Are overhead expenses in your CPA firm running away like a wild, untamed beast?
You might be like a lot of practice owners I know, whose success crept up on them — and along the way, so did their overhead expenses. As business got better and better, maybe you started spending more freely on things that seemed so unaffordable in those tough start-up years. You operated for a long time with a tightened belt. As you began to prosper, you delighted in finally being able to put more money into your practice, trusting that it was an investment that would pay off in the long run.
Those investments could very well pay off. However, if your overhead is beginning to feel like a runaway train, it may be time to pull back.
One of the biggest overhead expenses for any small business is payroll. It can sap cash flow from a business faster than any other expense.
Is payroll your runaway train?
Take an honest look. Are you overstaffed? Along the path of growth, you may have hired too many people. Each one of those people costs you money. You’re subjected to registration and record-keeping requirements which can be expensive. You also have to pay unemployment taxes, withhold state and federal taxes (as well as Medicare and Social Security taxes), pay for workers’ compensation insurance, and remain in compliance with safety regulations to avoid injury to your workers.
If you fail to comply with all of the above employment requirements, you could face severe penalties, and maybe even be found personally liable.
Are your people properly trained? Too many employers assume their employees know how to do their jobs. Sometimes, their lack of skills or know-how might be handicapping your practice, and you won’t even know it. Spend time training each of your employees so that they understand their roles and how to perform at an optimal level.
Hire slowly, fire quickly. Don’t hold on to people who aren’t contributing to the success of your practice. When hiring, develop a screening process that includes having several employees interview a candidate. You’ll be more likely to get it right if you let your team members evaluate the potential co-worker.
Be clear about expectations and deadlines. Make sure each and every employee understands what’s expected of him or her, and agree on deadlines together. Follow up to ensure the employee has what they need to complete a task correctly and on time. Never just assume the work is getting done. Inspect results and offer constructive feedback.
Try employment alternatives. If you need help in your firm, consider using a temporary employee from a staffing firm, or hire an independent contractor. You’ll avoid the costs associated with bringing someone onboard as an employee.
When you reduce your payroll expenses, you’ll be making a huge impact on your overall overhead. Lower expenses mean an instant boost to your company’s bottom line.
Learn even more about growing and strengthening your practice! Check out my book The Ultimate CPA Practice in the New Economy: 10 Secrets to Attract More Clients, Boost Profits and Live Your Ideal Lifestyle.