“Rumors of my demise are greatly exaggerated.”  While I’ve been absent from the ‘blogosphere’ for a week or so, there actually was a reason.  I could think of no other way to sneak in the following post.  By being ‘gone’ I’m hoping the blasphemy of suggesting that time sheets may in fact have some value will slide under the radar.  Ok.  Here goes.  Time sheets have value  -  in a cost accounting context.  There.  I said it.

The traditionally accepted  business model for medium and small accounting firms is predicated on a revenue model that is cost based.  Value is driven by cost, and  cost is calculated as hourly rates times hours worked.   Hourly rates are established by comparison to other firms in the same market.  And then of course you have to accept the premise that every firm has identical expertise and will require the same amount of ‘hours’ to complete the engagement.

So if you have an average hourly rate times an average number of hours you have the value of the service provided.  Right?  Wrong! You may have your ‘cost’, but you absolutely, unequivocally do not have your value.   Cost accounting 101 – value is not a derivative of cost.  What you can reasonably expect to realize (value) determines the amount of  costs you are willing to incur to deliver that specific product, not vice-versa.    So why are you predicating value as a function of cost, and you are by accumulating hourly rates and billing them to your clients as the value of your services?

Typically I’ve railed against using hours and rates because I believe they under estimate value.  But be careful.   That knife cuts both ways.  In our current market, the use of hours and rates as a basis for a proposal can almost guarantee you won’t be successful.  In 35 years of practice I’ve never seen a market as cut-throat.  Frequently in our firm it has gotten down to one question.  “How bad do we want it?”  When considering any unique advantages we would normally expect to get an advantage from (industry expertise, idle capacity, contacts, etc.) we use them to get to our ‘walk away price’.  (The amount we won’t go below, regardless).  Certainly we consider ‘cost’ in proposing on an engagement, but we consider it in light of what we believe we can price the engagement at to determine our level of interest.

How do we determine ‘cost’?  Not by a standard rate.  There are other more relevant metrics.  That’s another post.  How do we determine ‘value’?  It’s unique to each potential engagement and to your firm.  Do you have a Pricing Committee?  You should.  Let’s talk about that next week.

Long known for our inability to communicate effectively either orally or verbally (yes there is a difference) as accountants we’ve found new facades to hide behind. Our communication with our clients is typically limited to brief general conversations, and written communications mandated by professional standards, such as engagement letters. The email / text message / voice mail have supplemented the traditional letter facilitating the anonymity so many in our profession seem to prefer, with the frequent result being misunderstanding or no understanding at all. Read more…

If not, then why do you think you can do your own marketing effectively?  If your firm is like most firms, you periodically find yourself in need of legal representation, investment advice, insurance analysis, etc.  In most cases, you will retain a professional to help guide you.  We’ve had great counsel from many sources over the years, yet for many years when it came to one of the most fundamentally important functions critical to our healthy growth – marketing – we did it ourselves.  And not particularly well.

Simplistically there  are three aspects to a successful growth plan from a marketing perspective Read more…

Several years ago when our team members collectively drafted our mission statement,  one of the underlying principles defining who / what we are was “We strive to do more than our clients expect”.  Subsequently published on our web site as part of our culture, we endeavor to live up to it – not always as successfully as we would like, but nonetheless always attempted.  Unfortunately in our society the value of exceeding expectations is more often forgotten or ignored than practiced.  There aren’t a lot of great examples of companies or organizations who do this.  Two years ago, on yet another honeymoon, I experienced it first hand. Read more…

Unquestionably, large mature accounting firms can have some distinct advantages.  As smaller firms can we overcome them and compete on the same level?

When I left the ‘Big 8′ (yes children, before it was the Big 4 it used to be the Big 8 back in the olden days) to practice with several other big firm refugees we were certain of the many opportunities that existed to invoke positive professional change, and do it better.  Like most teenagers, we knew it all – especially everything that was ‘wrong’.  We missed no opportunity to criticize.  And like most teenagers, we somehow missed all the things our former Big 8 employers had done that were ‘right’.  The naivete of youth.  And we were professionally youthful having only been recently emancipated.  Read more…

When I ‘retired’ from Arthur Young and Company a couple of years ago, (1978) it wasn’t because I didn’t love the profession, or the work. It wasn’t because the compensation was inadequate. It was the job. It was my employer. I wasn’t trusted. I was given an annual quota of time to fill, monitored by a semi-monthly report submitted on my time sheet in quarter hours. Annually, there was a summary of my hourly performance in comparison to my peers and to employees that I had never met, who had served before me. We complied with an arbitrary standard we had no input in setting. The majority of my waking hours were planned for me, without my input. Read more…