How do you raise your profits without raising your prices? It’s the classic conundrum in competitive markets like accountancy, and credit control for accountants seems to be one of the answers.
A survey by Bloomsbury Professional found that nearly a quarter of accountancy firms plan to raise client fees over the coming year in order to increase their profitability.
But many are still reluctant to pass on fee increases to their clients, and are instead cutting back elsewhere – a kind of mini-austerity – to raise their profit margin by cutting costs.
For most, 55% of those surveyed, this means the removal of some of their less profitable service areas, as they hone down their business on the most lucrative niches.
However, almost as many – 53% of the accountants surveyed – are instead looking to credit control to improve their ongoing profitable status.
In terms of the biggest risks they face, 26% of those surveyed said their clients pressure them to reduce fees, perhaps explaining why only a quarter expect to be able to impose fee increases in the coming year.
And 25% highlighted late payment as a major risk they face, further demonstrating why effective credit control is important for accountants.
Credit control has a number of direct benefits in terms of boosting profitability – and in some senses it is simply a case of keeping your cash flow more liquid.
Ensuring clients are invoiced promptly, and encouraged to make payment promptly too, means your trade debt is kept low and your business account is kept as high as possible, even if the total amount coming in is still the same in the long term.
But by reducing the risk of non-payment, good credit control can actually increase the total amount you collect over time, making it a very useful method of maximising your profit, while minimising your risk.
If you would like to talk to a member of our team about credit control, please call us on 0808 256 5012.