Fast food. Sunbathing. Forgetting to floss. Humans have a habit of doing things that are bad for them without fully grasping the consequences, often realizing too late they’ve made a big mistake. Many times, those things have a way of insidiously working their way into our lives — fast food is, well, convenient and usually cheap. Sunbathing is relaxing and leaves you with a glow that probably isn’t — but might seem to be — healthy. Flossing is a hassle and awkward, so it’s easy to pass.
But all three of those things, done habitually, can have some serious consequences (and at least two of them are major causes of pretty nasty breath, just sayin’). The same phenomenon can happen in business. Sometimes the expedient thing, the easy thing, the thing that feels right — can do some damage over time.
Bookkeeping service offered by your firm might not seem like it’s ripe for this kind of misstep, but it most definitely is. We’re not talking about mistakes in the bookkeeping itself; an experienced accountant hardly needs a primer on that. We’re talking about mistakes your firm might be making with bookkeeping service itself — mistakes that might cost you in the long run.
Misstep 1: You consider not offering bookkeeping service
It can be tempting. Accounting has been in a maelstrom of change over the past few decades, and as the proverbial dust begins to settle, it’s clear that many of the traditional accounting firm services present a challenge for growth and profitability.
Bookkeeping in particular has become highly commoditized, leading to barely positive margins and a very unsexy reputation. It’s like doing the dishes — everyone knows it needs to be done, but pretty much everyone hates it. Worse, even organized, efficient, and experienced bookkeepers have to spend a great deal of time on the bookkeeping, especially if the client is slow, uncooperative, or disorganized.
And all of that assumes you’ve been able to find and retain organized, efficient, and experienced bookkeepers for your staff. That’s far from a foregone conclusion. Firms of all sizes have retention issues on top of challenges just in finding talent to begin with. Nowhere is turnover higher than in lower-paying positions, and bookkeepers tend to be among those.
Why is it a misstep?
On its face, ejecting a barely profitable part of your business seems like a sound decision, right? You lose all of the above frustrations. But this is where you could be hurting yourself without knowing it.
Clients don’t like needing to go multiple places for service. Getting away from a proper full-service model not only forces them to do that if they rely on you for other services, it opens your client to poaching. You’ve sent them somewhere else for bookkeeping, and that provider suggests to them that they might be less inconvenienced and more satisfied if they were to bring all their accounting needs to them.
Of course, you might work hand-in-hand with a bookkeeping-only business and aren’t worried about poaching. You might even handle the handoff to that partner, meaning it’s all transparent to your client. Problem solved, right?
Except it isn’t, really. That partner will still face the issues you faced when your bookkeeping was in-house, and their problems are still your problems. Whether that’s seasonally adjusted pricing you have to pass along to your client, or constantly working with a new staff person who is unfamiliar with your client(s), this ends up being at best a partial solution. As a cap to that, you lose a degree of control over quality, efficiency, and all the hallmarks you likely want to tout as benefits of working with your firm.
Misstep 2: Not mining your bookkeeping clients
Here’s another easy mistake to make. Especially if your bookkeeping clients are only (or primarily) bookkeeping clients, their low profitability can make them easy to overlook.
Because these kinds of clients tend to be low return, they can fade into the background. If they’ve stated unequivocally that they don’t need or want other services, this can push them farther down the list for attention. Even for those clients you might be able to upsell, it can be hard to see a “big win.” Almost no one goes from bookkeeping only to a top client overnight, and the slow burn might seem to be a less worthy effort than seeking out an all-new client who has big needs and deep pockets.
We haven’t even mentioned your own internal capacity for more work, yet. You could be prepared to do more for existing clients, but unable to take on the additional work. And that lack of capacity can cost you, especially if you don’t understand why you have it to begin with.
Why is it a misstep?
The first and most obvious reason it’s a mistake not to mine your bookkeeping clients is they’re low-hanging fruit. You know who they are, how to contact them, and have a greatly increased chance over a new prospect of getting them into a meeting to discuss your other services. When you consider the time it takes to find, contact, persuade, meet with, and finally sell a new client, your bookkeeping customers begin to represent a much more lucrative time investment.
Perhaps more importantly, you have their books, which means you have insight as to whether and how much they might be growing. Growing companies will ultimately need more services, and you can know it even before they do, while also being first in line to offer them. Even for clients who aren’t growing, you can take an advisory stance. Offer them the kind of insight they need to take their business to the next level; not only is this highly lucrative (with small clients, it can take time, but it’s well-worth investing in), it’s also ultimate customer service.
We’re not suggesting an unnecessary play for more revenue. You’ll surely have clients using your bookkeeping service who just don’t need anything else. But for those who do (or soon will) they will truly appreciate the fact that you gave thought to their business and their success. That leads to good customer retention, protecting your revenue down the road.
Misstep 3: Manual bookkeeping
Do you use a washboard? How about a horse-drawn carriage? No? But you probably have ice delivered to keep the food in your icebox fresh, right? Have an outhouse on your property?
These absurd questions are designed to make a point: it might not always be immediately apparent at the time that the “usual” way of doing things has become outmoded and inefficient, but get a little distance from them and they become laughably outdated. Bookkeeping is squarely in that place between the “old” and “new” ways.
Why is it a misstep?
We discussed earlier all the ways it might seem to be a good idea not to offer bookkeeping at all, and those same reasons apply to manual bookkeeping: it’s slow. It’s low-return. It’s inefficient.
The good news is that technology is saving the day once again, providing you with automated bookkeeping options that allow you to retain your bookkeeping clients as a MUCH lighter lift, while also retaining a degree of control over quality, and predictability regarding its expense to your firm.
Automating your bookkeeping relieves you from staffing pressures and opens up resources you can use to pursue new business, or grow the business you have. And automation offers immense gains in efficiency and accuracy that no human could ever hope to match. Plus, it’s endlessly scalable.
We’re more than happy to share this overview of bookkeeping software with you, including a side-by-side comparison of some of the top offerings in bookkeeping software. Once you’ve looked it over, reach out to discuss it with us in more detail. We’ve just scratched the surface here on the advantages of managing your bookkeeping service more actively, and through automation.