Guide · Capacity
Accounting firm KPIs: ten metrics for small firms, with formulas
A small firm doesn't need a dashboard of fifty numbers. These ten metrics show whether clients are profitable, whether the team has room, and whether the work gets done on time. Each comes with a formula in plain words and a worked example.
Start with what you can measure
Most of these metrics need two things: the fee for each client and the hours each client takes. If you don't track time yet, track it for a month, including emails and chasing. That one month is enough to start.
Clients and profit
Revenue per client
Total monthly fees divided by the number of clients. Watch it by client type, not only as one average.
Hours per client
All the hours a client takes in a month, including chasing, messages and fixes. This is the number that is easiest to underestimate.
Effective hourly rate
A client's monthly fee divided by the hours it takes. Clients far below your target rate are the ones to reprice.
Margin per client
The fee minus the cost of the work, divided by the fee. The cost of the work is the hours times what an hour costs you, including pay, taxes, benefits and a share of overhead.
Capacity
Utilization
Hours spent on client work divided by the hours available for client work. Very high utilization leaves no room for busy months; very low means unused capacity.
Admin share
Hours spent chasing documents and answering status questions, divided by total client hours. This is the share automation can bring down.
Delivery
On-time close rate
Closes finished by their due date divided by all closes in the month.
Days waiting on clients
The average number of days between your document request and the last document arriving.
The firm's own health
Days to get paid
The average number of days between sending your invoice and being paid.
Client retention
Clients at the end of the year who were clients at the start, divided by clients at the start.
A worked example
HypotheticalA hypothetical client and firm, for illustration only. The hourly cost and staff hours match the examples in our other guides; the fee and hours are made up.
Effective hourly rate: $350 fee ÷ 5 hours = $70 an hour
Margin per client: ($350 − 5 hours × $42) ÷ $350 = 40%
Utilization: 128 client hours ÷ 160 available hours = 80%
Admin share: 1 hour of chasing ÷ 5 hours = 20% of this client's time
Hypothetical figures, not data from a real firm.
How to use the numbers
Review them monthly.
A short look each month beats a big review once a year.
Look at the trend, not one month.
Busy months distort every number.
Act on the outliers.
The lowest effective rates and the longest waits are where the work is.
Keep the list short.
Track fewer metrics well rather than many badly.
Questions
What's a good margin for a bookkeeping client?
It depends on your costs, your market and your service level. Set a target for your own firm and use the margin per client to see which clients meet it.
Do I need practice management software to track these?
Not to start. A spreadsheet with one row per client covers most of them.
Which metric should I start with?
Hours per client. Almost every other metric depends on it.
See where your firm's hours go.
The free Snapshot takes about 3 minutes and works from your own answers.