What is the right unit for CPA-practice economics?

Why should the practice keep separate units?

A client-month repeats with an ongoing scope; a completed tax job is seasonal and may require different review effort; an advisory hour consumes the owner’s time directly. Counting every engagement as an average job hides this difference. Track accounting clients and assigned hours, accepted individual/business jobs, owner advisory time and work that was requested but not accepted. Extend the unit definition when adding payroll services, cleanup projects, representation or financial-statement engagements.

Standard prices are not realized invoices. For tax/advisory, the base applies 96.0% price realization before recording revenue. A standard individual $500 job therefore invoices $480.00. Nonpayment is a separate 0.5% loss allowance; cash follows its own lag. Record discounts, write-downs and collections with distinct fields so a fee problem cannot disappear inside an accounts-receivable balance.

What does one accounting client-month contribute?

The permanent preparer’s loaded productive rate is $49.49: hourly wage times burden, times paid hours divided by productive hours. The owner’s loaded productive rate is $84.00: monthly salary and burden divided by productive capacity. Multiplying those rates by the engagement’s respective hours gives the labor allocation. It recognizes paid administration and unavailable time rather than assuming every payroll hour is billable.

This client contribution must still fund rent, systems, marketing, insurance and other commitments. It is not the firm’s cash contribution from one additional client when a permanent employee has spare capacity, and it is not net margin. The firm income statement deducts full salaries as fixed commitments, while only seasonal overflow varies with accepted hours. Use an allocated view for fee design and the full payroll ledger for cash planning; adding both allocated and fixed salaries to the same statement would double count.

How many engagements fit into paid time?

One permanent preparer offers 120.0 productive hours out of 160.0 paid hours. At 6.0 hours per monthly client, that role can support 20 accounting clients only if no tax jobs or other preparation work compete for it. The owner offers 120.0 productive hours. Accounting-only owner capacity would be 96 clients, but tax reviews and advisory work must also fit. The smaller remaining capacity governs accepted work.

The seasonal position can supply at most 128.0 productive hours, equivalent to 160 paid hours at 80.0% productivity. This is a total monthly allowance; actual schedules must satisfy local working-time and overtime rules. The model does not price overtime or assume free weekend labor. A second permanent preparer appears when requested recurring work reaches 30 clients and remains employed afterward.

Acceptance priority is recurring accounts, business tax jobs, individual jobs, then advisory. Whole tax jobs are accepted only while both preparation and owner hours remain. Base first-year unserved tax jobs total 30. Increasing demand beyond that boundary changes the unserved count before it changes revenue. Use the seasonal workload example in the private candidate article; the current guide’s executed table already makes the limit explicit.

Which dashboard exposes the next decision?

Review a short dashboard each week in busy periods: accepted work by service, standard versus actual preparation/review hours, realized invoice per productive hour, unbilled work aging, invoice aging, scheduled collections and remaining owner review capacity. Monthly, reconcile client additions and losses, recurring revenue, payroll and cash. A full queue is not earned revenue; completed work with missing approval or authorization can still be unbillable.

For pricing, investigate engagements whose actual hours exceed scope before raising every fee. For staffing, distinguish a temporary peak from a recurring workload that can support another permanent salary. For cash, separate a late invoice from a write-down or bad debt. Calendar occupancy alone cannot show these problems. Keep client confidential information in the practice’s controlled systems, rather than exposing it in a public planning exhibit.

The IRS security checklist and FTC guidance make data handling a real operating responsibility. Time spent on security, training and administration is part of the paid/productive gap. Do not convert the case’s capacity allowances into a claim of regulatory compliance. Refresh task times from the practice’s own completed engagements, then update the monthly statements and collection assumptions together.