Practice Performance Reporting with Xero Practice Manager: Practice Productivity

This article is an extract from the book 'Everything you need to know about Xero Practice Manager'
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Practice productivity

Practice productivity describes the relationship of the billable time completed in your practice to the total time. Total time is measured as the total billable time completed in your practice for a specific period plus the total internal time for the same period (excluding leave).

Total billable time / (total billable time + total internal time – leave)

Your practice productivity can be measured for a specific date range and can be compared between date ranges to ensure we’re working on the right things. Practice productivity allows us to determine how admin-heavy our practice might be so we can ensure we have the right ratio of billable, administrative and management team members and that our teams are focussed on the right activities.

The revenue we generate from invoices must cover both the billable and internal time that occurs within our practice. If the ratio between internal and billable time becomes too high, it means fewer billable hours must earn enough revenue to cover the same costs. You want to make sure your practice is not too admin-heavy by ensuring your administrative and management activities are necessary and efficient.

There is a necessary amount of administration that needs to occur in every practice. This doesn’t just include office administration activities but also management and business development activities. Administrative activities occur at every level of our practice and are not confined to one department or tier. Some examples include:

• Office administration
• Internal meetings
• Scheduling and capacity
• Internal training and continuing professional development (CPD)
• Sales and marketing
• Accounting and finance
• HR/recruitment
• Business development
• Internal IT
• Plus many more.

All of the above activities are necessary for the smooth and continued functioning of a practice but with the exception of sales, none of them contribute directly to the revenue or profitability of our practice. Our objective with these necessary activities is to ensure they are conducted as efficiently as possible with the least amount of time and resource required for the same output.

Let’s look at four examples of how you can improve the efficiency in your practice:

1. For our necessary office administration, this could mean ensuring that our office admin activities are centralised to a specific group of people. This allows our billable team members to remain on billable activities where their time provides the greatest return.
2. For our internal meetings, this could be ensuring we are holding the right volume of meetings, on the right frequency, with the right people attending, in the right location, for the right duration, and with an agenda.
3. You can’t waste time on sales or customer service. Without creating and maintaining the relationships you need to retain existing customers and acquire new ones, you will not have sufficient work to keep your billable team members billable in the future. What we can do is manage the expectations of the types and frequency of communication our customers receive so that we are able to consistently exceed these expectations and retain happy customers. For our prospects we can make our sales process more efficient by having an established sales process, shared communication amongst team members, and by minimising the administration of customer onboarding by using apps like Practice Ignition.
4. For our training and CPD, we want to ensure that we have the right people receiving the right training in the right frequency in a way that works for them, so that we can develop and progress our team members through their careers. Establishing a culture of continuous learning, planning and tracking people’s progress, and celebrating achievement are all ways we can ensure your practice will always have the skills it needs to deliver quality services for its customers.

As you can see from the examples above, measuring, managing and monitoring your practice productivity is not about cutting your admin back to the bare bones of what is necessary. It’s about keeping the right balance of muscle and fat on those bones so your practice can become a lean and resilient fighting machine.

Total practice productivity should aim to be 55% or above including administrative and management staff. Anything less than that could indicate that our practice is admin-heavy and we should be getting more bang for our admin buck.

Every time sheet added to a client or internal job in a practice contributes to our practice productivity. This is a high volume of data that typically has a low variability. While individual staff may have variations in their productivity month to month, collectively your practice’s productivity is unlikely to change very much as anomalies are evened out. Our practice productivity therefore is fairly stable and a number you should know.

So how can we make sure we’re working on the right mix of activities to keep our practice humming?

To view your practice productivity in XPM we’ll need to create a custom report.

Here is how it is built:

Report type: Time Productivity

Fields to display on report (in order):

• [Staff] Name
• [Client] Client
• [Job] Job Summary
• [Task] Name + Label
• [Time Productivity] Billable Time
• [Time Productivity] Non-billable Time
• [Time Productivity] Total Time

Criteria for the report:

• [Time Productivity] Date – is on or after {the start date you want to report on}
• [Time Productivity] Date – is on or before {the end date you want to report on}

Rows are: Grouped and subtotalled by the first field

Note: For this report to work well, you will need to ensure your admin and leave tasks are set up as per the instructions in Chapter 7: Setting Up Engagements If you don’t have admin and leave tasks using job labels to differentiate between the sub-tasks, read this chapter now and make that happen before you proceed.

This report will helpfully display a summary of all of the billable activities that have occurred in your practice over the time frame selected. It will also summarise all of your admin time into a single row so you can compare this number to the total time (excluding leave) subtotalled at the bottom of each column. You will need to export to csv or pull out your calculator to determine the exact percentage here, and monitor this change over time. You will also need to update this report periodically to include current periods.

Although a practice productivity task summary report in XPM helpfully displays where the time in your practice is going, it does not allow you to drill into any of these numbers to see which staff, jobs, clients or sub-tasks are being used. You will need to create separate custom reports for each number you might want to drill into. The best way to view your practice productivity is with Link Reporting.

The Practice Performance report in Link Reporting displays the productivity performance of the entire practice over time. The productivity calculations are done at the click of a button, and you can drill into any anomalies you see on the report for all the detail you need.

One of the easiest ways to increase the profitability of your practice with your existing resources is to improve your practice productivity. By ensuring your billable team members are able to focus on billable activities, you will increase the billable time and billable value in your practice. If we are effective with our billable time this will translate to increased revenue. In the next section we will cover how we can measure and monitor how effective we are in our practice using practice write‑offs. You can help your team succeed by providing them the information they need at www.linkreporting.com

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