Getting ready for spring cleaning in March? Cleaning out your bookkeeping client list based on profitability can help you realign your work with your firm’s goals.
Ideally, you should be evaluating your client list annually to decide which relationships are profitable enough to warrant keeping and… which are not. You can do this by creating a ranking system, typically from A (meaning your top clients) to D (the ones you should probably consider cutting ties with). These rankings should be based on how much work you’re doing for the client and how much money they are generating for you. Here are our top five ways to evaluate the profitability of your bookkeeping client relationships and create those rankings.
Overall profitability
As the old adage says, time is money. Do you feel like you do too much work for how much you’re getting paid? The money you make from clients still might not warrant keeping them around. This is how you calculate overall profitability. Determine how many hours you’re getting paid for vs. how much work you’re actually doing. Then, you can figure out if the payment is worth the time and effort. You should also be factoring in the difficulty of the work and whether or not it is something your firm can practically continue to tackle.
Payment
It may seem obvious, but the timeliness of a client’s payments should also be a factor in your evaluation of client profitability. Are you having trouble collecting payments on time or finding yourself constantly sending excessive bill reminders? That might mean the client isn’t consistent enough to warrant keeping around.
Referrals
One of the often-overlooked ways clients bring in revenue is through their referrals. Word of mouth remains one of the best ways to reach people. Some of your current clients might have been referred by other clients. If a client you are considering firing was referred by a client you would never fire, you might feel like you’re caught in a sticky situation. Find a way to keep the older client in the loop so no hard feelings develop.
Providing new services
If you’re on the fence about firing a client, you might ask yourself if there is a way to make your relationship with them more profitable. Offering additional services can be a great way to increase profit. Consider whether or not a client on the lower end of your rankings might be willing to consider new service packages. You might even ask them directly if they would rather consider a new package or cease doing business with your firm, after explaining that your firm’s goals no longer align with your current work.
Try creating the ranking system for your bookkeeping clients based on these metrics for profitability. It can be hard to let go sometimes – and to see when you need to. Creating a set of standards like this makes the process more objective. At the end of the day, your firm’s goals and profits should be at the forefront of your decision-making.
