6 Mistakes to watch out for when setting up Xero Practice Manager with Practice Ignition

Over the past 10 years, I’ve gained some pretty vast (and some might say random!) experience within the accounting industry, sharpening my expertise as a Practice Manager at multiple firms.

I was also part of the first wave of implementation partners for Xero and went on to implement practice management software for accountants in a number of roles, including Head of Customer Success at Practice Ignition in their earlier days. Needless to say, I’ve gained some niche knowledge around how best to implement Xero Practice Manager and Practice Ignition, yet also understand how to make it work logically and functionally in your daily operation of running an accounting practice.

It’s also why Clarity Street was founded. We understand there is a gap in the market for helping firms to navigate their way around the operational line of business application space and how to make these apps work functionally within your business. Clarity Street will extract the frustrations you feel within your business and help you build wealth through leveraging your technology.

Whether you use a third party to assist or self-implement, the following is what we believe to be the 6 most common mistakes you should watch out for when embarking on the implementation of Practice Ignition (PI) and Xero Practice Manager (XPM).

Before we begin, it’s poignant to note PI & XPM are both great pieces of software in their own right, and together they dramatically enhance the client experience and the operational excellence of a firm.

There are industry opinions that may contradict this of XPM, however, one might also suggest this stems from an industry trying to make this application work how they are used to with other older, server-based practice management applications.

Let’s get this clear from the outset.

Stop trying to over-engineer the software, it’s not the same piece of software you are used to, it’s new and it’s different so if you think differently, then it will give you the information you need. If you think the same, you will be frustrated and blame the software for its shortfalls...instead of maybe yourself!

1. New software, same process

Traditionally accountants are quite reactive to their client needs, only really moving on client work when there’s either a fast-approaching deadline or if the client contacts them. This behaviour from the outset leads to an inefficient process because the client is in control from the beginning, instead of the accountant.

Once the work arrives in the office there’s a long-winded pickup/put down the situation as you go back and forth to the client to get the relevant information to complete their work.

When you finally complete the work, it could have taken months, instead of days. After raising the invoice, not all clients are diligent payers and depending on your payment terms, these can stretch out to several weeks before payment is received. All in all, it’s traditionally an inefficient process that’s racked with delays and in many cases write off’s due to extra time spent unintentionally.

With the implementation of PI and XPM, you are perfectly poised to rethink your client lifecycle process before you implement the software. Clarity Street are strong advocates of running a work schedule to proactively call-in clients work based on when you completed it in prior years.

It’s not an exact science as clients have a habit of wanting things done at a different time sometimes, but for the majority, you can schedule and then call in the compliance work, therefore managing client expectations and capacity internally. Scope the work based on what you did last year, and contact the client to get any missing information, but don’t start the work yet!

Prepare a proposal in PI, select the billing type (ie, on acceptance, on completion, monthly recurring – we're BIG fans of on acceptance!) turn payments on, send it to the client. Off the back of an accepted proposal, you receive payment, the invoice automatically deploys into Xero, your jobs automatically deploy into XPM, the invoice will feedback to the job and then because you have everything you need, you can start and complete the job in a matter of days or weeks.

Any additional queries during the job will be answered in a more timely manner because the client has paid you, and likewise, the expectation to complete the job quicker internally is much higher. The clients are happier, and the business is happier because you aren’t spending wasted time writing lengthy invoice descriptions and then chasing debtors!

The common mistake here, is sticking with your same processes and remaining reactive to your clients when you now have software that will allow you to be very proactive and enhance your client experience.

2. Your fear around your perception of your client’s reaction

Possibly the two things Accountants seem to hold the most dear to themselves in this industry is their time (because that’s mostly how they bill for their services and quantify their value) and their relationships with their clients, they are fiercely protective of them and very fearful of upsetting them.

To the point where, they are more likely to adapt their own internal processes and procedures around what they believe the client wants, to make the client happy, often to the detriment of their own operational accounting practice needs.

Practice Ignition as we know, greatly enhances the client experience for engagement and payment. Xero Practice Manager greatly enhances the accountants experience to complete the clients work.

If you fear to communicate with your clients about the new software you are implementing and therefore the changes the client will experience, then it could quite possibly halt your implementation, or your full adoption of the wonderful features PI has to offer in relation to what the client will see.

For example, you may not necessarily like the entire layout of how the onscreen acceptance or PDF version of a proposal is presented, or you may be fearful of presenting your fees upfront to the client so you can assist them with their cash flow and yours, or you have concerns around requesting payment upfront before you’ve completed their work.

Let’s debunk some of your fears:

  1. Proposal Presentation: 99% of your clients will LOVE the experience of online acceptance. They won’t care if the formatting of the pdf isn’t exactly spaced like your old word documents or where the position of your logo is. What they will care about is the ease of understanding clearly what service you are providing, the ability to click to accept, the ability to provide payment for your service, the fact that you have been upfront from the word go and there’s transparency.
  2. Upfront Pricing: there are many options for pricing your services within PI, but ultimately there will be a version of providing a fee upfront when you create and send a proposal to a client. Therefore, stop hiding behind your hourly rate. Unless it’s a brand new client, with any current clients you already know what you’re going to bill them. It’s the same price you’ve charged for the last three years with a 3-5% increase give or take. So, use this as a guide and if you get halfway through the job and something unexpected pops up that you think will blow out what you quoted, communicate this with your client and raise a new proposal or once-off invoice. This avoids any scope creep and allows the client to make a decision.
  3. Payment Upfront: You don’t get to pay for your flight when you get to the destination, so why isn’t it the norm to take payment upfront for the accounting industry? Again, there are a multitude of options through PI for the timing of when payment is taken, Clarity Street are MASSIVE fans of payment upon acceptance though. It keeps everyone accountable, clients want their work done quicker and will also get info to you quicker if it’s paid upfront. Accountants have to get work done quicker and can’t drag their heels, so meeting lodgement deadlines is way easier.

    No more debtor days, no more wasting time on debtors, an improved cash flow position for you and your clients. It can be a challenging conversation at first, it takes communication with your clients, but I promise you, it will transform your business model (and your stress levels) by moving to an upfront payment model. Look to do this for the majority of your client base, that 5% that are always bespoke, handle them the same way you always have!

Don’t let your fear or perception of how your clients will react, halt your implementation. You’ll always get a handful of clients that won’t like your changes, just don’t let this handful deter your plans to implement.

The naysayers will either toe the line, you’ll adapt depending on how important they are, or they’ll move on, plenty more paying clients out there though!

3. Group Names & Contact Details

The accounting industry is one of the few that have to deal with the database upkeep where one contact can be related to multiple entities. This can get confusing at times around management of a group, processing all the relevant compliance requirements and which entity is the billing entity.

XPM has a feature that allows you to create a group name and then link in all the relevant entities so at a glance, you can see all the jobs, invoices and WIP position of the entire group should you need to. The more pertinent point here is how this group name then links through to Practice Ignition.

Traditionally accountants will send one engagement letter via a word document that will list out the relevant entities associated with the agreement. Because PI is so simple and user friendly, best practice, along with directives from governing bodies suggests that each entity should have their own engagement agreement accepted, just like a client would sign a tax return for each entity.

By ensuring that every entity has a group name associated with it in XPM, not to mention that every client has a contact name and email address input, you can now send your proposals to each entity individually or as a group so that the relevant director will accept the entities proposals.

There’s a knock-on effect here also that will allow you to deploy a job into XPM off the back of an accepted proposal for each entity, which allows for clearer job and workflow management in XPM. There are conflicting opinions in the industry about job management in XPM.

Some say that having one job with multiple tasks that relate to the relevant compliance requirements that get managed through task manager is a good approach. In our experience as the software stands today, we have found this to be a cumbersome approach to managing workflow in your office as it removes the onscreen ability to quickly see what work is due and the state it sits in.

If in time the software platforms change, we will willingly support this option, however, right now Clarity Street’s preference is still multiple jobs for easier on-screen reporting and job management.

Regardless, our recommendation here is to ensure that all contact details, client details and group names in XPM are thoroughly filled in for the most up to date proposal creation experience and to allow the flexibility that both systems offer, no matter which way you create and send your proposals to clients.

XPM has a client export and import function that can help to plug the gaps, however, be aware as this can also cause very big issues if done incorrectly.

4. Service library and job templates

Before Practice Ignition came onto the scene, early adopters of Xero Practice Manager loved the idea of having a job template for every type of service they sold, such as “Activity Statements”, “Tax Return – Individual", “Annual Compliance” and so on. They also liked to have multiple tasks for each job template and to-do items under each so that in theory, you could track the progress of a job as you went along.

Great in theory, but the reality is, as an accountant once you know how to complete a tax return, you don’t need to follow a checklist to make sure you’ve done everything. In fact, ticking off those tasks and to-do items became an afterthought and more time was spent micro-managing this, than actually doing the work.

In reality, unless you are reporting on how much time each task within each job is taking your team to complete, this function in XPM is a little obsolete. You really only need a couple of tasks available in a job template to log timesheet entries to either measure productivity or for invoicing purposes.

Taking this one step further, if you’re reducing the number of tasks on a job template and removing to-do items, then you really only need a handful of job templates in XPM.

What you should have though, is a lengthy and detailed services library in Practice Ignition, as many as you can think of. Best way to think of this is, whatever you have used on your invoices in the past as the descriptions for your services, these now become your services library in PI.

Then when you create a proposal and select the relevant services for your client’s needs, these are connected with your job template in XPM. PI has the ability to either copy the service description into the job description when you create the proposal, or you have the hyperlink to the proposal in the job upon acceptance of a proposal and deployment of the job, should you need to see what type of work is to be completed.

So, think less job templates and more services, because the automation of PI, will drive that efficiency of your job creation moving forward.

5. You only need one template for your terms and conditions

This isn’t entirely relevant to XPM, however it’s definitely something to look out for when setting up PI. Traditionally a firm would have maybe half a dozen word documents that are set up as the different entity type’s engagement letter, ie. One for a Trust, an Individual, a Company and so on. When engaging with a client, the admin team would select the relevant letter template and adjust accordingly for the client to sign and send back as agreement and an authority to act.

Practice Ignition doesn’t really work like that and if you create a multitude of different engagement terms, then you are diminishing the efficiency gains you created by adopting the software.

The easiest analogy here is like booking a flight online. Every time I fly, even if it’s with the same carrier, I select my flight, destination, time, seats preference and so on. When it comes to payment, I put the relevant payment details in and then before anything is processed, I have to “read” and then tick to accept that I have done so, the airline’s terms and conditions, which are exactly the same every time, accept for the details of the particular flight I am purchasing.

Practice Ignition is no different. The “flights” are the services that you select for the client based on their needs. The engagement terms are the high-level terms and conditions you need to display (usually sought from your governing body) that your client needs to agree on. These don’t change.

If for example, you have some very specific terms that differ from your standard engagement terms that need to be displayed (for example, some specific audits and SMSF’s need their own terms), you can place these in the specific service terms area. PI is super smart so these terms will only appear when that service is selected.

Keeping it simple, means if there are any updates you only have to amend one document, not to mention, you’ve removed the potential for human error when creating your proposals, because you can’t select the wrong template if there’s only one.

6. Let’s WIP your mentality into shape

WIP. The lifeblood of a traditional accounting business. Used to understand the financial position and projected billings for a given month. However, no longer relevant when your engagement software promotes upfront and mostly fixed price billing.

The paradigm is that WIP (work in progress), literally promotes inefficient behaviour. The longer you take, the more hours you clock up, the more you can bill your client at the end. Great in theory except for a minor catch, it is rare that a client is billed for every hour on the clock when a job has been completed inefficiently and gone way over the perceived budget, in fact, that’s when time gets written off, because the director already has an instinct as to what the client will be comfortable with paying.

However, the mentality in accounting businesses is that WIP is still such an important performance metric, even when a firm has moved to upfront pricing for the majority of their client work. Not to mention WIP can be manipulated by team members not logging their hours or working outside of business hours, therefore potentially underestimating the actual cost of the job.

To be clear, upfront pricing is more the norm than it is the exception these days. Clients expect it and it’s good business practice being able to assist them to manage their cashflow (giving them an indication of cost) and to manage your own cashflow.

Sure, there are firms that are still heavily entrenched in a time cost billing method, but those who have adopted PI, would have a majority on an upfront engagement (be it a fee for a project/compliance work) that is either billed on acceptance or on completion, or a fixed price monthly recurring billing type.

And this is great, but why are you managing WIP still in the traditional sense through XPM, if you’ve agreed on a price to complete the work with your client? It’s now a moot point, because you’ve given the price, the client has agreed, in a lot of circumstances, payment has even been taken, so if you go over budget, it’s no different to the traditional method. You cut your losses and write it off!

The focus for a reporting metric should look to something collectively more positive for the business, a figure that everyone can impact and will see increased efficiency gains, Average Hourly Rate (AHR). Setting a minimum target for the firm and then tracking the average hourly rate on a job, means that no matter who worked on the job, it’s about getting it done in the most efficient way possible, because the fee is already set from the outset.

It also means as an industry if we are striving for an increased AHR, then it is much more difficult to be rewarded for inefficient work practices. When you use PI and generate a fixed price proposal for the work you are completing, WIP is irrelevant, productivity, however, is a much bigger driver.

Conclusion

PI & XPM are great pieces of software and used in the right way, can greatly enhance your internal operation, client lifecycle and your client’s experience, leaving you and your firm in a positive position to complete work.

There are many help articles and video’s you can watch to implement this is the right way, otherwise get in touch with us at Clarity Street: [email protected]

6 Mistakes to watch out for when setting up Xero Practice Manager with Practice Ignition

About our Guest Author: Amy Holdsworth | Clarity Street

Amy started Clarity Street in 2015, with the conviction that by using the right software, simplifying processes and engaging teams, practices could really soar.

Over the past 10 years, Amy has gained vast experience within the accounting industry, sharpening her expertise as a Practice Manager at multiple firms.

She was also part of the first wave of implementation partners for Xero (following the purchase of WorkflowMax) and went on to implement practice management software for accountants in a number of roles including Head of Customer Success at Practice Ignition.

It was the frustration Amy witnessed during her day-to-day dealings with accountants, that sparked her desire to make practices more effective and profitable.

Prior to joining the accounting fold, Amy spent 10 years in business development and management roles within the hospitality and finance sectors, both in Australia and abroad.

In her spare time, Amy is a tantalisingly-good baker, an avid world traveller, and has recently returned to the competition stage for Calisthenics - a sport she dominated as a junior.

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