This article is an extract from the book 'Everything you need to know about Xero Practice Manager'
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Quality reporting is the reward for good data and good processes. If you’ve followed and applied the settings and processes in this book, you will be in a great position to run regular, reliable reports to help you see what is truly happening in your practice. This chapter covers the types of reporting you’ll need to run your practice, how to prepare those reports, along with some suggestions on how often and who would benefit from receiving them.
The old adage ‘What gets measured, gets managed’ is only half true. By creating regular and reliable reporting rhythms within your practice you will direct the attention and behaviours of your partners, job managers and people toward the metrics that matter most. However, preparing amazing reports that aren’t shared with anyone won’t help you. Sharing regular practice reports with partners that don’t interpret, discuss and act on these, also won’t help you. Reporting by itself will not improve the profitability of your jobs, clients or people. Reporting is about enabling good conversations that lead to actions and outcomes.
We will first start by looking at the types of reporting you have in your practice, then take a closer look at the various metrics and how they can be monitored to improve the performance of your practice. Finally, we will look at how to implement regular reporting rhythms in your practice so you know what reports to run, when to run them, and what actions you can take based on the data you find.
Types of reporting
Raphael’s work The School of Athens depicts two legends of western thinking in debate. Plato, famous for his theory of forms, indicates upward – describing an eternal order of the cosmos from macro down to micro. Aristotle, famous for his empirical sciences, indicates downward – describing how if we measure the micro, we can understand the macro.
In accounting as in the universe; as above, so below.
By measuring and accurately recording the transactions that occur within our practice every day, we can roll this information upward into the job, from the job into the client, from the client into client groups, from our client groups into our partners, and from our partners into our practice.
We can use the same data to apply a depth to our practice reporting by looking at who is performing these tasks and measuring individual performance. We can roll this information upward to a team, job manager, role, office, partner or practice.
We can then view both of these across time by looking at how our people, jobs, clients, partners and our practice is performing over time, and compare these against previous periods or our expectations.
There are four levels of performance reporting in our practice:
- Job reporting
- Client reporting
- Team reporting
- Practice reporting.
Job reporting describes the reporting on jobs that are actively being worked on in our practice. Reporting on open jobs allows us to quickly intervene when we identify jobs that are at risk of missing a deadline, or going over budget. We use metrics such as task due dates, remaining budgets and projected write-offs to give us insight into jobs that need our attention. Open jobs should be monitored closely as they are changing each day.
Monitoring our open jobs closely allows us to step in and take decisive action as soon as we spot issues, such as accumulating projected write-offs. It is the most powerful tool for reducing write-offs, which lifts the overall performance of our practice.
Client reporting describes the reporting on completed jobs. Unlike open jobs that are constantly changing with each time sheet entry, completed jobs are static and provide insight into how accurately our client engagements have been priced. We use our completed jobs to identify clients we have underpriced our work for, so we can lift their fees for future engagements. It is the second most powerful tool for reducing write-offs in a practice.
Reporting on completed jobs is most often grouped by the clients so we can view multiple jobs within that client or client group. By grouping the completed jobs, we get a clearer picture of how profitable the client is overall. This is why we think of open jobs as job reporting, and completed jobs as client reporting. We are making different decisions with the information, so we want to break it out into two separate categories.
Team reporting looks at the performance of our individual staff, and the teams they fall into. We want to be reporting on metrics such as productivity, write-offs, revenue, profitability, average hourly rate and return on investment (ROI) within our teams, and individual staff. We can use this data to reallocate internal activities, identify a person's strengths and weaknesses, what a person's billable rate should be, and who is due for a pay rise.
Teams are collections of people. An individual team member may belong to a number of teams. By rolling up individual performance to these levels we can measure, compare and improve on a team's performance. We can identify people from a cohort who might be ready for promotion, or others who might be struggling. We can also take habits and processes from one office and translate those into another.
Our team performance metrics are only as reliable as our time sheeting and invoicing frequency. Because invoices and write-ons/offs are typically applied at month end, we are unable to assess an overall team’s performance in periods of less than a month. We can, however, report on productivity on a weekly basis.
Practice reporting describes the highest level of reporting available to us. The objective of our practice reporting is to measure and improve on the overall performance of our practice and to anticipate future performance. The types of metrics we want to report on include revenue, profitability, productivity, WIP balance, WIP multiple, practice write-offs, practice write-off % and average hourly rates.
Practice reporting involves thousands of transactions which reduces the volatility of our reporting. Where we may have extremes in profitability and performance on jobs, tasks and people, these are often evened out at the practice level, resulting in greater reliability of reporting. This has the benefit of allowing us to compare practice performance over time with greater confidence. Our invoicing cycles are monthly, so practice level reports are best viewed for a complete month and compared between months.
As above, so below. Let’s start at the bottom and dive into the metrics to keep an eye on while your jobs progress.
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