This article is an extract from the book 'Everything you need to know about Xero Practice Manager'
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Uranus has 27 moons, and there are just as many ways to bill an engagement using Xero or XPM. This topic is broken down into three sections:
- General guidelines for setting up engagements
- How to set up engagements with XPM
- How to set up engagements with Practice Ignition.
We will start by looking at some general guidelines that are relevant regardless of which system you use to create your engagement. We will then look a closer look at how to set up engagements specifically in XPM and finally, how you can improve your efficiencies by using Practice Ignition.
Overview of jobs
There are three types of jobs you will have in XPM:
- Annual jobs
- One-off jobs
- Internal jobs.
Think of an annual job as the annual engagement that you have with your client. It is generally for completing financial statements and tax returns (or annual accounts) but may also include other services such as GST, VAT, payroll, management accounts or even quarterly coaching. With annual jobs you generally agree on what services you will be delivering throughout the year, and what the billing method is for those services. The billing method for these annual engagements can either be time and cost, quoted or fixed-price agreement, as covered in Chapter 2: Industry Billing Models.
One-off jobs are jobs that fall outside the annual engagement, so the work involved is not known when the initial engagement is put in place. Examples could be a cash-flow forecast, an organisational review or a strategic planning session. One-off jobs need to be treated as separate to the annual engagement, so a separate job should be created to capture the time on this.
Internal jobs are for capturing internal time such as administration, internal meetings, leave and any other non-client work. You should always have two internal jobs set up: one for admin time, the other for leave. We will cover this in more detail shortly.
A common mistake is having multiple jobs per engagement, eg. if your engagement has annual accounts and six GST returns, we want to create a single job to represent that engagement. We would have ‘Annual Accounts’ as a task, and have six ‘GST’ tasks using labels to differentiate the various filing months. We would therefore have seven tasks on the one job.
Following on from this, you want to avoid having seven separate jobs in this example. Using separate jobs works fine if you are billing each GST job on a time and cost basis, but if the engagement is a fixed-price agreement, you are unable to match the 12 monthly invoices to the seven separate jobs. This causes a whole range of issues when reporting because the revenue is not associated with the activity, therefore write-ups are incorrectly allocated, which destroys your chances of getting any useful reporting.
Another big mistake is not doing time sheets. If you are not doing time sheets, you are unable to analyse the profitability of your jobs, clients, and the performance of your staff. Improving the performance of your practice is very simple, you just need to lift your productivity and/or reduce your write-offs.
You can lift your productivity by monitoring it on a weekly basis, to find ways to help your team be more productive, eg. take unwanted distractions or administrative tasks off them so they can focus on their client work. This will allow them to get their work done more efficiently.
You can reduce your write-offs three ways. You can review your average hourly rates historically, to see which client groups performed the lowest, and look at raising their fee. You can also monitor your actual vs budget at a task level to project your write-offs, and find ways to reduce them as they are happening. You can also analyse your write-offs at a task or a staff level, to see if there are particular staff members that are struggling with particular tasks. This is covered in more detail in Chapter 13: Management Reporting.
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