Solve Your Capacity Planning Challenges With These 4 Action Items

Achieving any form of balance or equilibrium within accounting can be like learning a new language: it’s far easier said than done. 

It’s more like trial and error—you keep at it and try different strategies until you start to get the vocab slightly less wrong before you start to get it right.

With capacity planning—your firm’s ability to handle the demand of work from your current and prospective clients—it’s an iterative process that’s dependent on learning the nuances of your client's needs and the way your firm operates. 

Capacity planning is (almost) always a constant state of guessing, adapting, and adjusting until you’ve found yourself in that perfect balance point.

But getting to that balance point has been made easier thanks to new tools and knowledge sharing that helps accountants get it right the first time. Improving your capacity is something nearly every firm is capable of doing.

Why is Capacity Planning Important?

Capacity planning is more than throwing people at the problem of excess workload. It accomplishes so much more for your firm by:

• Supporting the mental health of your staff to reduce turnover
• Create efficient turnaround times for clients to reduce churn
• Maximize profits by ensuring you aren’t overspending on labor
• Increasing your ability, meaning onboarding new clients

Simply put, well-executed capacity planning benefits everyone. Your firm is happier, your clients are happier, and your profits are healthier.

Since accounting has innate seasonality with tax season, capacity planning is something that must be kept in check on a recurring basis. Simply doing it once or twice a year can have you blindsided by an unexpected excess of work while doing it monthly or semi-monthly makes sure you’re always at a healthy balance point. And since it affects your bottom line, it makes sense to dedicate time to capacity planning from a dollars and cents perspective.

4 Steps to Improve Your Capacity Planning Right Now

Capacity planning can sometimes feel like a “do it when needed” type of activity. But waiting for the period of time when it’s absolutely necessary will do more harm than good. Unless you can magically change your capacity on a whim, the adjustments to your team structure will take time to come into effect. Even part-time hires will need time to fully ramp up and have the desired effect on your firm.

Whether you sense a capacity crunch in your future or you want to go through the practice for some peace of mind, here are 4 actions you can take right now.

Determine if you need part-time help before you need it

Hiring for work that needs to be done is like spending money from an unpaid invoice. Just as you would risk the payment bouncing or the funds taking too long to hit the bank account, you’re setting yourself up for risk of the hiring process not going as smoothly as expected.

Ideally, you should be determining if you need part-time help 90 days in advance. This gives you time to:

• Create a job posting or start exploring contacts in your network
• Find the best fit for your firm
• Complete the admin work associated with bringing on a new hire
• Ramp up a new hire so they’re efficient by the time you need them

The first step to identifying whether you need to increase your capacity is figuring out your current capacity. To do this, you can slave over spreadsheets, hit calculator buttons, or even throw darts at a wall if you’re desperate. But what’s most important is that you’re writing your thoughts and process down so it can be repeated.

In general, to calculate your firm’s capacity relative to demand, take the same approach as the story of priorities and a jar. More specifically, start by doing the following:

• List out the big things: These are your monthly services broken down by client with an approximation of hours per service.

• Identify the tasks that make your firm work: These are the hiring and other admin tasks that keep your firm operational. Try to create an hour total that accounts for all these tasks.

• Account for all “optimal” tasks: These are the tasks that can and should be done, but are least necessary for your firm to operate. A good example of this is marketing efforts. Turning off the faucets for client generation can be easily done to put resources elsewhere while also minimizing the work added to your firm.

By the time you’re done, you should have the hours of work necessary to complete your client work, keep the firm operational, and maximize its performance. Once you’ve done so, start accounting for the hours each member of your firm can contribute to each task. Look at your firm’s forecasts or any new work that could be added to your pipeline in the next quarter and start accounting for who will be able to take on that work. When there’s a gap, it’s time to start thinking of hiring.

Find the ideal team make up for your firm

There’s a wide variety of roles in your accounting firm, each with its own specialization. You can think of these roles as the finders, minders, and grinders of your firm.

• Finders are the people who bring the work in (think client managers). 

• Minders are the planners who keep everything running smoothly internally like a production manager. 

• Grinders are the accountants and bookkeepers who are getting the work done.

Finding a balance in your firm means finding a balance point between these roles. Too many finders and you’ll have too much work on your plate. Too many minders and you won’t have enough people for them to manage. Too many grinders and you have idle hands who are being paid but generating little to no revenue for your firm.

There’s no ideal balance point that works for every firm. Consider the nuances of your operations and client services when finding the balance point that works for you. For example, if a large portion of your clients have bookkeeping and payroll services, more grinders will help you get all the work done. 

Or, if you’re outsourcing work or using part-time employees, having the right amount of minders will guarantee the quality is up to par with your standards.

Optimize your processes

The biggest killer of firm efficiency is the dreaded bottleneck. The key to optimizing your processes is to try to cover any potential weak points and potentially hiring people to do so.

For example, take your clients that require bookkeeping, payroll, and consulting work. If the bookkeeper can’t complete their work because your firm is behind schedule on completing payroll, all of a sudden the balance point you found is going to break. Unfortunately, this isn’t nearly as simple when you’re looking at your firm at a macro level.

To figure this out, it’s best to go straight to the people who are most affected by these problems at every level. Talk to your accountants and ask where they’re experiencing any lag in their workflows. Do the same for your bookkeepers, your managers—basically everyone but the custodian (and maybe even them, too). 

Capacity planning is done in a very hypothetical space. Just as the force of gravity is never truly the same because nothing is ever falling in a vacuum, your capacity planning can’t be done in a vacuum. By getting feedback from the people on the frontlines, you’ll hear where there’s drag in your system that’s preventing your reality from being like your model.

Bonus tip: Optimized processes and increased ability to serve clients opens up avenues for growing additional revenue channels, like offering advisory and fractional CFO services or finding a new vertical to target.

Automate the basic (and redundant) tasks

Got the basics of capacity planning figured out? Then it’s time to level up. Once you’ve got your firm operating smoothly with deadlines being met without people feeling overworked, you can start focusing on what tasks are the big revenue generators to try and allocate more resources to them.

But you can’t just take away people from doing one thing and expect things to stay as perfectly balanced as you calculated them to be. The secret to mastering capacity planning? Making the basic tasks a thing of the past by embracing new technologies.

Your firm does a lot of different tasks for every client. With the way technology has progressed, especially in machine learning and AI, certain tasks are being completely automated by having software complete the exact same processes with no manual inputs. If you want to win hours back to dedicate to other tasks, it’s time to explore your options by clicking below to get in touch with a Botkeeper specialist!