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Is uncharged partner time productive or destructive?

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25th May 2017
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A Maximit survey uncovers some worrying statistics.

Our survey of small practice partners revealed that only 18% of partners billed in excess of 30 hours a week. So what can we conclude from this figure? I must admit it surprised me as being somewhat on the low side given that the thing  accountants sell is their knowledge and skills on a time basis.

On the reasonable assumption that partners are working around 40 hours a week why is so much time going unbilled and what does it signify? If accountants were flogging tins of beans surely they wouldn’t be giving away 25% of their stock pro bono?

From my personal experience of accountancy practice “back in the day” and from talking on a near daily basis to those still at the coal face there is still an ever present nervousness about the size of the bill and fear of alienating and ultimately losing the client.

Some accountants have the confidence to present a bill and explain that the client is getting a tremendous service at a very keen price, all part of the “value added” school of accountancy or as it was formerly described in a slightly more crude and direct but nonetheless valid manner – “I have saved you a wedge in tax so my fee is reasonable” – although clients may often struggle to see how and where these savings arose. Too many others regrettably are somewhat meek and unable to present their case and simply write off time. Criminal isn’t it ?

Talking of which, why is it that our professional cousins in the legal profession seem to have no issue with presenting hefty bills for services that often achieve very little for the client ? Is it one of life’s many mysteries or can we narrow the gap?

My analysis leads me to conclude that for most people the instructing of a solicitor is a one-off experience but the annual or more frequent use of an accountant means that the practitioner always has one eye on next year’s expected recurring fee and is scared to rock the boat. Many legal services rendered are opaque in as much as there is often no set timeframe for a case so the meter simply ticks upwards, unlike preparing a set of accounts or a tax return where the likely time taken can be estimated fairly accurately and will be expected by the client to remain fairly constant especially in a low inflation environment, however much extra work was done in a year.

An equally big worry is whether my opening statistic means that partners are spending time on unproductive administrative matters that could quite easily be managed by somebody else. One practitioner I spoke to recently told me she is in the office at 4.30am and works until late afternoon, doing absolutely everything herself. I know it’s true because every time I ring, guess who answers the phone. A highly profitable operation perhaps but one wonders why she is unable to delegate.

There is also the matter of training and keeping up to date with professional journals and tax changes. Should this be incorporated into the “40hr working week” or should it be extra-curricular, perhaps taking the working week up to 45 hours ?  If it is part of the mainstream working day how many accountants look at the training as cost base that needs to be shared across the clients – after all is it not part of the ability to deliver the service and the more expertise gained the better the service, certainly in terms of taxation or business advice ? We’re straying into the territory of management accounting here but I suspect that charge-out rates often have a nebulous basis instead of a formula backed by substance.

Then again, possibly partners are so comfortable with their current earnings that they only work a maximum of 30 hours a week – is accountancy the ultimate lifestyle business?

Replies (7)

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Man of Kent
By Kent accountant
26th May 2017 12:37

Only billed 30 hours a week?!

I think you'll find that most partners in small practices/sole practitioners would be delighted to "only" achieve 30 hours of chargeable time a week.

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Replying to Kent accountant:
Norman Younger
By Norman Younger
26th May 2017 17:11

Exactly - what is the reason for this ?
If the time is spent on other vital activities such as CPD it needs to be recouped somehow .
How many firms work out their charge-out rate with a true overhead recouping basis ?

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Replying to Flying Scotsman:
Man of Kent
By Kent accountant
27th May 2017 15:13

This is a very old fashioned way of working.

I think you'll find that most small firms/sole practitioners charge fixed fees, don't bill by the hour and don't record time.

Those that do record time will use it as a means to calculate/estimate recovery rates on clients. This is partly to determine whether the fees are high enough.

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Worm
By TheLambtonWorm
26th May 2017 21:20

More a case of the staff doing the changeable work, so the partners don't have to, i imagine.

Thanks (1)
Della Hudson FCA
By Della Hudson
27th May 2017 10:40

I agree with TheLambtonWorm. My job is strategy and bringing in new business. I make sure that we have the right people and systems in place to look after our clients. I'm aiming to get down to just one day a week of chargeable consultancy work as I build the team to replace me on a day to day basis. As you can tell, I have no problem delegating to the right people.

(Like most modern accountancy businesses we're mostly fixed fees and only charge ad hoc consultancy by the hour.)

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Replying to HudsonCo:
Man of Kent
By Kent accountant
27th May 2017 15:16

There's a big distinction between small practices where the owner/sole practitioner is the main fee earner and larger practices where they are the source of most new work - more of a business development role.

The practice I trained at - many years ago - were disappointed if partner chargeable time was more than 25%. Point being their main role was to bring in the work.

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Norman Younger
By Norman Younger
28th May 2017 10:31

Fixed fees definitely make more sense more routine work. Most tradesmen quote for a job on the basis of experience.

I fully appreciate the role of the partner driving business and signing off but do they truly build in all their own notional time at a rate that reflects their seniority as well as capturing their overheads ? I reckon many are simply building in their wages to the chargeout rate of their juniors on an unscientific basis - not unlike my question :)

Taken to the extreme the partner would have no chargeable time at all if they were simply an overhead but I suspect that many of my respondents were on the traditional charge method.

Whatever method is used I do feel form talking to accountants that our profession at the "high street" level is wary of charging as aggressively as our legal cousins and we have a reputation for being soft when it comes to fees. Everybody knows that solicitors are expensive and one swallows hard and takes their bill on the chin.

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