5 Ways you can Improve your Xero Practice Manager

Xero Practice Manager (XPM) provides us all the benefits of a practice management tool you’d expect including job management, timesheeting, disbursements, job budgets, invoicing, document management, scheduling, staff capacity and many others while allowing us and our staff to work remotely, accessing all of our clients’ ledgers and all at a low monthly fee. Wow.

Many practices using XPM are experiencing one of the below problems that can be easily resolved through a combination of updated settings, processes and staff training.

1. Mis-alignment of revenue/costs in fixed price invoicing

Practices that price their services on a fixed-fee recurring basis receive the benefits of predictable revenue, consistent delivery and simple pricing. Often however when translated into an XPM job we are invoicing these services in advance through a recurring job in XPM while our staff timesheet their time to this job. This mis-alignment of revenue and cost creates a lag where time over-runs are only identified over a year after they occur. This removes from us the initiative and opportunity for a conversation with our client.

Because our time carries with it a cost it is important that the revenue for our services in a particular financial year is matched up with the costs associated with delivering those services. This means that where we invoice in advance we need to have a job in our XPM setup in order to hold the Xero repeating invoices and a job with Xero repeating invoices already associated with it to which we need to apply our current period timesheets.

Where we might invoice in arrears for a fixed-fee agreement or for general billable activity like budget preparation, cashflow forecasting etc this is much easier as we should only have a single job open in order to apply our time.

2. Too many jobs

Many practices we meet are setting up a separate job per return or service that they deliver to a client and are frequently not closing jobs when they are completed. This results in a growing jobs list that makes it difficult for you and your staff to view their capacity, upcoming work and what can be invoiced.

For our fixed-fee agreement clients that we invoice in advance we will need at least two jobs open for most of the year. For our fixed-fee agreement clients that we invoice in arrears, we can leave the same job open for each financial year. Both of these jobs should contain:

  • The repeating invoices related to that financial year (synced from Xero)
  • The tasks/activities/services we have included in this fixed-fee agreement
  • All the returns that are included in that agreement
  • All disbursements and costs related to delivering the services in the agreement

We do not need a separate job per return, per service, per disbursement or per invoice for this client.

Where we might conduct services outside of a fixed-fee agreement we will set up a separate General Billable job with the tasks appropriate to the activity. This might be a budget, cashflow forecast or other service you offer. This job is only open for the duration between it being requested by a client and the job being completed. This same job can be invoiced on a fixed fee or time and disbursements basis.

Often when working with clients we will incur time on a activity that we cannot charge. This might be a phone call, meeting or answering ‘How to Reconcile Xero‘ questions. Instead of creating a separate job for non-billable activities I’d encourage you to add a non-billable task to your annual  job called ‘Non-Billable’ or otherwise.

Where practices are using multiple jobs for the same client agreement they are unable to report accurately on the profitability of that agreement. This is because the revenue earned on that agreement for that period is not allocated to the same job as the timesheets and disbursements that relate to preparing the financial returns for that period.

This removes from us the opportunity to review the pricing of services each year in an informed way. At best we can view client profitability across all of their jobs but not for specific agreements or services we might have offered them throughout the year.

3. Job Scheduling and Staff Capacity

While XPM offers us the ability to allocate staff to jobs and view the number of jobs a staff member may be involved in it does not provide us a predictive ability for when those jobs might be occurring or how much time might be involved without a lot of repeated admin in assigning and re-assigning staff to tasks.

By using job templates effectively we can easily assign staff to jobs and benefit from improved workflow and capacity reporting. This saves us time in individually assigning tasks and times to each staff member and keeping this up to date as availability changes.

We can then create custom reports within XPM that allow us to view and schedule upcoming work and allows each staff member to view the jobs they have on alongside the the expected duration and current status.

4. Not applying subscription costs to fixed price jobs

As part of offering value-based pricing to their client many accountants also bundle in the related subscription fees to those prices. Very few of these practices apply the monthly cost of these app subscriptions to the related fixed-fee agreement job. They instead recognise the cost of these subscriptions as a direct cost in their Xero to provide an accurate Gross Profit for their practice.

The downside to this method is that each fixed-fee agreement job has an inflated margin in XPM as we are recognising the total revenue each month on the agreement but only the cost of our time, not the related subscriptions. To view your true profitability by job we need to recognise the monthly cost of these subscriptions against the appropriate job. Fortunately there is an easy way to do this.

5. Not applying the cost of outsourced work to jobs

Outsourcing accounting and bookkeeping services has become a popular method of practices leveraging their time and team. By freeing up time from our team we are able to deliver higher-value services while handling the same volume of work.

Few practices however are correctly applying the cost of outsourcing to the related jobs. Sometimes this is because we are not receiving an itemised invoice from our outsourcing provider leaving us in the dark about which jobs to apply our monthly outsourcing invoice to. This artificially inflates our job profitability for our jobs and clients. While most practices recognise the cost of outsourcing above their Gross Profit line few have the information they need to make informed outsourcing and client pricing decisions.

 

The above five points are not an exhaustive list of problems easily resolved by a clever combination of technology, processes and people. If you can identify and resolve the just one of these common problems we see with with way practices are using XPM you will be doing more than 80% of the practices using XPM out there.

If you have any questions about anything covered in this article, you can email us or book a chat at a time that suits you.

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