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Tax & AccountingSeptember 14, 2021

Simplify the Budgeting and Planning Process by Leveraging Your Existing Accounting Firm Data [Updated for 2022]

Let’s be honest; no one (well, almost no one) likes the budgeting and planning process. But what if there was a way to draw a direct line from daily activities and engagements to the accounting firm and client data you need when making annual budgeting and planning decisions? And you could do it without creating additional workload for staff?

With the right accounting workflow solution, you can. The same software your accounting firm is already using to determine staff capacity and track the status of an engagement can also help you make data-based decisions about everything from tax season staffing levels to advisory services revenue targets.

How It Works

The same data that your accounting firm is collecting to support daily activities also drives the accounting data analytics you need to better budget and plan.

Your existing workflow solution already collects and utilizes a wide arrange of data, ranging from engagement statuses and staff capacity to the daily actions taken by your accounting staff, seniors, managers, and partners.

Since the data being collected is already tracked by the firm as part of your staff’s regular duties, there is little to no additional work for core users or leadership.

Let’s walk through two critical parts of an accounting firm’s budgeting and planning process – revenue target and revenue capacity – to demonstrate how your accounting workflow solution in particular can help you take the results of daily use to obtain the data you need fur to budget and plan successfully.

Example: Identifying a Revenue Target

Consider the basic revenue formula:  Existing Business - Lost Business + New Business = Revenue Target

Part one of the formula is straightforward. The process becomes complicated when you get to part two and start asking detailed questions about recurring versus annual engagements, where you lost business, and so on. 

Keeping the equation in mind, consider where your workflow solution can provide plug-in value. Also, ask yourself what pieces of information it holds that can help you more accurately define your revenue target. How can you utilize the data points populated from daily use to gain a better overall understanding of your revenue from last year? Information commonly utilized include:

  • How much existing business is recurring versus non-recurring
  • Hours and revenue allocated to existing recurring business
  • Hours and revenue allocated to existing non-recurring business
  • Hours and revenue related to what is now lost business
  • Staffing levels and which projects various staff worked on
  • Where there are role-based budgets in place

The daily actions taken by your staff members feed the answers to each of these questions. Their information plugs into the formula above, building a fact-based budget that other leadership won’t have to spend time deciphering.

Note: if you are currently using CCH Axcess Workstream or XCMworkflow, yes, your accounting workflow and productivity solution contains all of this information and more. Both of these solutions seamlessly build the foundational elements to focus on organizational growth, and both integrate with accounting data analytics solutions that help automate this process.

Identifying your revenue target, though essential to the budgeting process, is merely the first step. Once you’ve chosen the target, you have to be able to execute it to meet or exceed that target. That’s where determining your existing capacity comes into play.

Example: Determining Existing Revenue Capacity

Now that you’ve established your revenue target through data-based decision-making, it’s time to figure out how to meet it. Yes, it’s time to determine your revenue capacity, or more simply, how much revenue your accounting firm can produce at current firm staffing and staff capacity levels.

To figure this out, ask yourself these questions:

  • What is our current staff capacity?
  • Can we, at current state and staffing levels, successfully execute upon and reach our revenue target?
  • If not, what steps do we need to take to increase our capacity and reach our goals?

Even if you can’t answer these questions off the top of your head, your accounting workflow solution should be able to provide the necessary data. Staff at various levels in the organization have been using the solution to create efficiency and increase productivity in their daily functions. Meanwhile, your tool has been capturing data points like these, potentially without you realizing it:

  • Task types connected to a specific category
  • Each task established maintains a budget by role
  • Budget hours calculated to total actual spend
  • Each role unique to a specific function/level
  • Each level producing a standard rate
  • Each user maintaining a bill rate per employee
  • Each user calculated to their standard hourly rate
  • Task dollars at role level compared to staff dollars at the user level

Each data point gives you the tools necessary to determine the revenue capacity of your current staff and compare that to your revenue target.

As you calculate your accounting staff capacity, make sure to ground your calculations in realism. For example, it’s not feasible to assume that a revenue producer will spend 100% of their time in revenue-generating activities. Everyone has downtime. If you’ve been encouraging staff to utilize the solution to its fullest, you should be able to track that downtime, as well.

While it’s easy to get lost in the analysis, remember to take the step beyond crunching numbers and into strategic planning. With this type of data, you can identify where to shift resources between divisions, where hiring may need to occur, and what divisions are over (or under) performing. Use the historical data that your workflow solution can provide to build a data-driven budget.

Ideally, your workflow solution should be able to provide all of the data discussed above (and more) and better enable 360° visibility from your staff’s daily actions. While I used the annual budgeting and planning process to demonstrate how your workflow data provides additional strategic value, these analyses can easily be ad hoc.

Yes, your accounting workflow and productivity solution should be able to help you track revenue and capacity on multiple levels. Yes, the daily functions of staff members at all levels of the firm feed the data you need for fact-based decision-making and planning. No, you shouldn’t have to spend additional time extrapolating the answers (or having staff members do it for you).

When you’re working on budgets and planning next year, don’t make everyone else guess how you got that number. Use your workflow and productivity solution to back up your projections and set the organization up to achieve your revenue target, utilizing data you’ve been collecting all along.

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