PLANNING FOR YOUR FIRM

CPA Charles Lutimba, S/Technical Officer, ICPAU

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Introduction Competitive Strategy The Strategic Planning Process Plans for your Firm’s Various Functions Practice Manual Systems Bench marks to Drive Performance Monitoring External Forces Business Continuity Conclusion

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Introduction

The essential ingredient for success is for everyfirm to know its own strategy—the path that thepartners and employees wish to travel.

There is not necessarily a single right or wrongdirection for a public accounting firm.

Successful firms can be highly specialized orgeneral, focusing on transaction or traditionalaccounting services or high-end advisory services.

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The Firm’s Competitive Strategy SWOT Analysis

SWOT TechniqueSOWOSTWT

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The Firm’s Competitive Strategy

Applying market strategies- Overall cost leadership- Differentiation- Focus

To specialize or generalize, which way for your firm?

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The Need for Business Planning

When CPAs show neglect for their firms;- Problems with work–lifestyle; - Low profitability and/or poor liquidity; - Poor efficiency; - Lack of risk management; - The absence of necessary quality control;- High employee turnover; - Loss of clients; or Loss of professional

reputation.

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The Strategic Planning Process

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The Strategic Planning Process

Step 1: Formulate your own personal and business strategic plans

- Key questions – Are you going through this process on your own, or will you involve other people?

- Will the firm have a second or third office location?

- What are your personal goals? - What do you want to achieve in ten and twenty

years’ time? - What do you want to achieve in your personal life

and in your professional life?

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The Strategic Planning Process

Step 2: Decide on the business operating structure

Key issues –- Partnerships

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The Strategic Planning Process

Step 3: Outline your mission, vision, andvalues

- Firms start with a vision statement: The visionstatement touches on the impact of the firm,rather than on its services or potential markets.

- Construct a mission statement

- Then proceed with the Value statement, thesemight include: Respect, Courtesy , Equality,Responsiveness, Client-focus, Innovation.

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The Strategic Planning Process

Step 4: Define your strategic objectives Clearly state several “big picture” targets that flow from

your mission statement Your objectives might look like these: To achieve an internally generated fee growth of (XX)%

per year for the first five years of the firm’s life; To increase net earnings per partner by Ugx. (XXXX) per

year; Your objectives should not all be financial – Some could address the training and development of

your people; The reputation of your firm within its prime market area;

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The Strategic Planning Process

Step 5: Define strategies for achievingthose objectives

This element focuses on the way that each service—such as bookkeeping, tax advice, audit, financialplanning and business development advice—willdeliver profits, achieve its share of the targeted feegrowth, or contribute toward the strategic objectives.

The aim is to give each person in each unit guidanceand reassurance that they are genuinely contributingto achieving the overall target.

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The Strategic Planning Process

Step 6: Determine some systems, policies, andactions necessary to implement yourstrategic plan

Policies are prescriptive statements that simultaneouslyenable yet constrain the actions of employees.a) To use a mix of outright purchase and lease/hire-purchase/rental products when purchasing capitalequipment.b) To pay a monthly salary of Ugx. (XXXX) to theprincipal /partners in the initial twelve months, thenapply the remaining profits toward funding the growinglevels of work in progress.

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The Strategic Planning Process

Step 7: Implementation- The next step is to think about theimplementation of your policies. This also generatesa rapid increase in the size of your lists and notes.

Wheelen and Hunger (2000) identify three aspects:(a) Programs: the activities and steps needed;(b) Budget: a financial summary of costs, and hopefullyincome too, associated with each program; and(c) Procedures: the specific actions to be completed.

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The Strategic Planning Process

Step 8: Monitor and adjust plan as required A critical element of the planning process is to set up

some key performance indicators (KPIs) to summarizethe actions taken within the firm and measure theoutcomes from those actions. KPIs could be;(a) Profitability(b) Personnel productivity(c) Liquidity(d) Any other ideal measures

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Relations with employees & clients

The Challenge of generational diversity

- Your clientsrapid turn around, achieved error free, minimal cost, client mobility

- Your Personnelunderstanding employee mindset, employee turnover,

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Plans For Your Firm’s Various Functions

As part of your overall strategic planning, the firm needs to develop more detailed plans for the following functions:

1. Service delivery; 2. Risk management and mitigation; 3. Personnel; 4. Marketing and selling; 5. Technology; 6. Administration; and Finance, or budget

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Plans For Your Firm’s Various Functions …

Service delivery; - State the range of services provided by your firm - Who handle services not offered by firm

Risk management and mitigation;- Building a risk management mind-set into your firm

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Plans For Your Firm’s Various Functions …..

Personnel; - The personnel plan should attempt to forecast the likely number - and skills base of people required by the firm over a given period.- Fulltime, part time

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Plans For Your Firm’s Various Functions ….

Marketing and selling;• Marketing strategies to be employed should be

both internal and externalObjectives- Build market awareness of your firm;- Build your brand identity;- Refine your client base;- Acquire new clients; and/or- Grow your fee base by offering new services to

existing clients.

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Plans For Your Firm’s Various Functions ……

External strategies- Client referrals;- Memberships in professional or community

organizations;- Professional network referrals;- Speaking engagements;- Holding functions for clients, members of referral

networks, and prospective clients;- Seminars;- Articles and editorials in newsletters;

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Plans For Your Firm’s Various Functions….

Internal strategies- Increased utilization of your current services by

your existing clients; - Introduction of new services to your existing

client base; and - Increased charge rates.

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Plans For Your Firm’s Various Functions…

Administration; and Finance, or budget

- Purchasing of minor office supplies- Employees and suppliers- Sent bills and pay within the firm’s trading terms.

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Having a practice manual and systems

A well-run firm will need and want to document itspolicies and procedures

Several manuals will be required within a firm, eachwith a separate and distinct focus:

- A practice manual or quality control manual;- A staff manual or office manual;- The partners might even require a manual to govern

some of their dealings with each other: where thepartnership agreement is not very detailed orprescriptive.

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Benchmarks for Improvement

External benchmarks – Accountingfirms broadly similar to your own

Internal benchmarks – a check on saythe firm’s own performance

Other industry benchmarks

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Monitoring external forces

Environmental sustainability – A firm may attemptto act in an environmentally responsible manner.The simplest approach is to focus on “redesign,”“reduce,” and then if required, “offset.”

International standards for accountants (IFRS, ISASME)

Rising levels of regulation and professionalknowledge

Mobility of talent and clients Open International boundaries Technology Anti-Money Laundering

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Business continuity:

The short-term and long-term imperative The issue of business planning cannot be complete

without some consideration of business continuity. Interruption to business

- Can you prevent the occurrence?- How can you minimize its impact- What is the cost of the minimization?- Can you form links with other firms?

Continuity of business: The second generation

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Conclusion

A firm without a plan will simply meander along, responding toopportunities in an ad hoc manner. It may well develop indirections and in ways that do not suit the needs of itsowners. The end result could be disagreement in oneself oramong the partners, leading to low job satisfaction and lowcommitment to the firm.

Like any roadmap, some indicators are needed to keep thefirm on track. Benchmarks will keep the firm travelling at theright speed and help the owners make the right choices atmajor crossroads.

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