12 tips (and more!) on how to plan your firm's capacity

When crunch time hits, does your team have capacity for new work? This is why it is critical to know effective project management techniques to maintain visibility across projects and know what work to prioritise when you’re time poor.

What is capacity planning?

Capacity is the maximum amount of work an accounting practice is capable of completing in a given period of time. Capacity planning is the process of determining the resources (e.g. time and people) that the firm needs to meet its clients’ current and future needs.

The Basics: Bottlenecks and Critical Paths

When evaluating your capacity and thinking about capacity planning, it is important to understand two concepts from the outset: bottlenecks and critical paths.

A bottleneck is part of a process with limited capacity which in turn reduces the capacity of the overall process. It can be a specific department, a decision maker, or the advisory analytics team. But with well-defined processes, hold-ups should be apparent.

Fixing or improving throughput in your bottlenecks will likely have the biggest impact in your capacity, either by improving staff productivity or freeing up more time. This means more work can flow through the system in the short and long term.

Understanding the processes in place can help to uncover how processes overlap one another and how different teams share resources. One method to do this is via the critical path, which is the longest sequence of activities that must be finished on time for the project to be completed by the due date.

Understanding your critical path helps make dependencies visible, reduce project duration and enable quick analysis of the impact of missing a key milestone. Critical path insights can also help determine the maximum amount of slack allowable for each non-critical chain activity, without affecting the project schedule. While the critical path is often used for large, complex systems, it is also quite helpful in multipartner accountancies that deploy multiple processes.

The Numbers

According to David Smith, Founding Director at Smithink, an effective capacity plan requires two calculations:

• The bottom up calculation – which looks at the number of productive hours that team members should generate each month, multiplied by estimated charge rates; and
• The top-down calculation – which estimates the fees that will be generated from each client, plus an additional amount for estimated special work from existing clients.

The Impact of Your Firm’s Organisational Design

How you approach capacity planning differs depending on whether your firm is organised vertically, horizontally or as a hybrid.

A vertical accounting firm

In a vertical accounting firm, a partner often owns the entire relationship with a client and a pod or team that is responsible for completing all the work. This simplifies capacity planning because you only need to know the partner’s (or team’s) ability to accomplish any given service for any given client.

By combining how long each service will take with what processes are typically performed, you can calculate how many projects will fill the partner’s and the team’s time and, subsequently, how many clients they can take on simultaneously.

A horizontal accounting firm

In a horizontal accounting firm, people share the workload to fully serve the client. For example, in your firm, you might have an accountant doing tax lodgements, a bookkeeper doing compliance work and a senior manager delivering advisory services – all for the same client at the same time.

Through the process above, you will have a clearer indication of how long each process takes and how long it takes each person to complete a task. It’s then a matter of mapping the processes for current and prospective clients to determine the required capacity to fulfil those requests.

Planning Strategies: Push vs. Pull

Delivering services implies having a process, which can usually be matched to a production plan. There are two key strategies that you can implement:

A Push strategy: You determine what services to “push” downstream 

This strategy favours systematic service delivery when the offering doesn’t vary much from client to client. The key is consistency. If processes aren’t standardised, any change in timing or deliverables will have a substantial impact on the rest of the chain. Horizontal firms tend to favour this process, since each department delivers the same services over and over again.

A Pull strategy: Your service offering is determined by your clients’ needs

When a firm’s demand is uncertain, it should move towards a “pull” strategy. This means the work is “pulled through” to the end of the process and no new work is added until something has been completed. This keeps resources from becoming overwhelmed.

Kanban is a popular method used to illustrate the pull strategy, where work is divided into three broad stages – to-do, doing and done – and written on cards that are moved from left to right, from column to column or from stage to stage.

As a card is moved into the “done” phase, another one is pulled from the “to-do” phase and into the “doing” phase. This method helps keep bottlenecks from becoming complete blockages.

Accounting firms typically use push strategies for long-term planning and pull strategies for short-term executions. This is usually because upcoming work can be forecasted but can’t be executed until a contract is in place and resources are assigned.

6 Ways You Can Use a Push Strategy for Capacity Planning

1. Know Your Workforce

How much work can your team handle, and at what level of proficiency can they complete each task?

Map out your services and staff members, and then use a few metrics to grade them, such as quality of work, execution speed and knowledge base. Give each person a rating from 1 to 5 (1 being poor and 5 being excellent), across an evaluation criteria chart.

The result is a detailed overview of how everyone performs against one another. You’ll uncover who your rock stars are, who has the most versatility and who is best suited for specific tasks. All of these factors are important when it comes to your gap analysis.

2. Analyse Your Team’s Output

Now that you better understand each member’s strengths and weaknesses, take a look at how the team performs collectively.

How long does each step or process take, on average? Determine how much the team can complete, and how fast, when the team is fully focused. Understand what resource constraints exist and where.

3. Conduct a Demand Analysis to find out how much work needs to be done

Once you understand your team’s output, it’s time to take stock of the demands on the work they perform, such as their capacity. 

Take all of the work you have contractually agreed to deliver to your clients and look at it as a whole, and then break it down into all of the tasks. 

From there, estimate the average time and resources required to complete the work. To help with this, you might consider using a Gantt chart with a time horizon of about a week or two.

4. Conduct a Supply Analysis (How many resources do you have?)

Which staff members are on annual or on sick leave? Once you know who you have to work with, measure their throughput on a relative scale.

For example, if you have someone who works 40 hours per week at an average pace and another who works 20 hours a week but 1.5 times faster, the latter effectively works 30 hours compared with the average team member. Do this across the board over the same timeline, and use the result for your demand analysis.

5. Build a Gap Analysis and Strategy

Compare your demand and supply analysis. Take the number of hours needed for each of the services and fill them, from the role with the least overlap in skill to the role with the most overlap. For example, you may fill the hours needed for an advisory role first because you have only a few people who can provide that service.

Once you’ve filled the remaining hours as best you can, there may still be gaps in supply vs. demand. You might have demand for services that you don’t have the people to deliver or you might have staff that will have no work to deliver in one month’s time.

Once you’ve identified the gaps, you can bridge them with:

Short-term strategies:

• Increase capacity: Have people work overtime, or bring in skilled contract labour
• Increase time: Call the client and push back the deadline
• Decrease quality: Cut corners (not recommended)

Longer-term strategies:

• Upskill your staff: The more people with broader skill sets, the easier it will be to fill gaps as they arise.
• Time-phase the work: By doing a single type of work in phases, you can create the most efficiencies in that period. However, you may still need to push back some deadlines with this strategy.
• Hire up: Swapping one of your staff with someone more efficient will create capacity.

6. Implement a Workforce Plan

Unfortunately, with a push strategy, you constantly need to rebuild your plans. Once your time horizon has concluded, you must redo the supply, demand and gap analyses, and then reapply them to fill the gaps.

For this reason, firms with a push strategy often use Excel spreadsheets to manage and adjust plans as they see fit. This is also why accountants frequently use the push strategy for planning purposes – and why there needs to be a better way to plan for the long term. Which brings us to pull strategy.

6 Tips On How to Use a Pull Strategy (Kanban process) for Capacity Planning

• Map out your processes at a granular level so you can see what work is being handled by each team member. If one of them is handling a process on their own from start to finish, you may need the visual aid of the Kanban cards to a lesser extent. It will be more beneficial to have an understanding of how many projects the individual can handle at once. But, if you’re delegating work to people across different phases of a project, the cards can be a great way to visualise that flow.
• Show process stages on an x-axis and people on a y-axis. With this setup, you can see who’s currently doing what across your entire team.
• Visually show who can’t participate in certain activities. Indicate who’s unable to do certain tasks, so that you aren’t confused when they don’t do certain things along the process.
• Map project cards across the process and the people. Set up the board with the different stages, with to-do, doing and done as the basic setup – but, be much more granular.
• Create cards for each of your projects. Track the due dates on the cards and place them where they are in the process to easily see what’s on schedule. This will help you estimate how long things actually take, as opposed to the time you may have budgeted for them.
• Move cards from left to right across the process. As you move the cards, you’ll immediately start to see how things are syncing up and where work is bottlenecking. This will allow you to not only address bottlenecks before they occur, but also more clearly understand everything that’s happening in your practice.

1. To Leave Room for Last-Minute Clients

There are only so many seats on a plane. If you’re at full capacity and an excellent client comes along, you’ll have to turn the client away.

2. To Absorb System Shocks

If you’re running at full capacity, any unforeseen changes in your resources (e.g., staff on sick leave) or workload (e.g., unexpected extra tasks) can’t be dealt with appropriately.

3. To Always Be Selling!

Having that extra 15 percent capacity left, opens doors to the opportunity to cross- or up-sell your current clients. 

So, now that you’re running at 85 percent, what do you do with that extra bandwidth when you aren’t taking on new clients or absorbing shocks? 

You can use it to improve your processes and deal with bottlenecks. You can also keep it in reserve to give your staff a better work-life balance. There are so many things you can be doing internally to move your business forward that you should have no trouble using that extra capacity when it’s available. At the very least, it gives you the flexibility to decide how it should be used.

You’re Ready to Scale and Grow! 

Whichever way you structure your team and your workload, it’s important to have access to tools to give you a holistic view of all the projects and tasks flowing through your firm. The QuickBooks ProAdvisor Program gives you access to tools in QuickBooks Online Accountant and discounts on Karbon to help keep everything on track.