“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.

Last week we were informed we had been selected by Accounting Today as one of the top accounting firms  to work for in the United States.  I understand there will be an article published in January, 2009.  How did we go from being a firm that had the universal difficulty of other accounting firms – attracting and retaining top talent – to being named to such a prestigious club in four years?: We changed our business philosophy, and consequently our overall approach to providing service, after following the traditional accepted approach for 25 years. 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…

Just read Michelle Golden’s post on sending out mass mailings.  I thought it was very funny, and says so much about why we are so turned off by most of the mail we get today.

But most of all, I thought it also shows the value of criticism.  I read the other day, that the best thing you can hear as a company is a criticism, because that’s when you have the chance to improve.  If you never hear them, you can never get better. Read more…

I hailed from a large international accounting firm and like most of my coworkers there I became sick of the long work hours and never ending cycle of stress and emotional guilt tripping that comes with trying to justify going home after just ten or twelve hours. Searching for another job was difficult, as I rarely had a minute that wasn’t filled by working, commuting or sleeping. But the most substantial barrier to quitting my big accounting firm job was the myths that circulated concerning small firms. Read more…

After writing my first blog post, “Intern’s Corner: The Big Four Push” I began to think about how does one choose the right firm. I am lucky enough to have had to opportunity to experience different firms and different values over the past two years. I have been a member of Beta Alpha Psi (BAP) in that time period. By having those opportunities, I feel that I have been able to explore different options, and I know what is right for me. These are the steps that I took when choosing the firm I choose Read more…

Recently, Bob Nugent the Chief Financial Officer for Scolari’s Markets, a chain retail grocer in Northern Nevada and one of our favorite and most valued clients, gave our firm a compliment that created a HSD for me. (HSD is the acronym for High Satisfaction Day – a phrase I first heard from author Ron Baker.) We had recently completed several projects for Scolari’s, which had involved several of our team members. Bob, not known for lavishing unsolicited praise in the thirty years I’ve known him, told me how impressed he was with the knowledge, professionalism and service level he had received from our associates. Read more…

One of my sincerest hopes for this blog is that it will provide a forum for a discussion of alternatives to traditional practice management philosophy and practices by service firms in the United States. One such debate compares the relative merits and shortcomings of the billable hour. We have written much about this subject. For whatever reason, likely cultural in nature, our Australian and British counterparts seem to be much more engaged and progressive. Read more…

Several years ago we discontinued using time sheets as a basis for doing our billing, and began pricing our services based on our conviction that the amount of time committed had absolutely no relationship to the value of the service being delivered. Read more…

When I was a child (longer ago than I’d readily admit) my parents buying choices were significantly impacted by retailers who gave trading stamps with each purchase. For a new retailer, S & H Green stamps guaranteed an automatic approval from my mother, faster than the Good Housekeeping seal of approval, and almost as fast as my four brothers, sisters and I could disappear when we heard the buzzer on the clothes dryer go off and knew someone would be conscripted to fold under wear.

Read more…