The Problem with Timesheets? Not Enough Timesheets!
Time tracking and the V.B.T. (Value Billing Taliban)
by Frank Stitely, CPA
Stitely and Karstetter
Frank Stitely
I have long been a true believer in value billing. Five times a day I kneel towards the east and pray, “I am not selling time. I am selling expertise.” However, I just can’t follow with the end of the prayer which goes, “Time trackers are evil. We must stone them.” Time tracking is essential to value billing, done profitably.
More unconventional wisdom from Frank Stitely, CPA: Who’s Missing in Action From Your Workflow Processing System? | How to Make an Extra $72,000 by Working Smarter
Let’s invite some people to leave our discussion. If you are a coach, consultant, or some other type of CPA advisor, who has never owned an equity position in a CPA firm, please exit stage left. Yes, I know you have decades of experience observing CPA firms. I have decades of experience watching professional football. That doesn’t qualify me to coach the Redskins. Veteran poker players know that playing someone else’s hand is easier than playing your own when big money is on the table. If you’re a CPA firm employee, please stay. Some day you’ll need this information. But sit there silently until we are done.
There are three reasons time tracking is important:
- First, it allows for accurate value pricing and profitability tracking.
- Second, it’s a tool for employee and partner improvement.
- Lastly, it’s a tool for staff and partner evaluation.
Before you blindly recite the value billing prayer for the fifth time today, please consider that our predecessors in the profession weren’t imbeciles, regardless of what the consultants say. They knew we weren’t selling time. Hourly billing was never about selling time. It was about not losing money.
Hourly billing reduces the chance of losing money on a project. If you bill out a $25 dollar per hour employee at $70 per hour, you likely won’t lose money. Value billing has no such guarantee. At the heart of value billing is some form of fixed or outcome-based pricing. If you price a project correctly, you make money. If you price a project incorrectly, you lose cold hard cash. This is why time tracking is essential to value billing. How can you correctly price a project, when you don’t know how long it will take and how much it will cost?
So, you say you do know how long a project takes. How do you know? Even more importantly, after the completion of a project, how do you know if you made money without knowing how much time was spent? How can you price the next similar project?
The V.B.T. will tell you that, as an experienced manager, you just know from experience. Once you toss out the time sheets, your employees will miraculously stop cruising the internet during work hours. They’ll show up on time every morning, even Mondays, without hangovers. They’ll be as motivated to prepare tax returns as the Christians were to flee the lions in ancient Rome.
The real answer is that if you aren’t tracking time spent on a project, you have no idea. No, you really don’t. I guarantee that however long you think it takes your staff to prepare a tax return, it takes longer. I further guarantee that however long you think it takes you to prepare a tax return, it takes longer for you as well. I know this because I have time records.
When I bill for a tax return, I am amazed at the number of times we touched the return. At the end of the project, I don’t remember the ten e-mails and four telephone calls it took to get the return out the door. Fortunately, with time tracking, I don’t have to remember. I have the data in front of me. From memory, I might be tempted to charge $700 for a return without knowing that we have $1,000 invested in it. On the other hand, with time records, I might decide to charge just the $700 if we had an inexperienced staff person prepare the return, The point is that I have the data to make the judgment. I’m not guessing. Without time tracking you are.
Raise your hand if you have clients in the construction industry. If you really think time tracking tracking is unimportant, you should be advising your construction industry clients to give up job costing. They should just know how much labor they are using on jobs from experience. If you aren’t so advising your clients in the construction industry, you are a heretic to the V.B.T. cause, and so shall ye be stoned, infidel.
Here’s the primary argument against time tracking: Employees hate time sheets. Therefore, time sheets are bad. Here are some other things employees hate: balance sheets that must balance, cash flow statements, and stewed tomatoes. They’re right about stewed tomatoes.
Our employees, like the other seven billion of us on the planet, don’t like to be watched and judged. The management term for this is accountability. Our employees are right to be skeptical about our use of time tracking. I once had an employee tell me about the time he spent on a return, “You can’t handle the truth.” I think he was channeling Jack Nicholson in “A Few Good Men.” He (and Jack) were wrong. I needed the truth.
When I see someone spend ten hours on a return that should have taken five hours, I don’t immediately suspect internet porn as the problem, unless it’s a partner. I suspect we have a training issue. This summer, we taught a first year employee to prepare corporate tax returns. We had a lot of write-downs. But I expected that. I didn’t berate her for being slow. We worked on her knowledge during our summer leisure, instead of assuming she was fine, and then learning during tax season that she was not. Employees are right to be suspicious of time tracking, but that doesn’t excuse us from our managerial responsibilities to hold them accountable for their results.
If you don’t have data to objectively evaluate your staff, just how do you evaluate them? Since we’re not that good looking as a profession, God help us if looks are the measure. We would all still be grunts in the profession. How do you know if Susie or Janet is the more productive employee? Who deserves the biggest raise and the promotion if you don’t have productivity data?
The productivity data from time tracking leads to objective evaluation. Great employees welcome the feedback that poor employees fear. When your productive and unproductive employees receive identical compensation, the good ones leave for jobs where they are compensated for their accomplishments. You may think you accurately identify your great employees, but without data, you really are making evaluations based on appearance, not reality.
The V.B.T criticism that time tracking involves fantasy numbers, not real data, deserves some discussion. There is a hint of truth in this complaint. If your employees complete time sheets at the end of the week, the hours reported are surely unreliable. Weekly time sheets are useless. On Friday, nobody remembers exactly what he did on Monday. Fortunately, there is a solution to this. Trash the weekly time sheets in favor of daily time keeping.
All good time and billing solutions have task timers. Use them. Ours allows multiple open tasks at one time. If I get interrupted by a telephone call in the middle of reviewing a tax return, I stop the tax return task timer and open a new one for the telephone call. I may decide later not to bill for the call, but if the client calls three more times during the month, I probably will bill for it. What are the chances I would remember to bill for this at the end of the month if I haven’t tracked the time? If I have a fixed price arrangement with a client, I need to know how many times he calls and how much time is consumed. Otherwise, how do I properly price next year’s agreement? Daily time tracking not only tracks time more accurately, it increases billing as well by recovering lost time.
Earlier I proposed that time tracking helps us improve employee performance. What works for employees works for partners as well. At the end of each day, I look at where I spent my time. This holds me accountable for my daily time management. One of the central tenets of improving time management is that you need a baseline to improve. If you don’t know how you currently spend your time, how do you plot a path to improvement?
Finally, daily time management doesn’t significantly steal time from client projects. I barely spend five minutes per day starting and stopping time tasks. Done daily, time tracking is accurate and nearly painless. Done weekly, not only is time tracking inaccurate, it is truly a loathsome task.
Before you cast that next “he just doesn’t get it” stone, please reconsider your objections to time management and its importance to value billing done profitably. In any profit and loss statement, both revenue and expense matter, even with CPA firms. Value billing is the revenue side of your firm. Time tracking gives you the expense side. Paired, they give you the information you need to successfully manage your firm.
Tomorrow, instead of kneeling and reciting the V.B.T. prayer, recite this instead, “I need to know my costs as well as my revenues to succeed.”
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34 Responses to The Problem with Timesheets? Not Enough Timesheets! (Subscribe)
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Amen. Finally a value biller with some real-world common sense.
http://www.deltek.com
A truly oustanding article. As a solutions provider, I’m perhaps among those who should “exit stage left.” But given our solutions help in all 3 areas (tracking time, determining services value, and producing invoices,) I read on- and I’m glad I did.
While the merits of billing by time or by value continue to be debatable, the goal of achieving a profit is not. And you explain excellently how time-tracking is essential for doing so.
Thanks for the kind words. I was really expecting the VBT to go all jihad on me with maybe a death threat or two. I haven’t had a good death threat since last tax season.
http://www.b1g1.com
Just before I exit stage left, do take a look here Frank.
http://www.marquelawyers.com.au/
(And by the way, yours was the most humorous ‘keep the timesheet’ piece I’ve ever read. Wonderfully written. Congratulations on that.)
Thanks for the kind words! I looked at this law firm’s web site. Fortunately, my wallet was in the other room. I suspect they were trying to steal it.
You nearly convinced me. Until I noticed your comment that time sheets “allow for accurate value pricing”. This suggests you have missed the true point, and hence power, of value pricing. Value pricing is about how much value/benefit each client receives from your services, NOT how many hours it takes you to prepare their tax return.
It’s great that you have fixed-fee agreements to give your clients certainty over price. That’s a step in the right direction. But please don’t pretend this is the same as value pricing. It’s not.
I was waiting for this. Thanks. Our rates are not based on our worth to clients but the intersection between demand and supply for our services. If you charge $4K for a tax return and someone else will do it for $2K, your price goes down or you go out of business even if the return is worth $10K to the client.
The market doesn’t care how we calculate our bill, just the amount versus demand.
As CPA’s we seem to be afflicted by a disease we find unique. We all think we are worth more than we bill and collect. So do the fry cooks at McDonalds. We aren’t unique at all.
http://www.ariestech.com
The food analogy is perfect!
Let’s take this idea a little further down the food chain, literally. Using this approach, we assume that all professionals are the equivalent of toilet paper. Is the winner the one with the least amount of poop on them?
Oh wait, even toilet paper can be differentiated. So, professionals are less than toilet paper?
http://www.verasage.com/index.php/community/its_not_value_billing/
Drop the “Value Billing Taliban” moniker. Why in the world do you find it necessary to use such an analogy? Surely your arguments are strong enough to stand on their own without equating the opposition to misogynistic terrorists who shoot adolescent girls for going to school. Or are they?
http://verasage.com
Frank,
Your article misses on simple fact: empirical evidence. How do you account for the FACT that there are well over 2,000 professional firms operating in the world without timesheets–from CPA, advertising, law and IT to consulting. One firm is the most respected advertising agency in the USA, with over 1,000 employees.
I suggest you read my book, Implementing Value Pricing: A Radical Business Model for Professional Firms, to find refutation of every one of your arguments for keeping timesheets. You have not added one new argument to the debate.
I was a practicing CPA who at one time believed everything you wrote. I subsequently learned I had a limited worldview.
It’s alright to be wrong. The sin is to stay wrong, especially when the evidence is out there. It only requires some intellectual curiosity.
And btw, it’s “value pricing” not “value billing.” Billing is done in arrears, while pricing is done upfront. Big difference.
Cordially,
Ron Baker, Founder
VeraSage Institute
http://www.gregkyte.com
Yeah. Don’t be offensive by calling us the “Value Billing Taliban.” We’re the “Value Pricing Taliban.”
Here are some of the obvious problems I see with your defense of timesheets and time tracking:
1. Timesheets presume that time is a cost. It is not. Can you save it by not doing something? Can you turn it off? Can you keep it in inventory? No – it continues to flow whether you track it or not. Time is not a cost, it is a constraint. And as a constraint, it is somewhat artificial, given that it is almost never a binding constraint. There are 8760 hours in a typical year and not even the sweatiest of sweatshops expect their professionals to bill even 1/3 of that amount. There is almost always another hour available.
2. In light of #1, the marginal cost of time is effectively zero, making it useless in any rigorous analysis of pricing for profitability. Any student of microeconomics knows that maximum profit is defined by the condition when marginal cost = marginal revenue. If you measure a pseudo-cost with a marginal cost = 0, this will obviously lead you down the road to ruin.
3. The notion of profitability measured on a job by job basis may make some sense in construction and manufacturing, where the project is large and spread over many months or even years, but accounting, law and the other knowledge professions are not construction or manufacturing jobs. We answer questions. It might take hours, or it may take seconds, if the question has been posed before. In other words, time is not the principal input – knowledge is. Timesheets therefore are an attempt to measure with great precision, precisely the wrong thing. Couple that with the fact that virtually all firms that use timesheets also reward their professionals for spending more, not less time, and you set the stage for rampant abuse of a tool that didn’t make much sense in the first place.
4. Highly profitable manufacturing firms, like Toyota, do not measure profitability car by car, no do they use timesheets to track their employees activities. Why should CPAs and lawyers measure profitability client by client? Why not inquire what work commands the highest value for the effort involved? You don’t need to track time continuously to do that. Not even Henry Ford and Frederick Winslow Taylor monitored individual employees continuously – they measured a process, found a way to improve it, measured it to see if it worked, and moved on. Incidentally, Taylor, the so-called “Father of Scientific Management” who Reginald Heber Smith sought to emulate in introducing timesheets (in a non-profit legal clinic by the way) was ultimately found to have manipulated his data, setting the stage for timesheet inflation for decades to come.
5. Your costs are not determined in 6 minute increments, because you probably pay your professionals an annual salary, which means their cost, and in fact most of your costs, (rent, insurance, etc.) are fixed in the near term. The key to profitability is not allocating, with artificial precision, fixed costs that you cannot change in the near term, it is deploying the resources those costs represent for maximum effectiveness. This means coupling your people’s knowledge with the latest technologies and methods to make quantum improvements in effectiveness. Tracking time in 6 minute increments is navigating by rear-view mirror – it tends to lock you into “the way we’ve always done it.”
Check out this parable that helps explain why we continue to do things that don’t make sense: http://tinyurl.com/bezpzaj
Lot’s more points I could make, but as someone who has dealt with this issue for decades, and even once created from scratch an electronic billing system for my law firm, I speak with some confidence on the subject and I think these points alone are sufficient to counter your proposition. And before you embarrass yourself by referring to your fellow professionals as “Value Billing Taliban”, please read this and think harder.
http://en.wikipedia.org/wiki/Malala_Yousafzai
http://www.skcpas.com
Whoa, time is not a cost, but salaries sure as hell are. Our bank account seems to go down every payday. We measure salaries cost by time either annually or hourly.
Frank,
Time and space does not allow for a complete discussion of how flawed you are on ALL your points That would take an article twice as long as yours, since there are at least two or three points to counter each fallacy in this article, which is composed of nothing but those. Statements like “I might be tempted to charge $700 for a return without knowing that we have $1,000 invested in it” denote your lack of understanding of your profession, and of financial terms themselves. Would you actually have priced a tax return at $700 that would have taken your $25/hr employee an ENTIRE 40 hour work week to prepare? Are you so green at this work that you would not know that the proposed activity (preping the return) would take a whole week, or do you not understand the definition of “invested”?
I will at least take the opportunity to instruct you as to what the financial term “invested” means. Invested means you have put your money into something (in this case a tax return). If you have used this term correctly you have indicated you paid your $25/hr employee $1,000 (ergo 40 hours of work), your investment according to the article. “Invested” is not some delusional made up hourly price hogwash that you were hoping to get that in no way equates to what your customer feels is a proper price. “Invested” is actual money put into an item, or activity. My guess is your “investment” in your example would be more like $360, meaning at $700 you have made a handsome 48.6% contribution margin on this particular job. Sounds pretty good to me, and if $700 is the highest price this customer would tolerate for what you are giving them, then it is the right price. If they would have happily paid more, say $1,500, then you have screwed yourself by using your methodology and charged them your dollars per hour made up amount of $1,000. Value is in the eye of the beholder, not in the fantasy world of price per hour.
People always buy based on value. Do you think the Ford F350 at $30k has less materials and timesheet hours in it than the Ford GT at $150k (BTW at Gross Vehicle Weight of 14k lbs me thinks the F350 has more of everything!)? Do you think that those who bought the GT cared that they were paying FIVE TIMES AS MUCH for a vehicle with less steel and other materials, and time sheet hours as the F350? They are both Fords aren’t they? Why would they do something so foolish? I guess they need to get some schooling from a guy like you who better understands the way people make purchasing decisions, because by your article they clearly are delusional. They should be asking how much time it took to make that darn GT right?!. BTW they are the norm, your ideas are the ones that are unrelated to the reality of commerce and consumerism. They were (as all people do) buying value not stuff, or time. People buying the GT have more money, and are less price sensitive that the ranchers and contractors buying the F350. It has to do with mindset, not hours! You are as far off of reality as it is possible to get!
Doing things the way you recommend is the easy way, and the less profitable way for both you and your customer. Value Pricing is always harder, you actually have to discover the person behind the face of your client, what do they want from you, what do they feel about what you are providing, what level of means do they have, can you and they become good partners in their (and your) success? I guess the lazy ones will follow your advice simply put up a price per hour and hope for the best, pissing off customers, and employees. The rest of us who want to really make money, have happy customers, and employees, will look to a more value oriented approach to business, like real entrepreneurs do, take the risk of losing money so they can make spectacular profits.
All the best,
Justin Barnett CPA
Tom, how can you say time is not a cost? Can I save $ by not doing something? Yes, of course. Especially if my staff is paid hourly. Furthermore, if I stop doing something, I can spend that time creating value for other clients and revenue for my firm.
I value bill…oops – value price… much of my work, but I also monitor the time it takes projects to get done. I have adjusted future pricing and fired clients because of my time tracking showing how much time was spent on certain projects or clients. And because of that my profitability is higher than many firms.
Steve – I don’t mean to say that time is totally irrelevant, but you must admit, the passage of time is distinctly different from other inputs. It’s more like a river that flows past you – you can either dip your bucket in it or let it flow by – it keeps flowing just the same. This is not the same as material inputs like steel, fuel and chemicals – they are correctly accounted for with replacement cost accounting. There is an opportunity cost to wasted time, for sure, but it’s something that can be measured in tenths of an hour. Measuring something with artificial precision does not necessarily lead to optimization. The better way to address the cost of your overhead and professional salaries is to look at your processes, and see how to do things more efficiently – for example, using contract assembly tools instead of starting with blank paper or documents from previous deals. Automate, systematize, delegate, outsource! You really don’t need daily time sheets to tell you should look at these things. Timesheets for lawyers were invented by Reginald Heber Smith in the early 20th century to try to determine which lawyers in a free legal clinic were faster than others, and to make sure that all were busy. Smith was enamored with F.W. Taylor’s scientific management theories using time and motion studies in manufacturing plants. Smith eventually proved to be something of a fraud, but the timesheet lived on. It really only gained traction in the late 20th century, when business began to succumb to the false notion that measurement = management, and it was propelled into dominance in the wake of a US Sup Ct ruling outlawing fee schedules set by bar associations. It was initially hailed as a breakthrough, and firms grew rapidly as the “leverage” model took hold, but even Reginald Heber Smith is quoted to have regretted introducing the system at Hale & Dorr, where he eventually became managing partner. Timesheets are an example of the “McNamara Fallacy” – the notion that measuring something countable (like body counts or rounds of ammunition discharged, tons of bombs dropped) equates to superior management. What happens is that the important things are hard to measure, but they get lost when a culture of counting the easily countable things takes over. As Einstein reportedly once said – “Not everything that counts an be counted, and not everything that can be counted, counts.”
http://www.verasage.com
Steve,
Time is not a cost because it’s a constant. You are confusing cost with cost allocation, two entirely different things. If you pay your staff a salary, your cost is fixed, no matter how you decide to allocate it.
What we are saying is there are firms that have figured out superior methods to tract profitability, projects, etc.
What your timesheets can’t answer, Steve, is the most important question of all: How much money are you leaving on the table by underpricing.
We don’t become better pricers by being better cost accountants. We only become better pricers by understanding the value we are creating for our customers, and pricing accordingly.
Btw, the firms that value price, some of them have the highest profitability in the world, bar none.
If you’re interested in how these firms operate without timesheets, read some of the Trailblazer case studies at http://www.verasage.com. It can be, and it is, being done.
Ron, just because I keep time sheets doesn’t mean I don’t know what I leave on the table. I already value price most of my work. I just also happen to keep a time sheet to make sure I am using our time to its maximum advantage. The two are not mutually exclusive.
While I see the value of time sheets (because they have helped my profitability by cutting out poor clients and projects that take too long), I am certainly open to learning specifics of other ways to gauge my use of my own and staff time to make us more efficient.
http://www.verasage.com
Steve,
I understand, and I wish I had enough inventory to send you a complimentary copy of my latest book, Implementing Value Pricing. It contains all you need to replace timesheets with superior methods, and case studies from firms that have done it.
The best I can do here is send you to this blog post, which does contain an enormous amount of additional resources on the topic, all free:
http://www.verasage.com/index.php/community/comments/ask_verassage_all_about_t_a/
http://www.hayesknight.com.au
Hi Ron it’s been a while since i attended your seminar here in Brisbane Australia refer page 487 third edition on Value Pricing where you kindly quoted me on risks associated with fixed pricing.
Good to see you’re still actively involved in this topic. I read with interest you have some means of doing away with time sheets totally so i will get that book and peruse it thoroughly. I have always struggled here.
While i haven’t done a time sheet in 24 years we still keep them for less skilled team members, but not as a means for billing but more to ensure we are getting our KPI’s. We run budgets on jobs both in $’s and hrs so actual to budget can be seen and problem clients or in audit, problem areas on jobs can be quickly identified. This fits well with our “no surprises policy” which you already know about from my previous correspondence.
We are still an advocate of fixed pricing up front and its has been working well for us for 15 or so years. Value pricing is an area where i felt we struggled with but only for the lower level work, but after reading some of the comments in this post it would seem we have that under control because as someone rightly pointed out the lower level work we do is valued at the current market rate.
With higher level work value pricing is not an issue because it all comes down to selling the value to the client which for this level is easy. for lower level work the sell is harder and most often not worth the exercise hence the value is market determined.
I follow and understand the arguments against billings over procing. I am half way through Ron Baker’s book.
I still have a problem with determining the perceived value of compliance work for clients who would really prefer not to have to bother to get it done, and how do i perceive the difference in value in doing a tax return for a client who has a rental property, provides no summary but rather an envelope full of receipts, compared to the client who provides a perfect summary we can just plug into the computer. Let’s say one takes twice as long as the other, for the same resulting tax return.
Surely!! the client who has put more effort into their record keeping, who alleviates my time commitment so that i can work on another client’s tax return should pay less than the client who was willing to pay us to do more of the work.
How do i determine the perceived value between these two jobs, which is technically the same, but which “cost” me significantly different in terms of labour costs?
And how do i train my staff to determine this value?
Kerri,
I would argue there is different value in the two projects you’ve identified. You’re creating more value for the client with an envelope of receipts – the first client with a summary has created their own value, your value proposition at this stage isn’t overly high.
http://www.hayesknight.com.au
Kerri, i would have to agree with Shannon on this there is more value to the poor record-keeper in what you need to do than there is to the good record keeper.
We have been fixed pricing our work for some 20 years after being schooled in this by Paul Dunn who has commented above. Hello Paul.
While fixed pricing isn’t value pricing it is i believe a very important component. When i go to buy a suit i really don’t care how long it took to make. i make my purchasing decision on value for money. I really can’t see any difference to what we do as accountants for our clients.
Because of the problem you have identified we have developed a system in our firm that allows us to overcome issues where one client’s work is more difficult to deal with than others.
I’m happy to share this with you if you like. just please let me know. You can get an idea of our firm by looking up our web site. I’m the CEO of the Queensland office.
http://www.smiththornton.com.au
Agree wholeheartly with you Ken their is more value given to the poor record-keeper they NEED your service, and want you to do it, if not you haven’t sold your value.
There is also opportunity to be had, how about selling them your next service and give them peace of mind, could be as simple as a reminder service.
http://RonaldJ.Baker
Ken,
Great to hear from you! I wish I could go back and do that OZ Tour over. We’ve learned so much since then. The new book will give you everything you need to get rid of timesheets, essentially 3 KPIs and some project management. I’ve even got Ric Payne coming around to my point of view–not bad after only 12 years of fierce debate!
Also, connect with our VeraSage Fellow Matthew Tol, south of Melbourne (Ballarat). His firm is completely timeless, and he’d be willing to chat with you. Also, John Chisholm in Melbourne is our VS Fellow on the legal side who has been doing great work converting law firms.
I nearly always cite you on the risk issue, because you’re right–VP is less risky than hourly billing (it’s the perception that is the reverse).
Regards,
Ron
http://www.hayesknight.com.au
Thanks Ron. Bought your book yesterday. it should be here soon. Looking forward to reading it. Glad to make a small contribution to the value pricing debate.
I guess there needs to be some focus on how to sell the value because if you’re good at this then there is little chance of leaving too much on the table. As you’d appreciate we as a profession are very poor at selling value.
There are lots to learn here. I try to analyse the sales process whenever I’m involved as a buyer or seller. This helps me see what works and what doesn’t. I have a lot to say about this so may take this offline directly to you. i have your email address still so will get something to you soon if that’s ok with you.
Great article! Like I commented once before, if you don’t like to keep track of things (time sheets and expense reports), better to be a professional artist than an accountant.
Les Orr
http://www.hjortnesscpa.com
Shame on anyone who calls someone else wrong.
If Arnold Palmer tried to play golf like Jack Nicklaus, you would never have heard of him. If Jack played like Arnie – you would never have heard of him.
The reason it is difficult to take any of this discussion seriously is because it appears you can’t even make an argument in support of your theory without getting personal. I try in reading what you wrote to determine how you run a business. My rule is that it takes 10 things to run a business. A person who does five of them well is a millionaire – and no two people do them alike. The simple truth is, you have to do what works for you, based on what you know. You can always learn more, but it’s how you use what you know that makes you successful, and knowing how to maximize your strengths and avoid your weaknesses – not whether you are “right” or “wrong”.
As a CPA, if you don’t understand what makes your client successful, then you shouldn’t be providing them advice. Until one of you value – whatever’s demonstrate that you understand this, how can you expect me (the customer) to take you seriously? That’s not very kind, but the customer who says your food stinks is not your enemy – it’s the five people who politely tip you and never come back.
By the way, it doesn’t hurt to treat others the way you want to be treated.
The whole “pricing” versus “billing” terminology leaves me feeling the way I did about politicians using the term “revenue enhancement” instead of “tax increase.” The concept of billing up front is hardly new.
Also, given the 2,000 firm number worldwide, there really don’t seem to be that many firms doing this. I wouldn’t cite that number in support of value billing / pricing.
Great piece Frank. Time sheets are used for more than billing time. One either values that or they don’t.
I have waded through the dissertation. I have read everything. I have absorbed it all.
Usual stuff that I hear a lot from old firms but confirmed in spades when I read the comments regarding use of timesheets for staff performance.
If you need to use a timesheet (even as a component) to know how your staff are working, can I suggest that the partner/manager has the problem? And it’s a big problem.
Culturally, the firm that uses timehseets is going to have issues. Taking the author’s comment
“Let’s invite some people to leave our discussion. If you are a coach, consultant, or some other type of CPA advisor, who has never owned an equity position in a CPA firm, please exit stage left. Yes, I know you have decades of experience observing CPA firms. I have decades of experience watching professional football. That doesn’t qualify me to coach the Redskins. Veteran poker players know that playing someone else’s hand is easier than playing your own when big money is on the table. If you’re a CPA firm employee, please stay. Some day you’ll need this information.”
Well, I only have 17 years experience owning and running my own Chartered Accounting firm. I worked in one for a number of years too under the influence of timesheets and the near-sighted views that they create.
By getting rid of timesheets, you are saying that you trust your staff, you encourage them to work collaboratively and you allow them to chase ideas and thinking rather than just production. Ideas and innovation are far more valuable than just production in any business – especially in ours. If you view what you do as a commodity, then I suppose production is the mantra.
Do I know it works? Hell yeah. Why? I have about 10 weeks off a year, have NEVER lost a staff member to another accounting firm and we have a culture that is the envy of many (amongst oher things).
If you want to micromanage, keep the timesheet. If you want a business, dump it. Your costs are your costs. It’s what you do with the “assets” when you’ve paid for them that matters. Do you want them working with you and your customers or do you want them working for you? I know which I would rather have and what I’ve got.
You can take the other option and do with it as you please.
Very interesting discussion. Just wondering how the employees referred to in this article are feeling? Trusted? Empowered? Autonomous? Productive? Devoted and willing to work hard to contribute?