Top Practical Strategies for Tax Preparers to Increase
Increasing profitability is a fundamental part of growing a business, especially when it comes to maintaining a full-fledged, successful tax preparation practice. For small to mid-sized tax preparation and accounting firms, there are plenty of strategies to do so. Whether a firm’s goal is to increase its overall headcount, sales, revenue, or decrease its expenses, here are six strategies to increase profitability and revenue in 2024.
- 1. Create a Referral Plan
- 2. Cross-sell Services to Existing Customers
- 3. Reduce Inefficient Spending
- 4. Revisit Marketing Strategy
- 5. Revisit Pricing Strategy
1. Create a Referral Plan
Word-of-mouth referrals are powerful for any business, let alone tax preparers and accounting businesses. When it comes to hiring in tax or accounting, clients need to make sure they can trust new hires coming in and the overall firm before sending over their earnings for tax preparation. Having a recommendation from a potential client is a great way to ensure someone they trust is working for one’s tax preparation organization.
This is another tactic to bring in more client referrals as well. If clients are happy with one’s service, they will happily send their friends and families over to that tax preparation provider. Keeping client’s content is of the utmost priority for any tax firm, and having a client referral plan is a good way to provide clients the opportunity to refer their friends and family. The best way to do so is by compensating clients for sending the firm new business. This simple way of incentivization is perfect to keep advancing and growing one’s firm. If one does not want to offer existing clients money for referrals, they can introduce other alternative incentives within the plan, such as free additional services, discounts, or free resources.
2. Cross-sell Services to Existing Customers
Customer acquisition is often the biggest focus for a tax preparation or accounting firm; however, one should always make sure not to forget one’s existing client base. It is often easy to forget one’s current clients, yet they are the easiest individuals or businesses to sell to as they already trust the firm and love the firm’s services. If one offers a variety of tax and accounting services, it may make sense to package them together or talk to clients who haven’t signed up for them. These services may make sense for them to add to their current package; they just are unaware of the. One should segment their client base list into the different service packages they are under and approach them with offers to sign them up for additional services that they would most likely be a great fit for. These additional services may be perfect for a client and add additional revenue from one’s existing customer base.
For example, a tax preparer may have clients who are signed up for general tax preparation services but could use additional additional tax planning or audit services as well. One can introduce existing clients to new additional services with an email letting them know of the existence of another service that could greatly benefit them, or a simple meeting can get the point of interest along as well. Offering a discount for these additional services is a great way to entice clients and interest them in adding the additional service to their overall package.
3. Reduce Inefficient Spending
A tax preparation or accounting firm should never focus on low-value tax and accounting services. This is because these types of services do not turn much of a profit and can be considered as a big drain on resources and employee time. If one has many different offerings and were to consider dropping low-value services entirely, this could free up a bunch of time for tax and accounting staff to focus on higher-value work that requires more focus and time commitment while increasing the overall firm revenue.
The same can be said with expenses. The goal of every tax preparation and accounting firm is to reduce their expenses, but how can that be done? The first order of business is to look at all expenses and evaluate the area of overspending. This could be expensive office space rent, expensive contractors, or an unnecessary amount of staff. This can be changed by operating as a remote-based firm or outsourcing responsibilities to an external firm rather than keeping it in-house. Automation and accounting software can also reduce the manual labor hours a tax preparer or accountant would spend on that task, saving time and money.
4. Revisit Marketing Strategy
Marketing is essential for any business, let alone a tax-prepping or accounting firm. This function of the firm is one of the most important aspects of the business as it often can be one of the sole providers of clients for the firm. Keeping it fresh and up to date is crucial in order to stand out from the rest of the tax preparation and accounting firms. Competitors all invest heavily in this area of the business as, while it can be an expensive investment and commitment, it can also pay dividends for one’s tax or accounting firm.
The key to getting more clients and referrals lies in building brand awareness and exposure for the accounting firm. Focusing on aspects of brand building, such as blog content creation, social media marketing, search engine optimization (SEO), and paid online advertisement, is crucial for marketing success. Investing in these areas of marketing and either outsourcing these responsibilities to a marketing agency or hiring in-house marketing professionals should be a major priority for any firm. This is the aspect of the company that will allow one’s tax or accounting firm to skyrocket its profitability, revenue, and growth.
5. Revisit Pricing Strategy
Tax preparation and accounting firms should always revisit their pricing model regularly as the market forecast and economic outlook change. In order to increase profitability, a firm can increase their service fees to boost profits or reduce them to become more competitive in comparison to competitors who may have higher rates. The basic concepts of supply and demand apply to a firm’s pricing strategy in this example, and it is important to differentiate which strategy to choose for the firm. An increase in price can potentially drive existing and new customers away from competitors, while reducing the price can undervalue the service a firm is providing, leading to smaller margins.
Another approach one can take is to change their operating pricing model to a value-based pricing model rather than an hourly one. The industry standard for many tax preparation and accounting firms is to operate on an hourly basis; however, this often creates additional work for employers as they need to document and forecast how much time is spent on each client. This can increase one’s costs overall as employees work longer for clients than necessary. A solution to this problem is to price one’s services according to the potential value one believes they can provide to their customers. This could be a fixed cost per service, or something alot more flexible. Regardless, a firm would know exactly how much revenue they are retaining which each client, allowing them to avoid the guesswork in estimating hours for the client. The client would often appreciate this pricing model as they get a valuable service for one fixed price rather than paying by the hour.
How tax preparers can make money year-round?
Tax preparers stay busy year-round by taking on both business clientele and individual clientele. This allows individuals to make good money in the off-season, helping businesses and individuals fulfill tedious IRS requirements.
Will tax preparers become obsolete?
In the accounting profession, a major concern continues to be that AI will take over jobs and make human tax preparers and accountants obsolete. However, this fear is largely unfounded and based on misconceptions about the capabilities and intentions of AI.
What is the busiest month for tax preparers?
For most tax preparers, the busiest time of the year tends to be the tax season rush, which begins in January and doesn’t slow down till Tax Day, which is around April 15.
Is there a shortage of accountants in 2023?
There is currently a major accounting shortage that has brewed for multiple years now. The growing problem continues to be underlined by the massive drop in the number of tax and accounting graduates sitting for the Certified Public Accountant (CPA) exam over the past few years.