The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi GUIDE TO MANAGEMENT OF PRACTICE
FOR SMALL AND MEDIUM SIZED
PRACTITIONERS
Committee for Capacity Building of CA Firms and Small & Medium Practitioners (CCBCAF&SMP)
Guide to Management of Practice
for Small and Medium Sized
Practitioners
Committee for Capacity Building of CA Firms and
Small & Medium Practitioners (CCBCAF&SMP)
The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi
ii
© The Institute of Chartered Accountants of India
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DISCLAIMER:
The views expressed in this book are those of author(s). The Institute of Chartered
Accountants of India may not necessarily subscribe to the views expressed by the author(s).
The information cited in this book drawn from various sources while every efforts have been
made to keep the information cited in this book error free, the institute or any office do not
take the responsibility for any typographical or clerical error which may have crept in while
compiling the information provided in this book. Further, the information provided in this book
are subject to the provisions contained under different acts and members are advised to refer
to those relevant provisions also.
The Guide to Management of Practice for Small and Medium Sized Practitioners is based on
Guide to Practice Management for Small and Medium Sized Practices, Second Edition of the
Small and Medium Practices Committee, published by the International Federation of
Accountants (IFAC) in December 2011 and is used with permission of IFAC.
Edition : January, 2012
Committee/Department : Committee for Capacity Building of CA Firms
and Small & Medium Practitioners
(CCBCAF&SMP), ICAI
E-mail : <PRESIDIO_ANONYMIZED_EMAIL_ADDRESS>
Website : www.icai.org
Price : ` 50/- (including CD)
ISBN : 978-81-8441-513-1
Published by : The Publication Department on behalf of the
Institute of Chartered Accountants of India, ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg,
New Delhi - 110 002.
Printed by : Sahitya Bhawan Publications, Hospital Road, Agra-
282 003.
January/2012/500 Copies
iii
Foreword
The Institute of Chartered Accountants of India (ICAI) is committed to
augment the strength of the Chartered Accountants operating in small and
medium sized practices. ICAI is making constant endeavor to build their
capacities and to enable them to face and take advantage of the existing
competitive environment.
Small and medium-sized practices (SMPs) have a significant presence in
India and play more effective role in the domestic market. They need to grow
to catch expanding professional opportunities. Their growth would be
possible by restructuring their size, skill development and intensive
specialization in vivid areas of professional development.
I am glad to know that the Committee for Capacity Building of CA Firms and
Small & Medium Practitioners(CCBCAF & SMP) of ICAI has brought out the
book on “Guide to Management of Practice for Small and Medium sized
Practitioners”. This Guide provides SMPs with knowledge of practice
management principles and best practice guidance on a whole range
of practice management topics including strategic planning, managing
staff, client relationship management and succession planning.
The aforesaid Guide is designed to assist the members in encouraging good
practice management amongst the CA fraternity. The guide was originally
developed by IFAC based on global practices and principles. The Committee
has published the aforesaid Guide by customising and adopting the Indian
suitability & perspective and in synchronization of local regulatory, services,
record keeping and other related requirements. This guide has been
developed to help the members of ICAI make the best use of the
Management Practice guide .
I sincerely hope that the aforesaid guide will be of great help to our
profession and will help to serve clients better. I congratulate the Committee
for bringing out a guide which is useful for the Chartered Accountant
Professionals.
January 27, 2012 CA. G. Ramaswamy
New Delhi President, ICAI
iv
v
Preface
This Guide to Management of Practice for Small and Medium Sized
Practitioners has been prepared by the Committee for Capacity Building of CA
Firms and Small & Medium Practitioners (CCBCAF & SMP), ICAI to provide
guidance to small and medium sized practitioners ( SMP’s) on how to better
manage their practice and ultimately operate in a safe, profitable and professional
manner.
The Guide provides SMPs with knowledge of practice management principles and
best practice guidance on a whole range of practice management topics including
strategic planning, managing staff, client relationship management, and succession
planning. As such the Guide will help SMPs operate with greater proficiency and
professionalism and in a so doing help them cope in an increasingly complex and
competitive environment.
Members in practices use the Guide as is, or tailor individual modules to suit their
own needs. The CCBCAF & SMP is committed to serve the public interest,
strengthen the accountancy profession and contribute to the development of strong
Indian Economy by establishing and promoting adherence to high-quality
professional standards, furthering the convergence of such standards and
speaking out on public interest issues where the profession’s expertise is most
relevant. I hope this book on “Guide to Management of Practice for Small and
Medium sized Practitioners” will be a very useful support material for SMPs.
I place on record my deep sense of gratitude of CA. Anil Mathur & his team and
CA. Rakhi Govil for preparing the basic draft of this publication thereby sharing
his relevant experience and expertise amongst members. I appreciate the efforts
put in by the members of CCBCAF & SMP & officials of CCBCAF & SMP
Secretariat, who have provided necessary support for publishing the aforesaid
book.
January 25, 2012 CA. Vijay Kumar Garg
Chairman
Committee for Capacity Building of CA Firms
and Small & Medium Practitioners, ICAI
vi
Introduction
Purpose
The Guide aims to assist firms to practice in a safe, profitable and
professional manner. The Guide seeks to do this by providing practical
guidance across a whole range of practice management topics.
The Guide is intended to improve the management and operational efficiency
of SMPs so as to ultimately make them more professional and successful. As
such, the Guide is intended to: address the opportunities and challenges
faced by SMPs; improve the competitiveness, profitability, and sustainability
of practices; enhance the expertise, competence, and efficiency of those
managing practices; provide practical assistance to those engaged in
managing practices so as to provide an environment conducive to the
provision of high quality services; and, showcase global best practices and
latest practice management techniques.
Intended user
As the title suggests this Guide is primarily directed at professional
accountants working for or as SMPs. While its primary user is likely to be
those managing the practice and senior professional staff, certain parts will
be useful to more junior staff and as an introduction to the practices for new
staff. It is also considered suitable as a reference guide meant for everyday
use. In addition, SMPs may find the Guide helpful when it comes to providing
general business advice to SMEs. Likewise, professional accountants
working in SMEs may find it useful. Finally, students, educators, training
providers, researchers, and other agencies may find the Guide useful.
Coverage
The committee has sought to assist in exploring ethical and professional
challenges a practitioner will face as a principal, partner or employee in a
practice in addition to promoting a commitment to quality services to the
client, community and regulators. This may be developed as a formal
certification programme in practice management as part of regulation of
members offering public accounting services. The following table includes
examples how such programme may be structured and developed:-
Guide to Management of Practice for Small and Medium Sized Practitioners
2
Introduction to Public Practice:
• Local regulator or professional body obligations.
• Professional services marketplace
• Overview of what public practice involves and required skills and
attributes
Practice Structures
• Business structures for a practice
• Practice finances and resources
• Facilities management
• Partnership agreements
• Entry and entry strategies
• Business continuity and succession plans
Ethics, professionalism and risk management in public
practice
• Ethical issues
• Risk management
• Quality control
• Liability and insurance
• Professional standards for specific practice areas
Practice planning
• Strategic planning
• Creating and monitoring a practice business plan
• Defining services strategies
• Developing a technology strategy
Practice staffing
• The market for accounting staff
• Identifying practice staffing needs
• Recruiting , retaining and developing staff
Guide to Management of Practice for Small and Medium Sized Practitioners
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• Culture and values mix
• Delegation and supervision
• Communication
Business finance plans
• Financial issues for consideration
• Pricing and reviewing practice services
• Controlling work in progress
• Debtor management
Building and growing a practice
• Growth strategies
• Client review, management and retention
• Building a brand
• Strategies for putting plans into practice
Development of Module
It is intended to have 8 independent modules as per following details:-
Module 1: Practice models and networks
Broad Coverage of Module :
1. Forms of public practice business structures
2. Factors to consider in a public practice partnership or shareholders
agreement
3. Establishing a practice referral alliances network guide and checklist
4. Evaluating your potential partners guide and checklist
Contents of Module
• Which practice model is right for you?
􀂃 Sole practitioner
􀂃 Cost-sharing arrangement
􀂃 Partnership of equals
􀂃 Unequal partnership
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 The consolidator model
􀂃 Multidisciplinary firms
• Practice management
􀂃 Family members working in the firm
􀂃 Decision-making approaches
􀂃 Issues to consider when structuring or restructuring a firm
􀂃 Partnership agreements
􀂃 Remuneration and profit-sharing models
• Using networks to add value
􀂃 Advantages and disadvantages of network alliances
􀂃 Referral network
􀂃 Professional network
􀂃 Management support network
􀂃 The evolving firm and the need for regular review
Module 2: Building and growing your firm
Broad Coverage of Module
1. Developing a business plan for your firm
2. A marketing plan and checklists for your practice
3. Creating a sustainable practice
Contents of Module
• Developing a business plan for your firm
􀂃 A simple business plan outline
􀂃 SWOT analysis
􀂃 The organization chart
• Assessing growth requirements and developing a growth strategy
􀂃 Benefits of growth, and sustainability
􀂃 Should I grow, and if so, by how much?
􀂃 Internal growth strategies
􀂃 External growth strategies
Guide to Management of Practice for Small and Medium Sized Practitioners
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• Strategies for coping with increased regulation and competition
􀂃 Increased regulation
􀂃 Increased competition
• Creating a good culture for your firm
􀂃 Building a productive culture
• Identifying target clients and new service opportunities
• Building a brand, marketing and promotion
􀂃 Building a brand
􀂃 Marketing and promotion
• Putting your plans into operation
􀂃 The importance of implementation
􀂃 How to implement your plan
• Financial management
􀂃 The capacity budget
􀂃 The financial budget
􀂃 The cash flow forecast
Module 3: Technology and e-business
Broad Coverage of Module
1. Guide to introducing a paperless office
2. Guide to introducing a firm portal
3. Introducing an e-business strategy for your firm
4. Creating a first impression―your firm’s website
5. Checklist for creating a virtual office
6. Developing a technology strategy for your firm
Contents of Module
• Software and hardware options
􀂃 Choosing a hardware/operating system platform
􀂃 Terminal Services/Citrix (thin client computing) versus
traditional local area network
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 Software options
􀂃 (PC-based or fat client computing)
􀂃 Communications
􀂃 Document management, workflow and scanning
􀂃 Integrated suites
􀂃 Software and hardware selection
􀂃 Other hardware/infrastructure considerations
• Maximizing your current software and hardware capabilities
􀂃 Application champions
􀂃 Typing
􀂃 Multi-screen workstations
􀂃 Client concerns
􀂃 Email overload
􀂃 Personal digital assistants (PDAs, Smart phones, Blackberrys )
• New and emerging technology
􀂃 Hosted applications
􀂃 Social networking/online communities
􀂃 Wikis—collaborative knowledge
􀂃 Multimedia, video sharing and games platforms
􀂃 Blogs
􀂃 Communication technologies
􀂃 Freeware
􀂃 Introducing a paperless office
􀂃 Overcoming factors that work against the paperless office
􀂃 Potential issues with regulators and courts
􀂃 Exploring the role of knowledge management systems in
business
􀂃 Creating competitive advantage with your firm’s knowledge
􀂃 Using technology to alter information in search of knowledge
􀂃 Preparing for knowledge-centric information systems
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 Exploring document and content management
􀂃 Understanding document management: an accounting firm
context
􀂃 Establishing knowledge and information repository requirements
􀂃 Establishing requirements for your firm
􀂃 Establishing when you need a document management solution
􀂃 Technology to deliver efficient document management
􀂃 Technology considerations for document management solutions
􀂃 Client portals and delivering information in a secure
collaborative environment
􀂃 Moving to a “less paper” firm
• Introducing an e-business strategy
􀂃 The client portal
􀂃 Hosted applications
􀂃 Product/service sales
􀂃 Client engagement
􀂃 Client communications
􀂃 Recruitment
􀂃 Multimedia
􀂃 Calculators
􀂃 Other possibilities
• The role of the virtual office and working remotely
􀂃 Outsourcing/in-sourcing (also known as resourcing)
􀂃 Mobile working
• The emergence of the global reporting system
􀂃 Data collection and reporting
􀂃 Data consumption and analysis
• Business continuity and disaster recovery strategies
􀂃 Back-up
􀂃 Maintenance plans and technical support
Guide to Management of Practice for Small and Medium Sized Practitioners
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• Insurance
Module 4: Risk Management
Broad Coverage of Module
1. A guide to developing, implementing, and monitoring a risk
management program within your firm
2. Understanding professional indemnity insurance
3. A checklist for client engagement & review
4. Risk management checklists
Contents of Module
• Professionalism and ethics within the firm
􀂃 The Code of Ethics for Professional Accountants
􀂃 Fundamental principles of the IESBA Code
􀂃 Ethics threats
􀂃 Safeguards
􀂃 Ethics threats and possible safeguards
• Risk management within the firm
􀂃 Identifying risk within an accounting firm
􀂃 Examining internal risk
􀂃 External risk
􀂃 Developing a risk framework for your firm
􀂃 Adopting risk mitigation strategies
• Client engagement
􀂃 The engagement process
􀂃 Review and re-engagement
􀂃 Reviewing ongoing engagements
􀂃 Managing the disengagement process
• Quality control processes within an accounting firm
􀂃 Objective of quality control
􀂃 Benefits of an effective quality control system
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 General principles of quality control
􀂃 Quality control elements
• Business continuity planning and disaster recovery
􀂃 Prevention—Risk Management Plan
􀂃 Preparedness—Business Impact Analysis
􀂃 Response—Incident Response Planning
􀂃 Recovery
􀂃 Death or incapacity of practitioner
􀂃 Liability and insurance within your firm
Module 5: Planning for your firm
Broad Coverage of Module
1. Strategic planning for your firm
2. Risk management plan for your firm
3. Sample office manual for your firm
Contents of Module
• To specialize or to generalize? Your services strategy
􀂃 Specializing
􀂃 Generalizing
• The need for business planning
􀂃 The strategic planning process
􀂃 Steps in the process
• Planning for effective relations with clients and employees
􀂃 The challenges of generational diversity
􀂃 Clients’ perceptions
􀂃 The “devaluing” of information by the internet
􀂃 The challenges of greater client mobility
• Developing plans for your firm’s various functions
􀂃 Service delivery plan
􀂃 Risk management and mitigation plan
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 Human resources plan
􀂃 Marketing and selling plan
􀂃 Technology plan
􀂃 Administration plan
􀂃 Finance plan or budget
􀂃 Assessing when plans need to change
􀂃 Building a risk management mindset into your firm
􀂃 Ten steps to successful risk management
􀂃 Minimizing exposure to loss of key personnel
􀂃 Minimizing potential problems in service delivery
• Implementing a practice manual and systems
• Using benchmarks to drive performance and improvement
􀂃 External benchmarks
􀂃 Internal benchmarks
􀂃 Other industry benchmarks
• The business of running your firm
􀂃 The key stages in running an effective firm
• Monitoring external forces
􀂃 Environmental sustainability
􀂃 International accounting standards
􀂃 Rising levels of regulation and professional knowledge
􀂃 Mobility of talent
􀂃 Technology
􀂃 Anti-money-laundering
• Business continuity: the short-term and long-term imperative
􀂃 Interruption to business
• Continuity of business: the second generation
Guide to Management of Practice for Small and Medium Sized Practitioners
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Module 6: Client relationship management
Broad Coverage of Module
1. Sample client questionnaires
2. A guide to client classification and review
3. Assessing and exceeding client expectations
4. Benchmarking service practice service levels
Contents of Module
• Knowing your client
􀂃 Client questionnaire
• Reviewing your client base
􀂃 Client classification
􀂃 Benefits of client classification
• Measuring and exceeding client expectations
􀂃 What do clients want?
􀂃 Measuring client expectations
􀂃 Exceeding client expectations
􀂃 Internal versus external strategies
• Benchmarking service levels
􀂃 Benchmarks
• Embracing opportunities for enhanced relationships
􀂃 Using gap analysis
􀂃 Summary: maximizing opportunities
• Developing strategies to provide a full range of quality services
􀂃 Identifying the services required in the marketplace
• Strategies for providing a full range of quality services: mergers,
networking
􀂃 Common concerns with referrals or introductions
􀂃 Mergers
􀂃 Cherry-picking
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 Alliances
􀂃 Referrals
• Invoicing and collection
􀂃 Credit control
􀂃 Collection techniques
􀂃 Some fundamental rules
􀂃 Why clients don’t pay
• Conflict resolution and arbitration services
􀂃 Five signs of rising conflict
􀂃 Dealing with conflict
􀂃 Ending a client relationship
Module 7: People power (Developing a people strategy)
Broad Coverage of Module
1. Firm employer and/or employee manual
2. HR employment checklist
3. Firm induction checklist
4. Individual personal development plans
5. Staff appraisal and development guidelines
Contents of Module
• Your firm and its people
• Factors impacting people management
􀂃 Community expectations
􀂃 Economic changes
• Your people management strategy
􀂃 The mix of employees
􀂃 Clarifying expectations
􀂃 Considering generational diversity
􀂃 Attracting Generations X and Y
􀂃 Recruitment
Guide to Management of Practice for Small and Medium Sized Practitioners
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􀂃 Induction
• Leading your team
􀂃 Setting an example: “tone at the top”
􀂃 What employees expect from leaders
􀂃 Building a high-performing team
􀂃 Communication
􀂃 Delegation: The key to firm leverage
• Managing and retaining employees
􀂃 Motivation
􀂃 Keys to a productive, cohesive work environment
􀂃 Performance management
􀂃 Productivity versus performance
􀂃 Calculating productivity
􀂃 Assessing performance
• Training and development
􀂃 Identifying development needs
􀂃 Development is an investment
• Rewards and recognition
􀂃 Remuneration
􀂃 Providing recognition
• Exiting/transitioning employees
􀂃 Termination
􀂃 Retaining older workers
􀂃 Exit surveys
Module 8: Succession planning
Broad Coverage of Module
1. A succession plan for your practice
2. Checklist for purchasing an accounting practice
3. Selling an accounting practice: checklist
Guide to Management of Practice for Small and Medium Sized Practitioners
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4. Internal succession issues: checklist
5. Admission of a new partner: checklist
Contents of Module
• Succession planning for the sole practitioner
• Developing your succession plan
􀂃 Understanding your firm
􀂃 Your future purchaser
􀂃 Succession plan
• Selecting your succession option
• Firm valuation and pricing
􀂃 Value may differ from price
􀂃 Valuation methods
􀂃 Capitalization of future maintainable earnings
􀂃 Rule of thumb
􀂃 Net book value
• Options for partnerships, consolidations, mergers and acquisitions
􀂃 Thinking about shared ownership
􀂃 Partnership/merger
􀂃 Consolidation
• Sale of firm, fee parcel or progressive sell-down
􀂃 Sale of firm
􀂃 Sale of fee parcel
􀂃 Progressive sell-down
• Developing internal succession plans
􀂃 Internal succession
􀂃 Admission of new partners
􀂃 Buyout by existing partners
• Exit considerations
􀂃 Taxation implications
􀂃 Constraints of trade
􀂃 Lifestyle changes
􀂃 Compliance issues
Guide to Management of Practice for Small and Medium Sized Practitioners
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The Guide to Management of Practice for Small and Medium Sized
Practitioners is based on Guide to Practice Management for Small and
Medium Sized Practices, Second Edition of the Small and Medium
Practices Committee, published by the International Federation of
Accountants (IFAC) in December 2011 and is used with permission of
IFAC.
This supplementary user guide has been developed to help ICAI members
make the best use of the Guide to Management of Practice for Small and
Medium Sized Practitioners prepared by the Committee for Capacity Building
of CA and Small & Medium Practitioners, ICAI. The guide can be downloaded
free of charge at http:/ www.icai.org.in.
This supplementary user guide includes many examples for illustrative
purposes only and does not reflect any policy positions of the ICAI.
Feedback Page
This is the first edition of the guide by the Committee, and, obviously,
therefore there is scope for improvement. We intend to make it as useful as
possible in its present format. The committee, therefore, hopes to keep
updating this guide on a regular basis in order to make it more functional.
We solicit comments and suggestions from practitioners and others to
improve the usefulness of the guide. In particular, we will welcome
suggestions on its use, coverage of relevant aspects, issues faced by
practitioners, and further areas for inclusion.
Your valuable inputs may be sent to <PRESIDIO_ANONYMIZED_EMAIL_ADDRESS>.