Examples of Transparent Fees structure

Fee structure and/or fee price

Hi FT - I have no hesitation is agreeing that clients or prospective clients should be informed in detail of the fee structure, ie how fees are calculated and billed, but fixing a price before you've even met the client doesn't work for me.  We are therefore back to the initial responses you got when you last tried this question, ie determine how you are going to calculate fees and then tell the world.

If you are still uncertain over the "structure" or "structure & price" methodology that works best for you, have you asked your clients what would best work for them?

I've said many times that there is no right & wrong in how a fee is calculated, ie I may meet a client, ascertain what they want, judge what they and I will have to do to meet that and come up with a fee that matches exacly the fee quoted on the website of the firm up the road.  The difference for me is that fixing a price based on an average client increases the risk that either client A will be over charged or, on the other side of the coin, that my objectivity will be compromised when I suddeny realise that the price I've told client B means I'll be working for nothing.

I rarely quote from rule books but looking at the ACCA's "fee basis" section it sets out 5 considerations when calculating fees.  There is an argument for saying that a fixed global price list doesn't actually satisfy any of the 5 completely and even a time based structure may only satisfy 1.5 to 2.5 of them, whereas a value based fee, taking into account the circumstances and abilities of me AND the client in front of me, can satisfy all 5.

Not that transparant to me....

The first link you have posted is fine, provided you have a t/o under £110k. 

As mentioned in this and your other thread is that its impossible to predict every outcome from a set of accounts without speaking to the client.  I think a fee structure is a good way to go about things but a one price fits all is difficult to apply.

disagree

I prefer to offer a free first meeting. This encourages prospects to meet me. At that meeting I find out about them, their requirements, their records, and then quote a fixed fee based on the information I have gleaned. They also get some initial advice. You need to meet with the prospect in order to get them to see that you are the accountant for them. Anyone who is only interested in the fee level will not be a good client.

agree!

I'm now going to contradict myself!

Here is a very successful practice - http://www.sjdaccountancy.com/about/contractor_faqs.html - that does quote fees on their website. Worth looking at.

Save time by not doing time sheets

Clients are not that bothered about the fee (assuming it's reasonably in line with other practices in the area), what DOES bother clients is when the fee for standard compliance work varies from year to year. We dont use time sheets or record time in any way.  I really couldnt care less if it takes 2 hours or 12 hours to do someones basic accounts & return.  We quote them at the first meeting, and then whatever we quoted is what they are charged for tha work every year - subject to inflation increases, and alteration if their requirements or the amount of work involved changes substantially.

Limited companies

SJD seem to only have fees for a limited company. Their fees seem to be reasonable but they don't include bookkeeping. They say they have bookkeeping software. I wonder how many potential clients are put off by that. What about the clients that don't get to grips with the software?

Don't care how long?

CD... You don't care if it takes 2 or 12 hours to do work that will bring in a fixed fee?

How do you and your team get paid if not time-based?

Would be interesting if you have a team that is also paid based on completed tasks. Then I could understand not caring how long it takes to do some work though I'd still think you place some sort of value on your own time.

I really don't think keeping a basic timesheet need take up much time, and the information it can provide could be useful even if client's are not charged based on time.

Since July I've been recording timesheets electronically, over 900 hrs recorded in 15min intervals. I doubt it takes me much more than a couple of minutes each day and I can instantly see how my time is spent and on what tasks. I can see 68% of my time spent on internal tasks, 43% around development tasks and 3.5% on quote/proposal related activities.

David Toohey
The Accountants Circle

wow!

Hi David,

You really do give your business 115%!!

115% - not quite!

'blok' - not quite.

There is overlap in those times, as I have most development tasks as a part of the internal work and a good portion of the proposals too.  They are not exclusive from each other!

Fad

David is so right.

I can understand accountants working to a fixed fee but I don't understand accountants not wanting to know how long they have spent on a job. Time is useful for planning next year and knowing the profitability of jobs. Completing timesheets takes very little time compared to the benefits they bring.

Not completing timesheets seems to be one of those fads introduced by americans for no good reason!

I wonder if I should introduce a fad for not preparing accounts and make lots of money selling books and speaking at conferences. When I get carted away for criminal offences relating to non-preparation of accounts I can accuse people of being old fashioned and not receptive to knew ideas!

Everything startes off as a fad

Hi Peter - I really do want to avoid the 500th debate on this topic but just wanted to pick you up on the Fad thing.  When I started life in "Articles" and learned the art of creative time sheet preparation alongside creative accounting, it was made clear that I should never bring up the subject of time sheets with my principle (the senior partner) as he hated them and refused to keep them.

Years later when he went into semi-retirement and I went into partnership with him I felt it was about time I raised the issue and he said that he had always refused to do them, regarding them as a waste of time and a fad brought in from America when he was doing his articles in the early 50s.  Consequently he stuck with the "old fashioned" approach of charging the client what the work was worth.

For my conversion to the old fashioned approach I have the lovely (and equally old fashioned) Hugh Williams FCA to thank http://www.dormerfinance.co.uk/wordpress/?p=54.

So just like windmills and using vegetable oil to power engines, sometimes the old fashioned stands the test of time?

Combination

Although both practices I've worked in have been religious in their belief in timesheets, with every minute of every day having to be recorded (although as Paul touched on, all the staff here employ various degrees of 'creative' timesheet filling to fill any gaps) I'd imagine that a combination of methods would be best. Use a timesheet (or some other method of measuring time) when preparing a given job for the first time so get an idea of the cost,and then in subsequent years don't bother. Experienced staff will get a good feeling for whether subsequent years start taking longer to prepare so fees can be adjusted accordingly.

But then I've never run a practice!

Paul & CD

I know you two don't use time sheets and I know you well enough to be independent thinkers are not into fads.

I have clients who sell their services and I recommend they keep track of their time - usually an estimate at the end of each day is near enough.

I'm a fan of value pricing but it has limitations. If you can justify the value to the client as £2,000 but an accountant down the road can do just as good a job and only charges £1,000 then you've got problems. Arguing a fixed price in advance can be unhelpful when everybody is using assumptions. I'd rather charge what I think it's worth and if the client disagrees adjust the invoice without question. Next year I would explain that I could only do the work at the price I believe is right. Any improvement in the information provided would result in a certain reduction.

.

If you can justify the value to the client as £2,000 but an accountant down the road can do just as good a job and only charges £1,000 then you've got problems. Arguing a fixed price in advance can be unhelpful when everybody is using assumptions.  Posted by petersaxton on Tue, 21/12/2010 - 14:20

I recall only once kicking myself for quoting a fixed fee.  A new client came to us and after looking at what was involved I quoted him £3k. Indeed at £3k we made a very healthy profit. However, I then discovered that he had happily been paying his previous accountants £7k.   So, I could have doubled our fee and still undercut the previous firm.

Peter

Firstly, I should repeat, repeat my comment made on previous threads that there are several methods of calculating fees and each firm picks what suits them and their clients, it's just that having filled out timesheets for over 25 years, it was time for a change for us and it's been such a relief. 

People will quote from books and gurus over the pros and cons of one method or another but, just like meat eating & veganism or gas guzzlers & Smart cars I talk from experience from both sides.

Remember the fee is not "fixed" till the client agrees, so I quote what I consider is reasonable, ask if that's OK, negotiate if necessary (never agrue) and we agree on a figure.  If my quote is way out with what the client expected (or can afford) and I value the client I will find ways to help out but, if, as in your example, the client prefers to try the firm down the road, then that's fine.  This policy represents the way most business has operated for about 6,000 years (seriously old fashioned).

Going back to the mechanics of time recording there are 2 sides to it, ie a way to produce a fee indication/forecast (hours x £s) as well as a way to track what people are doing.

Each person records up to say 2,000 hours a year (ie 20,000 x 6 minute units or 8,000 15 minute units) and these are then analysed by client, non-charge & activity, work type, then removed when billed or written off etc etc and over recent years I've had 3-4 fee earners (thank god for computers & spreadsheets eh?).

Now all I do, in April is to run down my 120ish clients jot down a rough estimate of what I think I'll charge each and compare this to my overheads to make sure I'm in the right ball-park for profit. Then contact each client with detailed proposals and, on average, get 5-6 queries.  All the bills for the entire year's anticipated work go out in April/May and the cash-flow has been one of the biggest bonuses.

As far as people management is concerned I work with them and talk to them and we plan their and my work load (both client and admin) a month or two at a time.  Again, this is how the majority of businesses manage their humans and I always found time sheets a blunt a de-humanising experience.

That's my lot on the topic I'm afraid, cheers.

Time and value

My experience is that in the minds of 'some' (possibly most?) clients time and value are inextricably linked.

In other words, if it is evident that you have put in the hard graft they are quite happy to pay the bill. That perception of value is only evident after the work has been done and not before.

-- Kind regards Andy

The advantages of time recording - many; the disadvantages of ti

“Firstly, I should repeat, repeat my comment made on previous threads that there are several methods of calculating fees and each firm picks what suits them and their clients, it's just that having filled out timesheets for over 25 years, it was time for a change for us and it's been such a relief.”

Paul, I know you are repeating yourself but you have to admit you have made the same mistake as previously. You still seem to be mixing up completing timesheets with calculating fees. There’s nothing wrong with the way you are deciding your prices except you don’t seem to know whether your jobs are worth doing other than by guesswork and memory.

“there are several methods of calculating fees and each firm picks what suits them and their clients”

Homing in on this statement, there’s also several ways to drive a car – one is recklessly and as fast as possible and another is carefully and considering other road users – but I would not give them equal weighting but I would prefer to consider the advantages and disadvantages of each. Surely, that is a better way than simply saying one way “suits” me.

“If my quote is way out with what the client expected (or can afford) and I value the client I will find ways to help out but, if, as in your example, the client prefers to try the firm down the road, then that's fine.”

Given I’m talking about a client that I have worked with, if I know the work only took ten hours, then I would be earning £200 per hour. If I guessed that other firms would take ten hours and some would only charge £100 per hour I would think I would be losing a perfectly good client because I was charging too much and I would consider charging around £1,000. Paul, on the other hand, would not have the advantage of knowing how much he was making per hour from the client and would be perfectly happy for the client to go elsewhere. Paul’s judgement of the fee to charge may be spot on but my judgement would at least have the advantage of knowing how long I have been spending on the job and what other accountants are likely to charge for a job taking that long.

“thank god for computers & spreadsheets eh?”

Agreed. I use spreadsheets right now but I hope to swap over to Digita Time & Fees in February. Given there’s only me, tracking time is a matter of a few seconds work each day. I don’t know why anybody could ever make out that tracking time is not useful. If I stopped tracking time I would not give out a huge sigh of relief for the time and effort saved but it would concern me that I don’t know how long it took me to earn a certain amount of money for a particular job.

“That's my lot on the topic I'm afraid, cheers.”

What topic is that? The value of recording time? How long it takes to record time? Or, How to arrive at your charges for a job?

I agree with Peter

I use time sheets and fixed fees. I want to know if that £400 job took me 4 hours or 12. If it took me 12, I get the feedback that I have misquoted, so I can (a) adjust next year's fee and (b) when a similar job comes along, remember the lesson and quote higher. Simples.

.

......  there’s also several ways to drive a car – one is recklessly and as fast as possible Posted by petersaxton on Tue, 21/12/2010 - 18:53

Have you been following me ?  :)

My experience is that in the minds of 'some' (possibly most?) clients time and value are inextricably linked.  In other words, if it is evident that you have put in the hard graft they are quite happy to pay the bill. That perception of value is only evident after the work has been done and not before.

-- Kind regards Andy

Posted by andypartridge on Tue, 21/12/2010 - 17:42

Clients give you their records, and you magically produce a set of accounts, tax return etcetera. They have no idea how long its taken.  Their books could sit in your office untouched for a month, you then spend two hours knocking a set of accounts together, and return them.  THey have no idea if its taken you an hour, a week, or a month to do, so how can they equate time to value?

Transparent Fees

Although clients may not know the time that is spent, nor the cost of software used, they don't want to feel like they're a cash cow where their hard earned cash becomes a nice easy profit for someone else.

They realise if they were larger then they may be able to consider a part-time accountant, bookkeeper... anyone that may reduce those costs and these would mostly be employed on a wage/salary.

Although the topic is regarding a transparent fee structure, to put a structure in place will usually mean the amount of work involved must be anticipated and a part of this does include knowing how much time would probably be involved.  *Small promo here but anyone interested in a simple and quick timesheet solution can ask me for a free month trial of our Online Timesheet and Expense System.

I know the OP is asking for comments on showing this fee structure publicly, as they feel it can reduce timewasters.  I don't feel this is meant as an hr v fixed fee subject but whether or not fixed fees should be shown in such a way.

Personally, I think people in business value their own time enough not to setup meetings without any possible intention of using a service, expect on occassions they may be trying to fish for information and help to do it themselves.  This can just be a cost of winning clients.

I also think that trying to publish a set of fixed fees and say these cover what the client wants, may actually have the unwanted effect of turning people away as they:

can see the cost already and make a decision based on that;notice that it doesn't cover the service they need;don't understand the services and feel they must decide where they fit;feel it is not personal or specific to their needs.

Some of these are written really from the accountants view and I don't think clients truly know what they need and what it means.  If they are a soletrader or partnership which will they think they need? "One set of Director Report for Shareholder" is a service they should have?  Will they realise?

If a fixed fee structure is in place then I think it should be made clear what base service they would be looking at and why. They need to know the service can be customised to their needs... things like CIS tax can be handled if they need it, or excluded if not.

I'd not want to have anything in place that has a client making the decision to walk away too quickly. It should entice them to take the next step and find out why you would be the accountant for them.

That's my two bob on the subject.

David Toohey
The Accountants Circle

@ C_D

How does the client know? Through open and honest discussion, that's how. You are right, I might have knocked something up in a couple of hours and pulled the wool over the client's eyes, but what kind of business relationship is that?

A very recent example is a client who had a six-figure tax bill for January and double what he expected. He was hopping mad to the extent that I was a little concerned about getting the fee. I wonder, at this stage, what the value of my work was to this client?

We had a meeting at which I took out his file and went through the working papers with him. He was surprised at the level of detail and it was obvious I had gone to some trouble to arrive at the conclusion I had. I wouldn't say the client left 'happy' but he did leave confident in the knowledge that I had gone to a lot of effort to get things right for him.

And that is what I mean when I say that graft and value are linked in the eyes of clients. I can't speak for yours, but I can mine.

I hope you are not disagreeing with me for the sake of it ;)

-- Kind regards Andy

Accountancy costs and level of detail

“They realise if they were larger then they may be able to consider a part-time accountant, bookkeeper... anyone that may reduce those costs and these would mostly be employed on a wage/salary.”

I doubt that employing a part time accountant or bookkeeper will reduce accountancy costs in total. It will increase costs but result in more timely and useful information.

“We had a meeting at which I took out his file and went through the working papers with him. He was surprised at the level of detail and it was obvious I had gone to some trouble to arrive at the conclusion I had. I wouldn't say the client left 'happy' but he did leave confident in the knowledge that I had gone to a lot of effort to get things right for him.”

I’ve found that when clients do ask questions they only then realise the level of detail required to produce the accounts.

Andy

I agree that clients can be shown the amount of work involved, but, probably only 10% of clients want to know, and of that 10% only 10% understand what youre telling them.

Mention accruals and reserves to most clients and a glazed look crosses their faces. You might as well be speaking in Chinese.  

Missing the point

My clients don't expect to fully understand what I have done or why, but they are reassured and sense value in what I have done when I can demonstrate the effort that has gone into acting for them.

This might be a minority view amongst accountants but I feel it is the majority view amongst my client base.

It's a bit like traditional art versus modern art. Modern art gets criticism for a variety of reasons but one of the chief reasons is that the concept is often not matched by toil. Purveyors of traditional art like to be able to see that sweat has been shed in the completion of the work.

Maybe more clients than you think like to see that from their professional service providers too. If so, it would be a hammer blow to some value pricing theory.

-- Kind regards Andy

Why?

@FirstTab - you can use minimum fees to filter enquires and suggest you ask yourself if you are you are so drawn towards publishing fixed fees. Is it because this avoids an open discussion with clients about the value?

The problem with quoting prices upfront is that you automatically pigeon-hole yourself and make it easy to be compared. Worse, you are likely to be compared to the low cost providers. Is that where you want to be?
As for recording time to work out how much you have made, here are two quickies:

You will have a good idea how long something will take before you start if you carry out an assessment of the project before you start the work. To keep on track you can agree conditions and milestones with the client as well as carrying out mid-work and post-work reviews.The only thing that can be said for recording time and time based billing is that it is easy but there are massive opportunity costs for accountants and clients.

Keep in mind that time is not an issue if you are a knowledge worker. The key is the quality and quantity of your knowledge and how effective you are as a communicator. 

@Andy - showing working papers is a way of demonstrating the effort you have put in and this may build confidence but I think what client’s value is the trust you are building, not the time you are committing.

But, would a client really be more interested in the 20 hours work you have done or the one tax strategy that will wipe their tax bill for the year or a pricing strategy that will double their profit every year for the next 20 years?

Bob Harper

Time is an issue
"The only thing that can be said for recording time and time based billing is that it is easy but there are massive opportunity costs for accountants and clients.

Keep in mind that time is not an issue if you are a knowledge worker. The key is the quality and quantity of your knowledge and how effective you are as a communicator. "

There's more to be said for recording time than "it is easy". It also gives the accountant an idea of how much time they have spent on the job to get a certain fee. It may not be relevant to the client but it certainly should be relevant to the accountant. It is nonsense to suggest that it doesn't matter whether you spend one day or one week on a job for a fee of £500.

Time no longer = money

@Peter - I said time is not an issue for knowledge workers because they charge based on value for access to and/or transfer of their knowledge, not how long it takes.

This is a different business model where time is irrelevant. The sales process establishes if there is a match upfront and an assessment of the work will show if it will take a day or a week.

I doubt a knowledge worker would accept a £500 project if they thought it would take a day, let alone a week. A time base service provider does the work and then argues about the price.

This is why many knowledge workers write books. This allows people to access their knowledge at minimal cost. Interestingly, the Internet is the modern day equivalent of the printing press and it is a massive opportunity for knowledge workers.

People can publish their own online knowledge using videos. These videos can be the basis of a course, like a home study programme with checklists, resources and in-depth training.  

Bob Harper

It's simple

Do you accept that an accountant should record time spent on a job?

Expect

No, I do not accept accountants should record time spent on a job; I expect much more from the profession.

However, on a practical note I recommend firms carry on recording time until they have new systems in place.

Bob Harper
 

How?

"This is a different business model where time is irrelevant. The sales process establishes if there is a match upfront and an assessment of the work will show if it will take a day or a week."

Firstly, I'm not quite sure how time is irrelevant when most staff costs will have time as a significant element and for most the revenue one can bring in is directly related to the time that is spent. This is of course a completely separate issue to how clients are charged.

Secondly, how would you expect an assessment of work to be carried out and estimate the time it will take if there is no record of time spent on comparable tasks in the past?

David Toohey
The Accountants Circle

Time spent on a job is always relevant

"No, I do not accept accountants should record time spent on a job"

If you don't "accept" or "expect" - was that a type or deliberate? - then how will accountants know whether the work is making a profit or working towards satisfying their income requirements effectively?

Knowledge & time

Highly detailed time recording is, in itself, a waste of time and something we dropped years ago. However, a "rough" idea of the time a project/job/task will take is vital, if only to assess whether staff responsible for that particular job are working in a reasonably efficient manner.

A professional person charges for a combination of his knowledge AND his time.

Those who purport to sell only their "knowledge" and who peddle their "expertise" in books (99% of which are pure drivel) are really trying to make money for doing nothing - which in my book is the definition of a con artist. If by some chance their customers are subsequently succesful, they of course claim the credit, if however their customers fail, then it's always "the customers fault", never the fault of their useless "guides". 

"Rough" is better than none at all!

"Highly detailed time recording is, in itself, a waste of time and something we dropped years ago. However, a "rough" idea of the time a project/job/task will take is vital, if only to assess whether staff responsible for that particular job are working in a reasonably efficient manner."

I record my time to the nearest quarter of an hour if I am charging partly or completely by time. The nearest hour is enough for bigger jobs with a fixed fee.

If I recommend keeping track of time to some of my clients I would say record it in days or quarter days if they are put off by accurate recording or it isn't that vital.

How long

Its all relative - for a £200 subcontractor I'd want to know to the nearest hour, for a £10k audit I's want to know how many weeks x how many staff.

Time again

@David - I am assuming the provide has done it before so they know what they are doing but timing the first time you do something maybe necessary so you can calculate your walk away position. 

@Peter - there is no doubt that time recording is a way to calculate costs. I don’t think it is the only way but it is probably the most accurate but so what? The issue here is pricing and time is irrelevant when the seller is selling knowledge.

Bob Harper
 

Time is not irrelevant

"there is no doubt that time recording is a way to calculate costs. I don’t think it is the only way but it is probably the most accurate but so what? The issue here is pricing and time is irrelevant when the seller is selling knowledge."

Time is certainly not irrelevant. If the time took to do a job was a certain number of hours and you were paying somebody to do that work for you it would be ridiculous to quote a fee that was less than it cost you. Even if you were doing the work yourself and you had the possibility of taking on up to ten jobs but you had a limited number of hours in which to work. If you didn't know what you could earn in an hour on each job you couldn't make the most efficient decision.

Open situation

Bob

Why would you assume they've done it before or have a record or clear idea of the work involved?

There are plenty of accountants out there that are having to deal with venturing out in practice for the first time, taking on new types of clients, or restructuring the way they do business and charge and they may need to be clear on the costs involved and how to consider these rather than plucking figures from the air.  £2000 might sound great but it's not much good if it may mean a month of work involved.

If knowing time involved in tasks is possibly the most accurate way to measure a usually significant portion of the costs, and is directly related to those costs... surely that in itself should make it quite relevant and well worth considering.

Also why do you think accountants would only be selling "knowledge"? And how is that knowledge supposed to be provided?  The pricing is mostly, if not entirely, for services which take time (and knowledge) to provide.

David Toohey
The Accountants Circle

Time for a change

@David - accountants have two choices; spend time recording time so they know exactly what they have done or focus on the results the client want, develop project management skills and communicate with clients.

I think most people accept that time does not really mean value so time is a poor pricing strategy. So, time recording is only worth considering for management purposes. This is where I was stuck for a while but then I started considering other management strategies and again time because irrelevant. Does it matter if an accountant is fast or how they make the client feel? Does it matter if they do the job on budget or if they come up with ways to save and makes the client money?

Time is worse than irrelevant; it actually produces negative results because it gets the whole firm/profession looking in the wrong direction for the wrong answer. Everyone is looking for efficiency when they should be thinking about being effective. Managers (even people who manage themselves) are looking to leverage the time of employees like machines rather than treating themselves and colleagues with respect.

Your last point is crucial and the crux; are accountants going to cling on to being services providers or embrace being knowledge workers?

If they embrace change they can let time recording go. If they do not, my prediction is that these firms will be fighting over less work at a lower price. The firms that focus on value will work with better clients, earn more and will enjoy greater job satisfaction.

There is no easy answer but the choice is simple.

@Peter - recording time is no guarantee of getting paid. Almost every firm I have spoken/work with admits they do not record time properly. They work longer hours than they record, dump time and often end up writing some off. 

It is not about what you can earn in an hour but what value you can create. If you look at pricing and practice management through the eyes of a service provider who exchanges time for money you will never be able to see the other side of the argument.

I understand you, I have been there but we are talking about two different types of accountancy practice and there is never going to be an agreement between the two.

Bob Harper

Why and how?

Bob

I don't quite see why accountants have to make such clear cut choices.

Recording time needn't be time consuming, and even just rough records could be done.  There shouldn't be any reason to lose focus on results, development, and clients.

Time doesn't mean value, but it would certainly be a contributing factor.  The more time spent focusing on results, the greater the value that would be there (done within reason). This is why I struggle to understand why you keep saying time is irrelevant as it is just about always relevant in some way.

I would say it matter both if an accountant is fast and how a client feels.  There has to be a balance and with everything else remaining equal, the faster an accountant is the better.

It would also matter both if tasks are done within budget, and if they can identify ways to save or make a client money.

None of these should be mutual exclusive, there is not much of a choice there to be made but everything should be considered.

Recording time and considering it in certain ways isn't something I would consider negative, though I agree it is usually best for it not to be the focus and only a part of performance assessment.

People should look to be both effective and efficient.  Without being efficient the effectiveness would come at an excessive cost.

It's not so much my point but you've been saying selling "knowledge". I've always seen accountancy as a service that uses knowledge.  Service is the method and delivery in how the knowledge is presented. How do you see it differently?  How do you see an accountant being a knowledge worker without being a service provider?

"It is not about what you can earn in an hour but what value you can create."

Bearing in mind we're not referring to charging on an hourly basis... it is usually important what is earnt in time spent as that is how we all make a living. Value certainly plays a significant part in that but as I've said before, time is usually a considerable factor in creating and providing that value.

I'm still not quite seeing 2 distinct types of practices here apart from those that consider there may be some usefulness in recording time or at least having a clear understand of time involved in performing tasks, and those that don't.

David Toohey
The Accountants Circle

Not recording time means you are less able to judge profitabilit

"Almost every firm I have spoken/work with admits they do not record time properly. They work longer hours than they record, dump time and often end up writing some off. "

Not recording time properly isn't what I am suggesting. I am suggesting recording time accurately. So what if they write some off? - at least they would know what time was spent and compare it to their pricing and whether they should be doing the work at all.

It's not an either/or. I'm not saying should I prepare the accounts or record time. To be successful in business you have to be able to do more than one thing.

New model and a strategy

@David - I accept there could be a trade-off between effectiveness and efficiency. But, effectiveness can eliminate the need to be efficient.

If a firm of accountants has an effective client’s management program which includes getting clients to use accounting software correctly 90% of the completing and correct bookkeeping work at the year-end would disappear.

I am interested why you think more time means more value. 

@Peter - recording time perfectly just means the wrong information is more accurate.

The more accurate the time recording is the worse because it usually means the people looking at the data believe it must be right which makes it harder for them to gain new insights and perspectives!

Like I mentioned to David above, if you consider 90% of what accountants do (year-end accounts) then instead of developing effective client management systems (external systems which add value) to drive profits firms are looking for internal efficiency. Like you say, some refuse even work because it isn’t profitable when the reality is they are not effective!

By the way, there is a good argument that to be successful you just need to just do one thing. Starbucks focused on coffee when most coffee shops served everything. Subway seems to be doing well with one type of sandwich and when the owner of the Children’s Supermarket stopped stocking children’s furniture Toys “R” Us took off.

The model is narrow the focus, build depth, become exceptionally good because it’s all you do and dominate the niche. This is the opposite of the general practice approach and is what I believe the most profitable and sustainable firms will do in the future.

Bob Harper

Get it right quickly. Is it really that onerous for some people?

"@Peter - recording time perfectly just means the wrong information is more accurate."

Time spent on jobs is important. It doesn't mean you have to neglect other areas.

"The more accurate the time recording is the worse because it usually means the people looking at the data believe it must be right which makes it harder for them to gain new insights and perspectives!"

My data is right. I don't try to fool myself. If time spent on jobs is wrongly recorded then the managers are not managing properly. I've found that recording time take very little effort. It's my view that anybody who has difficulty recording time accurately and quickly is inefficient.

Theories v Experience

"Niche marketting" and "specialisation" - clearly these are the latest buzz words.  What utter rubbish.  What this really means is painting yourself into a corner where you take on only one type pf work and by doing so slash your potential client pool to a fraction of what it should be.  How boring also.

The idea of selling "knowledge" not time is also ridiculous. BOTH are equally important, your knowledge is why clients pay you to do their accounts instead of paying Fred down at the pub to do them, BUT, they are also paying for your time. 

I dont agree with complex time recording and analysis, and have never done it, but it is vital to have a reasonable idea of how long each job takes. 

Peddling theories that sound good but actually are not born out by the experience of thousands of accountants is potentially dangerous to young inexperiences accountants (or indeed any other profession) who might believe these theories - and end up bankrupt as a result.

Common

@Peter - even if time can be recorded 100% accurately without any effort (I think some software can do this by tracking your screen activity) there is still a cost because it gets accountants thinking about the wrong thing.

@CD - in the spirit of Christmas and a wishing everyone a happy and prosperous New Year I’ll reply by suggesting firms to ask themselves why selling knowledge rather than time so ridiculous when the time it takes to do the work is reducing, the amount of work is shrinking and the competition is increasing faster than ever before?

I agree, if you trade time for money it is useful to know how long to spend doing something. But, if you trade knowledge it is much more important to measure the value added. That is why accountants who see themselves as knowledge workers are likely to do more than just prepare accounts.

Yes, value pricing is a theory except for the firms implementing it where it is a practical reality. The numbers are growing and firms about other firms doing it here.

I also like to keep in mind that billing time is also a theory; it is derived from Karl Marx Labour Theory of Value. The only question is which is the best theory which may not be the most common.

Bob Harper

Bob and Mr Sensible

"there is still a cost because it gets accountants thinking about the wrong thing."

They shouldn't think about their time? That's exactly one of the things they should be thinking about:

Bob: "That a nice fee of £1,000."

Mr Sensible: "It took us 500 hours to earn it!"

Bob: You shouldn't be thinking about time."

Examples?

"and end up bankrupt as a result."

Have you got any examples?

Time is no help

@Peter - if the client is only going to pay £1,000 recording the time isn’t going to help. All it does is work out precisely the opportunity costs.

Other options are:

To approach the project differentlyWalk away before getting involvedAgree with the client that the project is not worthwhile

Bob Harper

Yes it is

"@Peter - if the client is only going to pay £1,000 recording the time isn’t going to help. All it does is work out precisely the opportunity costs."

Of course it is. You know whether the job is worth doing.

Before or after

@Peter - but using time-billing mentality you will only know the time after you have done the work. You will only know the job was not worth doing after it was done and you argued with the client about the fee.

Bob Harper 

Similar jobs

"@Peter - but using time-billing mentality you will only know the time after you have done the work. You will only know the job was not worth doing after it was done and you argued with the client about the fee."

No, you will have time records of many similar jobs.