“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.

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…

I’ve posted frequently about the deleterious effect I believe time sheets have on professional knowledge workers and professional knowledge firms. Regardless of the origin, or the use for which they were originally intended they have become at once a measurement of productivity, value, worth and efficiency. And I don’t believe they do any of those things particularly well. Granted they can generate useful and important information for reactive decision making but the costs of that information to the culture of the user far outweigh any marginal benefit derived. They are a very efficient tool for micromanaging. There are other very efficient micromanagement tools as well. There are performance evaluations - which we’ve previously posted about. How about ‘checklists’? Read more…

In my recent post, Beware the Jabberwock, I intended to suggest that as practitioners we always question what is the ‘common body of knowledge’ and accepted management philosophy we have been indoctrinated with over the past 50 years.  My comments were not directed specifically at Ric Payne or Principia, but rather at traditional thinking, while I did use one of Ric’s posts as an example.  My comments were apparently interpreted as a personal attack based on Ric’s comment which we have posted.  After again reading my post, I do see it could be interpreted as a personal attack.   That was not my intent, and I sincerely apologize. 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…

Our premise for this blog is that no matter how perfect the practice management model is in accounting, it can be improved by the collective minds, experience and efforts of the members of our profession.  No management model is perfect, and one that hasn’t changed substantially in more than 50 years, such as ours, certainly must have some room for improvement.

Change is always difficult if not traumatic.  It’s also inevitable if we want to improve our situation.  We freely admit that some of our theory is just that – theory.  Almost inevitably it flys in the face of what is traditionally accepted practice management philosophy.  To be validated it must first be falsified.  Read more…

Coming from the marketing side of our firm I spend some of my time browsing other firms sites to see what they are doing different, what information they have put on their sites, how they update them, etc. What is very interesting is that almost all of them have one thing in common, “They are different!” Different from the typical accounting firm. Read more…

The most recent Beta Alpha Psi conference occurred this past weekend in Los Angeles, California. The topics were very similar to prior years; Work/Life Balance, Your First Year in Public Accounting, and From Student to Professional. I’ve heard all of these topics before, but the last time I have heard them was about six months ago. Read more…

I love the fact that we don’t have to keep track of every minute of every day (one of the biggest problems with time sheets) because it frees up time to take care of the little (or not so little) things – like reading the latest tax updates (something that is not so little for me or our clients, but a necessity that has always eaten into my “billable hours”) and sharing information with clients and other people I know who may be interested (a “little” thing to me, that I thought about doing before, but never found the time when I was conscious of where all my “billable hours” were spent). Read more…

Rick Telberg in his article titled Four Steps to Getting the Fees you Deserve gave four tips I believe were directed to certified financial planners (CFP’s), but I believe apply equally to all engagements of service providers.

1. Don’t procrastinate – (when discussing fees) Not only for CFP’s but for all of us. Always discuss the fee up front. Establish the value and scope of the service up front. No one likes surprises. Especially clients.
2. Present the fee structure clearly
3. Put your fees in context – “This might be a good time to explain what you are delivering for the fee”. I couldn’t agree more. By defining the scope you’ll avoid misunderstandings and establish each party’s responsibilities.
4. Put it in writing – “Make it clear you’re not hiding anything”. We use a fixed price agreement which defines the scope, performance guarantee, responsibilities, and the fee. It is an addendum to the engagement letter for specific services.

Read more…