Versus the Law of Tax Preparer Time Management.
By Frank Stitely
The Relentless CPA
Let’s tackle my biggest gripe with the value pricing people. “Time sheets suck! Toss your time sheets!”
Who doesn’t hate filling out a time sheet for the entire week at 5 p.m. on a Friday? How could that ever be accurate? It cuts into my beer-drinking time!
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Do time sheets even exist anymore? They haven’t existed since about 1990 at the latest. Some genius invented the memory resident, background timer that lets us track and record time as we go. Our first time-tracking software was Timeslips back around 1990. It had a timer that fed timeslips into billing and reports on a real-time basis – back in 1990.
We never had time sheets. I spend maybe five minutes per day on time tracking. Time management experts will tell you that unless you track how your time is used, you’ll never figure out how to use it better. Time tracking makes people accountable not just to bosses, but to themselves. I am ashamed to admit how often I get to the end of a day and realize I have a whopping three hours of billable time. The real value is then asking myself, “Why?” Most of the time it’s Facebook trolling.
Here’s Frank’s Law of Tax Preparer Time Management: However long you think it takes a preparer to complete a return, it takes much longer. It takes three times as long as you think it does. We’ll get into why some other time, but this is an important little piece of information to know.
If you think you’re making good money on a $500 1040, you are probably wrong. I did this analysis a couple of years ago and found that on returns priced at less than $500, we made basically nothing. We were recycling money. The time to prepare a $500 return isn’t materially less than the time to prepare a $700 return. That has some marketing and client acceptance implications, doesn’t it? Of course, if you have no time tracking information, you won’t be able to do this sort of analysis. You get to continue serving low- or no-profit clients, because you don’t know where the line between profitable and unprofitable lies.
Finally, there is just one appeal of the “toss the time sheets” mentality. People hate them. People hate broccoli, cauliflower, fish oil pills, exercise and flossing. People hate lots of essential things. People in Northern Virginia hate stop signs and generally just ignore them. I would condense the food pyramid down to just beer, if not for the annoying health implications. Time tracking is essential to knowing your costs, and as we know, costs really do matter.
I’ll end this diatribe about the value pricers with some kind words. I once called them the Value Billing Taliban in an article, because they set Google alerts to quash any criticism of their religion. They also hate when I call it value billing and not value pricing. That dilutes their marketing message. I read an article that called value pricing one of the 10 most overrated accounting trends of the 21st century. I imagine they hired a hit man over that.
So, for the kind words … They have focused a lot of attention on billing methods and how to define the demand curve. They have given many firms the confidence to examine their billing methods.
In the grand scheme, they moved us closer to a recurring revenue model that emphasizes subscription-based pricing. For that, we owe them gratitude.
A lot of people crashed before the Wright brothers flew. The value pricing advocates are those people who crashed.