How to increase your accounting firm’s profit margin

April 11, 2022 Osman Khan
airpa increase profit margin

As any accountant will know, improving your profit margin essentially comes down to one of two things: increasing the money you have coming in, or reducing what’s going out.

That sounds simple enough, but in reality, we all know it’s a bit more complex. There’s no one strategy for this that will work for every accounting firm, and choosing the right course of action requires a lot of thought, planning and discussion across your team.

While we can’t give you a one-size-fits-all answer, we’ve put together a list of five key tips for increasing profitability, to kick off your firm’s plans.

1. Reduce expenses

A good first step when looking at your profitability is to assess your outgoings, and make strategic decisions about what you do and don’t need. 

It’s important to get this right, and avoid heavy cost-cutting that might impact your team’s morale and ability to do their job well. 

For instance, if you’ve had success with working remotely in the past couple of years, you might look at reducing the office space you use and switching to a hybrid model, or even going completely remote. 

You should also be regularly checking the subscriptions and services you’re using, and making sure they’re providing enough value to your firm to justify the cost.

2. Get more efficient

The faster and easier it is for your firm to process client work, the more you can do and the more you can sell. 

That’s not to say you need to turn it into a production line – instead, it’s about optimising the work you do, identifying any inefficiencies and bottlenecks in your existing processes and ironing them out. 

Talk to your team about the things that bother them, disrupt their work or take up lots of time. And where possible, find opportunities to automate the jobs that are manual and repeatable.

3. Fine-tune your services

A lot of accounting firms try to be everything to everyone – but in many cases, a better strategy is to focus on the things your firm does really well.

That might be a particular sector niche, or a service you’ve honed over the years. 

Looking at your services, think about how well they meet both your clients’ needs and your team’s expertise. Is there anything new you could add, or anything that’s not providing enough value you could take away?

This is also an opportunity to update your team’s skills and knowledge, training them to provide new or enhanced services. 

4. Update your brand

With the right services in place that provide value to your clients, you may be in a good position to raise prices and boost your profitability. But there’s another aspect of this to consider: your perceived value. 

This isn’t about tricking people into paying more with fancy marketing. It’s about making your service into something people are willing to pay more for, compared to other accountants’ services. After all, price isn’t the only thing clients care about – they might choose your firm based on quality, communication, expertise, or shared values.

Your brand is a big part of this, from your core values all the way to how you communicate those through your website, advertising and marketing. If your firm comes across in a way that resonates with potential clients, they’ll be more likely to pick you over the competition.

5. Pick the right clients, and grow with them

Attracting potential clients is great, but qualifying them is just as important. To be as profitable as you can be, you need to think about the value each type of client brings to your firm.

You might find some clients are actually draining more resources than they make up for in their fee – either because they’re only purchasing low-value services that are taking your team a lot of time, or because they’re challenging or time-consuming to work with.

Your business model might vary, but many accountancy firms find it’s more worthwhile to focus on long-term clients and recurring business than the one-off quick wins. By upselling in a way that genuinely benefits your clients, you can reduce the risk that they’ll outgrow you and go elsewhere. 

At the same time, you benefit from a more stable revenue stream, while developing your offering in line with your clients’ needs.

AIRPA allows you to automate and streamline your accounting firm’s core processes, so you can be more efficient and profitable.

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