3 Steps to Solve the Tax Season Revenue Slump
Last week, we discussed the challenges tax professionals face during their busy season - long nights at the office and unrelenting deadlines - and how to transform tax season by going paperless.
So, now that you know how to transform your tax season, let’s focus on another problem that going paperless with Receipt Bank helps to solve.
What we know from working with thousands of accountants around the world is that there is a significant revenue challenge when it comes to tax preparation for self-employed clients. Here’s why.
THE PROBLEM
By its very nature, compliance work is deadline driven. That's why traditionally, as much as 65% of revenue can be booked within the first four months of the year. That also means 65-70% of workload is within those first four to five months.
This puts an enormous strain on you and your team to get everything done accurately and on time, while keeping your sanity. As you can see from the graph above, it also has implications on your cash flow.
When a majority of your work is once-a-year obligatory tax prep and your revenue is similar to this graph, then you’re likely feeling the burden of trying to keep your head above water throughout the rest of the year. After all, cash flow is critical to the successful operation of a business and your practice is no exception.
This is why it’s important to ensure your business has Monthly Recurring Revenue (MRR) throughout the entire year, not just those first 4 months. Receipt Bank can help you out of that taxing (see what we did there?) situation!
LESS STRESS, MORE MONEY
Forget the late nights fuelled by coffee and sleeping on the office sofa. You have the power to transform your practice, to avoid the massive busy-season time crunch, and reduce the cash-flow risks associated with a tax season heavy business. Here’s how it can be done.
- Go Paperless: Capture your clients’ items digitally in as close to real time as possible
- Get Connected: Let technology do the heavy lifting with automated data collection and processing
- Shift to Year-Round Service: Engage with clients throughout the year in order to improve client relationships and offer value-added services
Transitioning your business from once-a-year tax preparation engagements, to year round activity is essential to solving the revenue challenge. Making the shift to year-round engagement means you can talk to your clients frequently and monitor their accounting throughout the course of the year. You’ll soon be able to identify additional ways in which you can help them with value-added services.
With added value, comes the opportunity for increased fees and in turn, MRR. So, as a result, you’ll still have a bump in revenue and workload during tax season. Yet, your overall revenue will increase and the workload is more evenly spread.
MAKING THE SHIFT TO MONTHLY RECURRING REVENUE
To better understand how you can move from project based billing to MRR, it is important to first understand where this opportunity comes from.
Receipt Bank’s technology automates the collection and management of client data and cuts the time spent on tax prep for your self-employed clients in half. Our award-winning Self-Employed client solution saves you time on those mundane tasks and categorizes the data automatically so that you can access a Schedule C summary anytime throughout the year.
What this all means is that with more time freed up, you can focus on providing value-added services to your self-employed clients throughout the year. The best part is, other than adding Receipt Bank’s technology as part of your tax preparation processes, you don’t actually have to do anything differently in order to see the time saving benefits.
Here is an example of how you can shift your pricing from project-based billing to MRR in order to increase revenue.
If you are charging clients a one-time fee for their tax preparation needs, then your revenue per client likely looks like the example on the left: derived from a once-a-year engagement without any value added services.
However, thanks to Receipt Bank’s technology, you can instantly take advantage of those opportunities to offer value-added service and in turn, increase revenue by 70%.
- Audit-ready archive: All of your client’s items submitted through Receipt Bank will be stored in their own personal archive on the cloud. This means their expenses are categorized, tagged, coded, searchable, downloadable and that you can deliver anything an auditor requests.
- Disaster protection: Your clients can sleep soundly knowing that in the event of disaster, they don’t need to worry about saving financial records because everything is secure in a central cloud location.
- Year-end tax planning: Minimize your client’s tax liability and meet face-to-face with them to identify where else you might be able to help them.
Remember that graph from before? It looks a little different now with the addition of monthly recurring revenue.
BETTER FOR YOU, YOUR CLIENTS, AND YOUR TEAM
When revenue, and workload, is spread more evenly throughout the year, you'll see the benefits almost instantly. After all, the revenue challenge doesn’t just affect you. It has an impact on your clients and your team as well. Here’s what solving the revenue challenge means to everyone involved:
- You: cash flow is much more manageable and your firm’s financial health improves. Long nights during tax season are eliminated. Plus, you have the opportunity to position yourself as a trusted advisors.
- Your clients: Client relationships are strengthened by receiving tailored advice, giving them a better understanding of what’s actually happening in their business.
- Your team: No more burning the midnight oil, and the opportunity to grow as an accountant to provide more advisory services throughout the year.
