The Wize Way

Episode 97: Tracking the right metrics- your Fab 5 Dashboard

• Wize Mentoring for Accountants and Bookkeepers • Season 1 • Episode 97

Share episode

Get EXCLUSIVE ACCESS to the Wize Fab 5 Key Performance Indicators when you subscribe to WizeHub: https://www.wizementoring.com/wizehub-offer/
_______________

Join us on The Wize Guys podcast as we unlock the full potential of your accounting or bookkeeping practice. Discover how the Fab5 KPI dashboard can revolutionize your firm's health, guiding you toward enhanced team performance, revenue growth, and operational efficiency. Dive into the art of leadership and strategy with actionable insights, empowering you to become the informed leader your firm needs.

Whether you're leading a budding firm or a seasoned practice, learn how KPIs like lockup figures can serve as the blueprint for scaling up. With monthly KPI presentations, we're igniting a passion for excellence and continuous improvement while addressing the unique challenges smaller firms face. Tune in and elevate your practice to new levels of success!

________________

PS: Whenever you’re ready… here are the fastest 3 ways we can help you fix and grow your accounting firm:

1. Download our famous Wize Freedom Strategy Map for FREE - Find out the 96 projects every firm owner must implement to build a $5M+ firm that can run without them - Download here

2. Need to Hire right now? Book at 1:1 FREE hiring assessment with our WizeTalent recruiters to help find your next best employee locally or offshore – Click Here

3. Book a 1:1 Wize Discovery Session – Spend 30mins with our Wize CEO, Jamie Johns, a $7M firm owner who is ready to give you his entire business plan to build a firm that can run without you – Find out more here

Wize Mentoring:

From Wize Mentoring is The Wize Guys Podcast, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time-poor practice to a business that runs without them. I hope you enjoy and subscribe!

Thomas Sphabmixay:

We're talking about the Fab5 KPI today. We're also going to be talking about where you can go about completing your Fab5 KPI dashboard. I won't go too long on about what the KPI's are, because this is something that we're quite truly familiar with. Now I want to be able to spend a bit more time going into the dashboard itself. This is all along the lines of processes. It's all about getting our processes right and building up that extraordinary system, having that performance dashboard for the system as well, so we know how it's tracking along.

Thomas Sphabmixay:

It's really interesting being able to see into different firm's Fab5 KPIs. We've all experienced this during the Wize Growth Super 8 sessions we've been having, where we actually meet with each other in a set and look at the Fab5 KPIs. There's so much you can gain out of looking at your own numbers as well as trying to look at them. If you ever have the privilege to, or you're in part of Wize Growth being able to look at the numbers of other firms and then marrying up the story that's currently happening in that firm against the numbers, you can get your ideas in sync with what the numbers are telling you. If it's reading, for example, a negative capacity, does that actually reflect in the firm? Do you feel that workload is very tight or, if you have spare capacity, do you feel like you do have the room to grow, or are people complaining about too much work? It's really important to look at your numbers. Without looking at your numbers, any advice you might be given or any decision you might make for your company is going to be extremely general and generalized. You'll be making generalizations and assumptions that you shouldn't be making. I would tell you now it happens more than often that seeing the numbers, will make you perceive your decision that you have to make completely differently. If that happens enough times you definitely need to look at your numbers before you make these decisions. I've seen enough times and all of us as mentors have seen enough times where you're thinking one way and you look at your numbers and it immediately makes you think a different way. There's enough of that happening that it's scary to try and make decisions in your firm without looking at the numbers. That's what we're going to be talking about very briefly today.

Thomas Sphabmixay:

You can't manage what you can't measure Getting your KPI dashboard into place. Once you start seeing the numbers, then you have something that you can drill into and tweak. Until then, you're just going to be making guesses. I won't go too much further on that. The Fab5 in the Wize Hub dashboard. When you're looking at the Fab5 KPI dashboard, this is now inside of our Wize Hub. That's just generally found under your accounts and your Fab5.

Thomas Sphabmixay:

As you can see, the first KPI of your Fab5, we're looking at your revenue and we're looking at it on a team basis as well as looking at a firm basis. When you're looking at your KPIs, instead of just going through what each of these numbers is focusing more on trying to interpret what story this revenue is trying to give us, we can see that Chris's team is growing substantially. They're growing substantially and they're also ahead on their budget. They're doing much better than they were last year and they cost the goods sold. Even though they're doing quite well, they're cost-to-good sold. They're definitely on the high end at 58%. That's resulting in a 2% EBITDA. You several interpret this way. You can interpret this as we're growing really quickly, but even before we experience growth, we might have had infrastructure come into place for this team to catch the increasing infees. But then you're looking at this and you're going well. If we grow any further to try and get this cost-to-good sold down to 40%, then we might, in fact, have to split this team into two, because we're already approaching 1.3 mil. This team is probably full of unsure individuals.

Thomas Sphabmixay:

The more you look at these Fab5 KPIs and you have them into place and you look at how your own story is reflected within these numbers and you look at the stories that are, the numbers of other firms, and what stories are happening with them, it's very possible to see the entirety of your firm's performance, from revenue, from financial figures to production, sales and satisfaction in client team and NPS figures as well. That is our Fab5. The Fab5 in the Wize Hub. You should be able to come to this KPI dashboard.

Thomas Sphabmixay:

What you're looking for here as a firm owner is if we're all green light here, then move on to something else.

Thomas Sphabmixay:

Like yes, you can spend time trying to optimize the workflow templates of your production team, but if the work in progress is sitting under two weeks' average worth of work and you're achieving budget and your cost-to-good sold are all good, then you're not really going to get much more out of trying to improve a workflow template.

Thomas Sphabmixay:

So go and focus on something else. Focus on what training systems or what marketing or sales systems you're putting into place for your firm and try to work on the actual metrics that are going to have your firm grow, such as your fees and then look at your leads, the client percentage, or you might be addressing things around your team and NPS. So, Tim and Kristy, we've had the privilege so far of being able to work with firms in their one-on-one sessions as well as now in their super eight sessions. What sort of advice or you want to give out to firms in the areas of making sure these are up to date as well as how to make me a better leader by using the data that we're putting together here? Tim, you want to go first.

Tim Causbrook:

Yeah, you touched on the leadership aspect, and it was crucial for me to make my client managers into leaders. A lot of the numbers that we're looking at on this screen are numbers that traditionally, owners would be expected to care about. That being said, I know plenty of owners, including myself, who haven't really cared about the numbers as much as they should have, and so the way you make people who aren't owners, who are employees, think like owners and act like owners is make them care about the things that an owner should care about, and this goes right back to Warren Buffett. Ed talks about it as well, but so does Warren Buffett. He talks about his ideal employee being someone who acts in the shareholders' best interest, and acts as though their own personal finances are invested in Berkshire Hathaway. So it's just a really great goal and really at the top management level the team leader level, showing them these numbers at least once a month and breaking it out per team creates that accountability, that responsibility, and it really makes them care about the numbers. They might not care about them initially I know in my own firm people didn't but they will come to care about them and, as Jamie says, everyone wants to be a winner. No one wants to see a read- across- slash across the whole dashboard there. You want it to be black and I'll just speak to a couple of things there. People get worried that it might make different teams competitive or crack toxic competition. It just never has.

Tim Causbrook:

In my firm, everyone wants to do well, but people want to see their colleagues do well as well and we're ultimately one firm. So we don't really do well unless everyone does well, and so it's just been nothing but positive and we're really focused on improvement. Bad teams can improve and get into the black. Good teams can still improve as well. So we don't talk about bad teams and good teams.

Tim Causbrook:

My firm it's just improvement. Is everyone doing a little bit better this year than they were the year before? And it's working on the business, not in it. So if you do a meeting where you look at these figures with your team leaders, it's a bit of time out of the busy calendar, probably packed with client meetings and reviews and things. It's a bit of time for everyone to just have a pause, look at the dashboard, make adjustments, and then look at the dashboard again the following months, and make adjustments. You don't want to be looking at these figures every day, but you also don't want to be not looking at them at all. So, yeah, I really couldn't encourage you more strongly. There are so many intangible benefits that you come out of looking at these figures on a monthly basis, per team breakdown if you're big enough that you've got more than one team.

Thomas Sphabmixay:

That's really well put, Tim. It's amazing how, as mentors right, Tim and Kristy we can see that the long-term strategic position of a firm can completely change within a month. You have people who might have health issues or you might have situations that come out of your control within the firm, and then you're hopefully looking at these numbers on a monthly basis to make adjustments and to see if the ship is still sailing straight. If you get a lot of crap come up during the month and you look at your numbers and go well, at least we're sailing straight, you know. Like you know, even if this stuff does have an effect, I can sort of estimate the magnitude of this effect, and then, versus these numbers, I think we've got a buffer going and that's the healthiest thing.

Thomas Sphabmixay:

Okay, this is you know. You look at a bank balance and go am I prepared for this expense? But this is looking at your business and going. Does it have the buffer you know in place for it to take on shocks that can affect a broad number of different divisions within this firm? So thank you for that, Tim and Kristy. How about, from your experiences, what sort of challenges have you seen firms run into trying to implement their Fab5 and what advice do you have for them?

Kristy Fairbairn:

Look, I think Tim spoke about some really great points for larger firms when they have a full team or they're moving into second teams. I find that firms that are smaller and still in that growth phase aren't prioritising their dashboard as much. But it can be lonely running a business, particularly when you have a small team or you're in a growth phase, and when you have your Fab5 dashboard set up it really helps support you. It's like an additional part of your team to really look at the numbers and gamify your business, see how you're going, particularly when you're stuck in it and you're in the weeds and you think, do you were smashing out the work? And you come and look at your Fab5 and you're way off the budget still or you're way over the budget. So, yeah, that's why it's been hard. It just gives you some validation and direction as you grow and scale your business to reach your ideal metrics on your Fab5. It's also a great way of leveraging with your team members to get them to see where you're going and help you make decisions around hiring.

Kristy Fairbairn:

If your cost of goods is still sitting really high, then you need to look at the resource mix you've currently got. Are those people serving you well when you look at your write-ups and write-offs, are you measuring those? They're really important to get a handle on the productivity and billable capacity of your team. If they all seem really busy but you're also doing a lot of write-offs, recoup that money. What strategies can you implement in your business to get paid for the hours that your team is doing, rather than writing off a lot to the business and absorbing that loss? So there's plenty to be diving into in your Fab5, even if you're a team of one or you've got multiple teams of multiple team members.

Thomas Sphabmixay:

I'm going to have myself, Kristy. It's important not to get discouraged that we're like a smaller firm and maybe we don't need to have these things in place yet. I can sort of it's more so I've got a close handle and a feel for the firm and whilst that might be true, at some point you will get to the point where you're not going to remember the names of certain staff members, maybe, okay, and you're not going to know who certain clients are belonging to which client manager, and you're going to need numbers to be able to drive that. And hopefully, at that point, you've already had a good habit in place, rather than now trying to get that habit into place. Okay, that's very well put, Kristy.

Thomas Sphabmixay:

From my end, what I've seen is probably one of the most challenging KPIs that firms have been trying to get a number on is the lockup figure. Now, it's fairly straightforward. Talking a bit further on the Fab5 itself, you've accessed your Wires Hub. You've been able to get your revenue and your profitability in. Where I see the major roadblocks occur with most firms surrounding a lockup. Okay, because in addressing your lockup, you actually need to address in which software are you getting your staff to import their time sheet as well as tracking the workflow and the fees associated with that workflow. So that's a hugely challenging one that I see a lot of firms go through. A lot of time it ends up looking like I need to make major changes and training to how I get my administrator to go about managing a workflow software. The advice that I can give is please start getting your team to do the time sheets. More importantly, even if your team is already doing the time sheet, if you're an owner in the position where you're also doing some client manager activities, please also do at least for the part where you're dealing with clients or you're having to review a certain amount of work or something. Just please add that part of the time sheet in. Because I was just in a board meeting this morning and I'm looking at a firm and they had about 86,000 right up.

Thomas Sphabmixay:

Now that obviously looks amazing. That looks great. It means we're pricing the jobs well, we're getting the jobs done on budget. But then he says to me on average I'm spending about half of my week reviewing work or seeing clients. Now that works out to be more or less about 70. If you get a given month of 160 potential hours and you're working productively half the time. Then you have about 70 or 80 hours that you're spending on your production per month and on a monthly and annual basis. That adds up to a lot and over six months at 70 hours per month, worked out to be something like 420 hours that the owner has put into work and at a charge rate. His charge rate was $400 an hour. It worked out to be 172,000 in WIP he has put into work, but that's not reflected in the write-ups and the offs.

Thomas Sphabmixay:

Now, okay, we're trying to withdraw the owner out of the position. We're going to work beyond that. We're going to get a team that is going to take the work off the owner, but for now, we're not going to know exactly. Together with knowing our capacity planner, we also need to know just how much workload is surrounding the owners themselves. Okay, because we need to be able to transfer that into the team.

Thomas Sphabmixay:

So, essentially, what the solution was is that the owner had to do and I implore everyone to visit this part of the WizeHub. If anything, because this is a very practical exercise that comes out of looking at the Fab5 please look at your quad activities owner's sheet. Okay, you're going to find that if you're an owner and you're doing client managing or reviewing or anything like this, you need to do a stock take of exactly what is actually on your list of tasks at the moment. You know, we need to be able to package up, look at your collection of tasks and package them up and then delegate this to a team member and then ask ourselves, what do we have to remove from that team member down the line? And so, hopefully, what that's going to do is there's this invisible write-off that is a part of every firm, every one of us. Okay, because owners don't do time sheets. It's very hard to get an owner to do a time sheet, okay, so every owner here has this invisible amount of time sheet that's going on here. So you might think, oh, the team's looking great, well, adding your write-offs, okay. And then you're going to realize that if it's substantial enough, then please do this Quad activities owner's sheet, do it to the extent where you can see groups of division, three items, groups of division four items, and so forth. And these are the tasks that you start to delegate from the top line of your team and that's going to help you inform.

Thomas Sphabmixay:

Okay, I think it's giving me an even clearer picture. Who exactly do I need to hire and what it's going to make you do? It's going to make you identify individuals in your firm who are going to be receiving your responsibilities, and then you're going to have to look at their responsibilities and what has to shift down the line. You have to put a point forward to your team that if you want to be able to progress in your role, you have to be able to go go lower-end things. So, as a leader, let me help you decide. lower end of things now moves down the line. Okay, you go to this person. You just sort of make sure they do it properly and, with the space you have opened up, I'm going to hand you something from my plate. Okay, cause I trust you, you work closely with the owner, so I'm going to hand you something from my plate and this is going to help level you up as a person. Okay, you're on to more advanced things. Now this is what I.

Thomas Sphabmixay:

So you have to think about the PR. Okay, the process is like this, because in any normal environment, people like the boss trying to give me more work. I don't think so. You know, I don't think so. You have to keep that in mind, that that's a real thing. So come in with your PR and your optics in mind how it's going to look like always to your middle managers, presented as progression to your more junior members. They are looking for work anyway. Your grinders and your production people are looking for work because if they don't meet their 90% productivity levels, which get reviewed on a weekly basis, they're going to feel like they've failed. The hardest challenge for them is getting enough work that fills them up to 90%. All that sort of discussion sort of happens off the back of this lockup metric. Okay, so when we're going into red flags around lockup, we can go really, really deep into people. We can go into people's roles and responsibilities because what we're trying to address in work-in-progress is this balance tells us how much unfinished product is lying around in the factory.

Thomas Sphabmixay:

Okay, so, moving on from write- ups and offs how much-unfinished product is just sitting around in this factory and looking at you know a sort of average of your monthly capacity? Your team has the ability to produce. So this $1.2 million team, they're producing about 100K every given month. Okay, so if they've got $15,000, $16,000 worth of work in progress sitting on their plate and they can do $100,000 per month, then they've only got about 16% of work like a work in front of them over four weeks. That's less than a week, it's just a little bit over a week and a half worth of work. So you get a new client comes in and just generally speaking, you're like, well, there's not much work in front of this new client. Quite certain we can quote you that we're going to get it done within about four weeks.

Thomas Sphabmixay:

Okay, but if this whip is reading 200,000, then you've got two months' worth of capacity stuck inside your unfinished product. So if you get a new lead come in, what are you going to tell that lead? That your turnaround time for your job is about eight to nine weeks away. So it's highly important to measure this metric. We need to know that food that is coming into the firm is getting digested and coming out the other end Okay. So we cannot have built up. If your certain software might have this I've seen, but not all but you might actually be able to bring up a work-in-progress balance aged as well.

Thomas Sphabmixay:

The whole point is we want to be able to get this number for work in progress as low as possible, and the lower this number, the better indication it is that your firm's workflow practices are smooth and your roles and responsibilities make sense, and appropriate that in combination with write- ups. Okay, with respect to how much time sheet the owner is putting in. Okay, so look, if you're not doing time sheet, it's all right. We can estimate it in about 20 seconds with a calculator and get probably close to about 10 or 20,000 of your actual billable hours and then take a look at that. But it still means that you've got to write off. So we want to keep these numbers low. So our lockup days are low.

Thomas Sphabmixay:

I've seen firms where revenue is tracking along budget if it looks great and then they're whipping it like their debtors are out of control or like their lockup just doesn't look right. It's a broken machine. Yes, you can build. Yes, you can. You know your billing on a say and then, on a cruel basis, you're showing profitability. But you need cash in the bank, and cash in the bank is informed by our metrics here. Okay. So I highly recommend in your next stage in implementing your WizeH ub, that you're not only looking to input your revenue and profitability numbers.

Thomas Sphabmixay:

I want you to understand lockup a little bit deeper and then actually have a go at getting those numbers from your workflow system because as far as the fab five is concerned, it's a really simple worksheet. All we need to do is we've got our work in progress, our write- offs. So work in progress balance at the end of the month and debtors balance at the end of the month and write- offs off year to date. Next look, if we just finished June, we just want to put what's the work in progress sitting in our office right now, put that number in, what are our write- ups and offs so far? Okay, if we're looking at all completed jobs what's the difference there? And put it into this box. And then your debtors, okay, and that's pretty much all there is for entering your lockup. As you can see, the hardest thing would be to get your workflow software to reflect this.

Wize Mentoring:

Thanks for tuning in. If you liked this episode, please remember to subscribe and leave us a five- star review. For more practical Wize tips on how to build a business that runs without you. Head over to wisementoringcom wizementoring. com/ to download a free copy of The Accountants 20-H our WorkWeek Playbook. We've included a link in the show notes below. See you in the next episode!