSINESS DEVELOPMENT—As practices grow, they will increasingly need to consider issues like developing a growth strategy, coping with increased regulation and competition, pricing, marketing and client relationship management, what services to offer and which clients to serve, and building a firm culture. Professional services range from the more traditional offerings of audit, assurance, accounting, and tax to emerging areas of advisory and reporting such as sustainability and integrated reporting. Successful firms can be highly specialized or general; they can focus on traditional accounting services or value-added advisory services. Advisory services is one of the fastest growing service areas as organizations, especially smaller ones, increasingly look to accounting firms for advice ranging from regulatory compliance to doing business overseas and adopting sustainable business practices. NETWORKING AND NETWORKS—In order to gain new clients and access expertise, many practices use different forms of networking, from traditional face to face through to electronic social media, as well as joining networks, associations and alliances of practices  as a means of obtaining client referrals, providing clients access to other experts  and gaining access to resources and tools. MARKETING—Attracting and retaining clients is a primary challenge facing practices, and securing new clients is one of the main drivers of future profits. This makes marketing and client relations one of the keys to success. Effective marketing and client relationship management demands communicating your value and services as well as knowing your clients, existing and potential—their challenges, aspirations, needs, and preferences. Practices need to understand how best to develop and maintain client relationships, including strategies to improve and cement client relationships. HUMAN RESOURCE MANAGEMENT—Staff and the firm’s leadership are arguably the most important assets of any firm and, as such, crucial to the provision of high-quality services and the ultimate success of the firm. Key issues to address include how to attract, retain, motivate, and train staff. INFORMATION TECHNOLOGY—It is critical for firms to adopt best practice in respect to emerging technologies, such as social media, smartphones, and cloud computing, as these technologies can help marketing and talent recruitment, reduce costs, and offer new client service opportunities. Cloud computing presents both opportunities—lower cost, wider geographical reach, and new services—and threats, such as the ability of SMEs to perform certain basic accounting functions themselves resulting in a reduction in the demand for such services from practices. Effective selection, implementation, and management of technologies, as well as training employees to use them, are fundamental to the success of any firm. RISK MANAGEMENT—Risk management is important to practices especially those in more litigious jurisdictions where the number and size of legal claims have increased over the years. There are frameworks and standards for identifying, evaluating, and acting on risks within a firm. Risk management includes ethical issues and safeguards that can be used to deal with ethical threats, the role of quality control systems, and additional risk mitigation, such as insurance. SUCCESSION PLANNING—As professional accountants in practice age, their thoughts inevitably turn to the value of their assets within the firm and their exit strategies from the firm. Hence, it is important that the practice has a succession plan that allows for the orderly exit of practitioners and a strategy that can be implemented to become succession ready. Succession planning includes discussing valuation and pricing, and options for consolidations, mergers, and internal and external buyouts.