Best Strategy for CPA Firms to Get Consistent Cash Flow
Today I dropped my daughter off to her sketching class and noticed all of the nearby local businesses, like a tack shop for horse riding, a pet grooming, and supplies shop as well as a veterinary clinic. The interesting thing about all of these businesses is that they are similar to accounting practices in terms of business. They all have ebbs and flows in their revenue model. Revenue goes up and then it goes down and it’s all contingent upon whether customers/clients keep coming through the door. It made me think, what’s the best strategy for CPA Firms to get consistent cash flow.
During the pandemic, we saw that many businesses had a tough time. Customers weren’t walking through their doors and much of their revenue disappeared. The government was shelling out cash left, right, and center to try to save everyone’s businesses.
Beyond the pandemic, there are still many businesses that don’t have cash confidence. When I had my first accounting practice, cash flow was up and down like a yo-yo and the worst part obviously, was when cash wasn’t coming in. I was still working and having to pay all my staff and bills. I had lots of work in progress and even if I was keeping up with accounts receivable, sometimes I simply had no cash – I wasn’t cash confident.
So how do we fix the model so that there is consistent cash flow? How do you get and maintain cash confidence?
Shift Your Pricing Model
As we know, many accounting firms use the fixed pricing model. To create consistent cash flow for your accounting firm, you need to shift your model from a billable hour model to a subscription-based value service model. In my firm, I took all of my corporate clients and put them on a subscription model so they were all paying monthly for the entire yearly service. I could finally breathe again. Now, this doesn’t mean having to work every single month for the client. It’s about getting consistent cash flow throughout the year so that you have cash confidence. This is what creates predictable cash flow.
As Verne Harnish, author of “How a Few Companies Make It…and Why the Rest Don’t (Rockefeller Habits 2.0)” says, “Revenue is vanity, profit is sanity, and cash flow is king.”
This is what I coach in the Accountant Successful Formula where I show you how to shift your model from the billable hour to this subscription model. If you want consistent cash flow and cash confidence every month, give me a call. I’d love to have a chat.
I’m Erik Solbakken, reminding you that when you take back control of your business model, you can take back control of your life. Stay tuned for more success tips.