Improve Your Life, Your Team's Lives and Your Customer's Lives: Kill the Timesheet
Ask seasoned professionals what they detest about their career, and almost universally, they will admit it is the dreaded timesheet. The firm’s time and billing program is the cancer that never retreats. Each day, professionals around the globe continue to slave to the almighty billable hour. Their lives, fortunes, promotions and self-worth are permanently tethered to the clock. Like a modern-day factory worker, the timesheet assembly line never stops and keeps moving.
Accountants and tax preparers inherently understand that time-based billing is not connected to real economic value created for their customers. That’s why firms write down far more than they write up. I have witnessed managing partners of top 100 firms brag about their realization rate as if it is a trophy proudly displayed on their desk next to the pictures of their spouses and children.
When an accountant rejects public accounting and tax services, and moves into private industry, during subsequent gatherings with old friends of the firm, you will never hear, “Wow, do I miss turning in my timesheet.” Those are words that are never spoken.
Even worse, our clients detest the timesheet and hourly billing. Why do you think they ask, “How long is this going to take?” They ask because they want a price, and your price must be lower than their threshold of value or they will pass on the project. So, ultimately, you have to make an estimated best guess, and then you must live within that decision.
I figured this out with the help of a number of innovators. People like Ron Baker; Justin Barnett, CPA, Ron’s former CPA firm partner; Daryl Golemb, CPA, a sole proprietor in San Diego; Paul O’Byrne and Paul Kennedy, of O’Byrne and Kennedy in the United Kingdom. Together, these and a few other trailblazers were determined to leave the billable hour behind, trash the timesheet and march into the unknown future, convinced there is a superior method of pricing.
Today, the process of conversion is far superior to the one we originally crafted. The steps are simple.
First, decide you want to leave the firm of the past and move toward a firm of the future. This isn’t magic, but it does require each firm, partner, and team member to recognize that no customer desires to “buy time.” As you leave the timesheet and clock-watching behind, you can focus on the results requested, value provided and price received. If any one of these three are out of balance, you aren’t engaged and avoid conflict because your pricing is inconsistent with their perceived value.
Next, perform a Pareto Analysis of your firm, better known as the 80:20 rule. Separate the 20 percent of your customers that drive 80 percent of your firm’s revenue from the other 80 percent. For voluminous customers that drive little net firm revenue, review your past annual invoices, add in unlimited phone calls, email support, and meetings to discuss any topic, along with a service guarantee that they will be satisfied with your services (not results, as in tax refunds), add a reasonable increase, and price your basic and this equates to your core service offering. Realize that in such a fixed-price arena, some jobs will require more efforts then others, but in total, don’t focus on that as the basic pricing should have ample cushion for outliers.
Now to the most important step. For the top Pareto group, interview them as if they are a new relationship and listen to what they want from you, rather than focusing on what you provided. You must listen to your clients and glean from them their hopes, desires and dreams. Your clients know what they pay you. Simply outline a scope of services, consider some value-added options such as a retirement preview, college planning and estate planning, along with an unlimited meetings and service guarantee, and then agree on a price the customer fully accepts. Then, add some payment terms and you are complete.
The typical tax preparer and accountant that bills by the hour spends an average of four hours a week filling out timesheets and one day each month with work in progress reports and billing. That’s nearly six weeks of your time spent on an administrative process that drives no customer value! Extrapolate that across your firm and your largest customer is the beast in the computer. You are a slave to a machine and an antiquated process. Free yourself, your team and your customers from this monster.
Price for value, deliver excellent results and ultimately get paid what you are worth.