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Timesheets: Clients don't buy time

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In advance of his AccountingWEB Live Expo debate on the subject, Reza Hooda rails against the recent timesheets resurgence and argues that clients don’t pay for the minutes you take to do the job.

4th Oct 2021
Partner and coach rezahooda.com
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If you do keep timesheets you’re probably doing so because you don’t have an answer to one of more of the following questions:

  • How do I know what to charge if I don’t know what it costs to deliver my service? 
  • How will I know if I’m making a profit if we don’t track time? 
  • How will I know whether my employees are working efficiently if I don’t keep timesheets? 

At AccountingWEB’s inaugural exhibition in December I will be battling timesheet advocates Alastair Barlow and Lucy Cohen in an interactive debate. Before the final showdown at the Expo, let’s tackle each question in turn. 

How can we sell something we don’t know how much it costs to deliver? 

Nobody cares how much it costs you to deliver your service. Whenever we buy anything, we do not base our purchase decision based on the cost structure of the supplier.

We do not walk into Starbucks and start working out the unit cost of the coffee beans, the milk, the direct labour, the overhead and then add an arbitrary mark-up to justify our reason to purchase. 

We buy something because we can justify the value we’re getting exceeds the price we are paying. Your price, therefore, is the maximum someone is willing to pay to buy your product or service. It has nothing to do with your costs. 

Remember your client is not paying you for the minutes it takes you to deliver your advice, they’re paying you for the years it took you to be able to give them the solution in minutes. 

How will I know if I'm making a profit on a job or a client? 

In a typical practice that uses timesheets, time costs will be allocated between the clients the firm has based on charge-out rates. This includes the profit you expect to earn (a completely arbitrary mark-up that has nothing to do with the value to the customer).

Firstly, you don’t need timesheets to know your firm’s costs: your firm’s costs are fixed. 

Secondly, no matter how much you try and slice and dice your team’s costs across clients, what’s important is the return on investment you’re generating as a whole from the cost base.

Trying to work out profit per job or profit per client completely ignores a fundamental advantage we have as a profession – the lifetime customer value. 

  • What is the value of the referrals you could potentially earn over the lifetime of a loyal client? 
  • What is the value of additional revenue through client growth and expansion?
  • Where is the profit calculation over that timeframe?  

Looking at a snapshot at one point in time and ignoring potential lifetime value distorts your decision making.

So what if we spent more time talking to a client because they had a particular problem this month. The timesheet might have said they are unprofitable, but isn’t that what you want your team to be doing?

If we are really the trusted adviser we say we are then why are we putting our team off talking to clients for fear of running a ‘loss’ on a job? It all goes back to not understanding pricing. 

We think that because price is a number that there must be a calculation we need to carry out to arrive at our price. Our analytical minds obsess over costs and mark ups to determine what a reasonable price should be. 

But when you have a pricing model which is based on what is important to your client, what they value and the outcomes you deliver then that is what will drive your profitability upwards. 

How do I know whether my team are working efficiently?

As pricing guru Ron Baker said, you can be efficient with things but you need to be effective with people. 

That means understanding better what our people are good at, where their gifts lie and what frustrates them. Some people may take longer to do something because they may be more thorough or they are having a bad day or the client is not providing the information or there is a problem with the internet or software. 

There are myriad reasons why something may take longer on any given day and timesheets don’t give you any of that context. What’s important is not how long it takes but whether we get it done on time. 

What’s the point of knowing that a job took eight hours if it sat on the shelf for three weeks? What’s important is managing deadlines and that means managing capacity.

By all means use time to project ahead and plan when things are going to be done and by whom. That is capacity planning and project management. 

If you hear the same job is appearing week after week then you have the opportunity to ask questions that will help identify whether it's a process issue, a client issue or a software issue. You can then decide what steps to take next, such as more training, improved processes or reviewing your pricing.

Timesheets focus employees on the wrong things

Inevitably, getting employees to complete timesheets will focus their minds on the inputs instead of the outputs. 

So long as they have clocked their 37.5 hours a week they’ll feel like they’ve done ‘work’. But how much of that time was effective? How much of that time resulted in a positive outcome, solution or result for the client? 

Instead, get your employees minds focused on what’s important to the client. Turnaround times, proactive calls, managing expectations, delivering great client experiences; these are all things that are important to your clients and make them stay with you.

That’s why you should focus your team on getting results, not clocking time. Most businesses in the world operate just fine and profitably without using, so why do accountants and lawyers think they can’t do without them?

Looking forward to the healthy debate on this topic at AccountingWEB Live Expo on 1-2 December in Coventry - see you there!

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Reza Hooda will be speaking at AccountingWEB Live Expo on 1-2 December 2021 alongside such guests as Rebecca Benneyworth, Peter Rayney, Paul Aplin, Anita Monteith, Carl Reader, Steve Collings, Reza Hooda plus representatives from HMRC. 

Replies (37)

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By Paul Dunn
05th Oct 2021 09:39

Reza: Brilliantly done (no surprises there!)

You absolutely nailed it.

One hopes that the 'other side' don't even bother to turn up. Their 'arguments' hold as much 'truth' as conspiracy theories.

Here's the point — all the while we even 'debate' this issue, we're not moving the profession forward. We do that when the entire profession realises it's all about outcomes and not (falsely measured) inputs.

Well done, Reza.

Case closed!

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By why always me
05th Oct 2021 09:55

There is no right or wrong answer here, the way of the world these days that a different view is wrong and must be stamped out is quite sad.

I like timesheets and although I don't know the unit price at starbucks, I know they will, and being called old fashioned or not moving forward is fine by me.

My experience of no timesheet firms is that they charge significantly more and at some points client realise that and move on

Each to there own, but I am keeping timesheets

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Replying to why always me:
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By North East Accountant
05th Oct 2021 15:25

why always me wrote:

There is no right or wrong answer here, the way of the world these days that a different view is wrong and must be stamped out is quite sad.

I like timesheets and although I don't know the unit price at starbucks, I know they will, and being called old fashioned or not moving forward is fine by me.

Spot on.

Brexit is done people but there's an awful Leave V Remain mentality set in that seems to think that if you're on one side the other side is the devil and are idiots.

For example - Timesheets V No Timesheets.

Do what you want here, that's called freedom of choice but respect other peoples same freedom of choice to do the opposite to you.

I think it says a great deal about the character of an individual (and not in a good way) when they slag off other peoples views just because they are different to your own.

Either you believe in freedom of choice or you don't.

And if you don't believe in freedom of choice for everyone how about going to live in Afghanistan for a year or two and then see how much you like being told what you should be doing......that might just change your mind.

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By RogerMT
05th Oct 2021 10:00

Everything "Why always me" said, plus, the article ignores another important aspect of keeping timesheets. Namely, if you don't keep timesheets, what are you going to do when someone disputes your bill, and asks for a breakdown of time spent?

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Replying to RogerMT:
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By David Winch
05th Oct 2021 10:47

As Reza says in the article, the supplier's/provider's costs are no concern of the buyer!

Why would someone "dispute your bill" if they'd agreed it in advance (something you can do when you don't charge for your time!). And if they "ask for a breakdown" tell them to get lost. It's none of their business!

David Winch
Sales, Marketing and Pricing Consultant, Cambridge

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Replying to David Winch:
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By RogerMT
05th Oct 2021 13:24

Not all work can be quoted in advance. A tax enquiry by HMRC for example, which could be straightforward, or more likely open a can of complicated worms. You tell the client it will cost "at least £x, but it is not possible to give a final figure", then they dispute the eventual bill, even if they have been paying on account, which I would insist on. This is not common, but it does happen in our industry. Handy to have a timesheet to hand then, o yes! :)

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Replying to David Winch:
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By RogerMT
05th Oct 2021 13:26

Also, see what colinstewart says below - exactement!

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Replying to RogerMT:
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By colinstewart
05th Oct 2021 15:46

I think that one of the issues we are all up against is that if you do take a client to Court for non-payment then the Judge will expect you as a fellow professional to work within the framework of 'taxation' as solicitors (also professionals) do. He will expect two things: Letter of engagement (your contract) and your 'taxation' - i.e. your time records - dates, times, and hourly rate. If you have all of that he can only censure you for your charge out rate. He isn't going to challenge your time records because they are a contemporanous account (Policemans Pocket Book in terms of evidence). Equally, he is not going to challenge you on aspects of recurring work that are fixed in terms of time and cost. So, we need to take the best of both worlds and make the most of them.
Some respondents seem to think this debate is about converting luddites - surely it is about considering other views so that you can get the best out of your practice. My first day in the profession was 1 July 1975 - I am not so arrogant as to think that I cannot still learn from other people and improve the way I work, and I often do.

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Replying to colinstewart:
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By Paul Crowley
05th Oct 2021 20:09

Agree
Based on the last time I went to court
Needless to say defendant was disputing a fairly small bill
Something that the rich do just for fun

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By flightdeck
05th Oct 2021 10:20

I like timesheets - they help you see where people's time is going. But timesheets don't have to drive billing; they may influence but do not have to dictate. Tasks can have a certain value irrespective of time taken.

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Replying to flightdeck:
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By Paul Crowley
05th Oct 2021 20:11

Timesheets are relevant data
Destruction of relevant data needs justification

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By raybackler
05th Oct 2021 10:24

I don't use timesheets, but I do use time as a basis for ensuring my pricing is profitable, plus I benchmark against other firms, so make sure I am competitive. I like your arguments for not using timesheets on a day to day basis, but there has to be a basis point underpinning pricing and margins, otherwise you can end up a busy fool.

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By Duggimon
05th Oct 2021 10:26

To address your answers to the three questions, which are not the only considerations relevant when deciding whether to keep timesheets or not, but I'll limit it to those.

1: How do I know what to charge if I don’t know what it costs to deliver my service?

Your answer focuses on the fact clients don't use time spent to value our services, this is no great revelation. When I fee my clients I don't give them the breakdown of time spent, I sent them a fee note with the list of work done over the year. This sometimes includes additional one off services in addition to the usual annual work. I remember what additional work was done in order to stick it on the fee note because it's recorded on the timesheets. I suppose we could do away with timesheets, but I'd need to record this somewhere else.

Instead of determining a fee level as regards time, clients place a value of what they think the service is worth, and you propose that this is the price you charge regardless of time spent, you simply charge the maximum the market will bear. If I was to charge the maximum the client is willing to pay, how would I know whether this is reasonable? I would need some independent method of valuing my service to compare with what my client deems reasonable. I wonder how I could possibly make this comparison, you haven't addressed this, you're taking one solitary method of valuation, but I need a way of assessing the value of my time to determine whether it's worth spending that time on this client, given the maximum they're willing to pay. How can I do that without quantifying that time? Again, you don't address this.

2: How will I know if I'm making a profit on a job or a client?

Some of my issues with this response of yours are covered above in my response to the first. The general thrust of your answer here seems to be that it doesn't matter whether I make a profit on a job provided the firm makes a profit overall. I suppose that might be true but what if the firm doesn't make a profit? How do I know which clients are being undercharged?

Say I have turnover of £1m and costs of £1m. I have a thousand clients each paying £1,000 for their accounts and tax returns. My costs are £1.05m. I can't keep operating like this, should I charge everyone a bit more or are there some clients who should be charged a lot more, and maybe some who should be charged less? I have no idea because I don't know how much time my staff are spending on each client. Some of them might have great books and we do a quick check and post the TB, some might have rotten books and it takes a week.

I'm the partner here, I'm not looking at most of the books, so I don't know which is which. My staff could of course just tell me which is which, they could come in and talk to me about the books and I could make a note that Mr Chumferton has no idea what he's doing with a bank rec and his accounts took an age to prepare but Mrs Brindlebaum is great and it only took a couple of hours. Or, my staff could just record this information for every job they do so I could see it at the touch of a button, that would be a timesheet. Your response does not address how we fill this knowledge gap, you just deny it exists.

3: How do I know whether my team are working efficiently?

Again, you don't answer this question. There is no reason why a timesheet would be an impediment to knowing the answer to this unless you ignore all other factors. Timesheets are the starting point for a conversation with staff. This job took eight hours last year, this year it took fifteen. I've looked through the working papers and it seems comparable, what was the extra time for? Then the staff member explains it through, we determine whether it's an issue with their working practices or additional work required for the client that we should charge extra for and then we move on.

Without a timesheet, you could have the same chat but how to quantify any of it?

Speaking broadly, nothing you've said convinces me in any way that having more information in the form of timesheets is a bad thing. With a diary open on your desk at all times as an aide memoir to note what you're doing, the timesheet itself takes fifteen minutes a week to complete, and for that the management has a quantifiable record of what's been done this week and by whom.

Nobody who is pro-timesheet is advocating using the data generated as the only method of pricing, or the only method of assessing staff, or the only method of anything, it's simply more data that's easy to read and understand that adds to the picture of the practice as a whole.

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Replying to Duggimon:
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By practice for sale
05th Oct 2021 11:16

I completely agree, you have made my arguments for me. Someone very clever once said to me, "if you cant measure it you can't manage it".

I fully agree that the choice of charging & pricing strategy does not need to be bound to the time spent. Its a choice each firm has to make, but in fact I fundamentally disagree with that - its like giving the service provider carte blanche to charge whatever they like. So I have used fixed fee engagements for over 20 years since I started my current practice. Didnt bother with time sheets when it was just me, but once my first employee started, it became obvious to me very quickly that we needed time records, not for billing but for cost control. If you sell something, you need to be sure that the cost is lower than the selling price. Thats true on a job by job basis as well as globally across the firm.

Which is why I clearly recall in my exams all them hundreds of years ago, several modules on costings. Marginal, standard, etc etc. The reason they exist is to ensure that the product which goes out is manufactured at a cost which is a) known and b) profitable to sell. I can't see why accountancy services would be exempt from that fundamental.

The argument about future referrals, organic client growth etc is not one I can buy into. If a client leaves they will not bring that business to you, if they are still with you, they will. So the imperative is to provide a great service now, and you can't do that if you are not making a profit.

And there is a clear contradiction in the OP's message. He suggests that its OK to use time for planning future capacity. But how on earth can you do that if you dont know the time attaching to a service?

To be honest, I read most of the OP with a wry grin actually thinking it supported the reasons why time records are really useful. In many other areas of the digital economy we talk about data harvesting and that 'data is power'. To me, time records fall perfectly into that category. It gives me the power to manage my business.

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Replying to Duggimon:
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By dwgw
05th Oct 2021 14:07

"If I was to charge the maximum the client is willing to pay, how would I know whether this is reasonable?"

- erm, perhaps because they paid it? What else do you need to know?

Put it another way, would you charge less than the client was willing to pay?

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Replying to dwgw:
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By colinstewart
05th Oct 2021 14:17

"If I was to charge the maximum the client is willing to pay, how would I know whether this is reasonable?"

What a quaint notion! you don't know what a client is willing to pay. You do know that cliants generally undervalue what you do for them, and in many cases the reverse logic applies: the more you charge them, the more valuable it is to them and the more willing they are to pay the bill promptly!

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Replying to dwgw:
By Duggimon
05th Oct 2021 16:09

dwgw wrote:

"If I was to charge the maximum the client is willing to pay, how would I know whether this is reasonable?"

- erm, perhaps because they paid it? What else do you need to know?

Put it another way, would you charge less than the client was willing to pay?

You misunderstand, or rather I wasn't completely clear. By "reasonable" I mean "enough". If what a client is willing to pay is less than enough to be worth my time, then it's not worth having them as a client. In order to know whether it's worth my time I have to measure how much time.

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By colinstewart
05th Oct 2021 10:32

An interesting couple of views on time sheets recently. The issues are actually quite simple:
(a) you certainly have an ethical and probably legal responsibility to be able to account for your fee in terms of both the quantum and the nature. All the Court can then do is debate the rate. I say the Court because that is the end game for a fee dispute - your professional body is not going anywhere near that one!
(b) Whilst all clients are different there is an over riding perception that on the basis that you are providing a professional service then each fee element is broadly a function of manpower and time.
(c) Back in the 1970's staff did have to account for every 6 minutes of the day (been there and done it!), but I credit my staff with more intelligence and I accept that there is downtime. But then that is part of the reason for charging more per hour.
(d) The nature of the work is critical: In broads terms, the more bespoke, and the more complex the work is, the more important it is to have a record of the time incurred.
So, whilst it is the case that routine bookkeeping work for example that is broadly constant for each client can be billed on a fixed price basis, it is in my view down to good practice management to know where the 'routine' (fixed biling) ends and the 'variable' (time sheets) starts.
If you have put the effort in to training your staff well then you should be able to trust them to understand how your practice works and work hard and well - look after your staff and they will look after you is an old but very valuable maxim.
None of this is high science! it all boils down to this: is your bill fair and can you justify it? If you can then like me you will enjoy the loyalty of clients for a long time, in some cases over 20 years.

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Replying to colinstewart:
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By colinstewart
05th Oct 2021 10:49

By way of a clarification: my fee invoices do include the time and fee rate for each element of work, and the elements that are fixed rates. I have had one fee complaint in 25 years and the client lost in Court. My clerk is £35/hour and I am £250/hour - because that is what you really what to know!

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Replying to colinstewart:
David Ross
By davidross
05th Oct 2021 11:14

You don't need an hourly rate to justify a fee, if you have a scale for the job and the client has agreed to that.

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Replying to davidross:
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By colinstewart
05th Oct 2021 11:26

Absolutely, and IFAC IESBA would support you in that view. Your practice, your choice.

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By David Winch
05th Oct 2021 10:54

Brilliant article, Reza. Any follower of Ron Baker is a friend of mine!

My goodness me, there are some time-sheet Luddites on here!

Time based charging is grossly unfair to both provider and client. It's intrinsically adversarial and thus can only ever provide 'win-lose' at best! More often it's 'lose-lose'. Charges based on the value the client tells you they will derive from the results you can deliver, provide 'win-win'.

Whoever would disagree with having providers and clients both hugely delighted, every time!

David Winch
Sales, Marketing and Pricing Consultant, Cambridge

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Replying to David Winch:
By Duggimon
05th Oct 2021 11:04

Not one single person thus far has advocated time-based pricing.

Timesheets provide the management of a firm with valuable information on the operation of that firm. If you eliminate them, that information is no longer available. It was useful information for the reasons outlined in my first, longer response and there is nothing in the article that explains how this information is conveyed in a timesheetless firm.

Perhaps you advocate the information is not useful, I fail to see how knowing what your staff are doing with their time is not useful though.

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Replying to David Winch:
paddle steamer
By DJKL
05th Oct 2021 11:11

Why so adversarial?

If absence of timesheets is the bees knees, if clients place values on everything you do that marries with your perception of the work 's value, why try to convert others to this view?

Instead why not just leave the backward Luddites to follow their path and you can remain convinced they will never, with their approach, be your competitor, that they are all doomed to falter.

Frankly when anyone comes out with all the conviction stuff re their belief system about anything my natural reaction is, " Methinks he doth protest too much"

To be clear, I have no skin in the game, my practice ceased in 2019, but maybe just leaving everyone to their own approach is the mature way to deal with the question.

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WUTSTS
By Michael_R_Grant
05th Oct 2021 11:19

'Remember your client is not paying you for the minutes it takes you to deliver your advice, they’re paying you for the years it took you to be able to give them the solution in minutes.'

YES, Reza! Incredibly well articulated. We have an intended hourly rate, but that's just an internal thing. We don't do timesheets and rely on our staff being savvy enough to be able to figure out whether the fee for a client is over, under or just right, and we react accordingly. Life would probably be easier if we relied on timesheets, but on the other hand I think that switching on the clock is pretty irritating for all concerned.

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Replying to Michael_R_Grant:
paddle steamer
By DJKL
05th Oct 2021 11:21

Michael_R_Grant wrote:

'Remember your client is not paying you for the minutes it takes you to deliver your advice, they’re paying you for the years it took you to be able to give them the solution in minutes.'

YES, Reza! Incredibly well articulated. We have an intended hourly rate, but that's just an internal thing. We don't do timesheets and rely on our staff being savvy enough to be able to figure out whether the fee for a client is over, under or just right, and we react accordingly. Life would probably be easier if we relied on timesheets, but on the other hand I think that switching on the clock is pretty irritating for all concerned.

Of course these years of study are presumably already reflected within the applied hourly rate.

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By tedbuck
05th Oct 2021 11:23

Always like to see the marketing boys saying that they are right and we are wrong - just like Tony Blair.

As a luddite I keep timesheets as a means of knowing what we have done for a client in the year because in our practice we sometimes find the odd thing outside the run of the mill service and it helps to know what it was and what it cost. We still bill what we think it was worth but it is nice to know what it cost.

But then I am an accountant not a marketing person so the need for everyone else to comply with my idea of the world just doesn't apply. Nice that!

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By tedbuck
05th Oct 2021 11:23

Always like to see the marketing boys saying that they are right and we are wrong - just like Tony Blair.

As a luddite I keep timesheets as a means of knowing what we have done for a client in the year because in our practice we sometimes find the odd thing outside the run of the mill service and it helps to know what it was and what it cost. We still bill what we think it was worth but it is nice to know what it cost.

But then I am an accountant not a marketing person so the need for everyone else to comply with my idea of the world just doesn't apply. Nice that!

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By NewACA
05th Oct 2021 11:30

I've worked in accountancy firms that had timesheets, and those that didn't, before I opened my own practice. The sad fact was the one's that didn't use timesheets were far less profitable, though the staff were generally happier (not suprising).

I can assure you that the likes of Starbucks do indeed have timesheets or something similar. I recall as a youngster (early 2000's) working in McDonalds for 6 months: they had clocking in and out and as an admin assistant working in the back office, the shift manager was obsessed with hourly labour rate compared to hourly sales rate, for which they were graded, hired and fired!!!!

Your biggest cost is staff, you need to be able to track how long a job is taking before the end of job, not a month later when you compare staff billing to their monthly salary (which is very difficult due to WIP often bridging months), that is then far too late. Timesheets give you the ability to track staff profitabilty virtually real-time, where good budgeting per client is used.

I am afraid I have never had anyone explain to me how to track real-time accountancy costs and profit per client without using timesheets - until then, those with brains who care about making pre-tax profits well over £100k per £200k client base part (before partner profit share/salary, but after all other expenses such as rent, salaries, marketing etc) will continue to use them.

When did any of these "gurus" ever line up one accoutancy firm that uses timesheets against another doing a case-study to show how they are more profitable? Answer: never, coz they are talking rubbish.

If your salary costs are a fixed cost, ie: an admin cost, then you have got it wrong and losing money. Salary costs for billable staff is a cost of sale and needs to treated and measured as such to improve profitablity.

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By tonyaustin
05th Oct 2021 12:34

What you say is fine if you provide a standard product, like your Starbuck's coffee. If you employ builders to build an extension to your house, they will charge according to how long it takes, the number of staff and the cost of materials, plus a profit. So you deliver everything on time, the clients are happy but your staff could do the work in half the time. You don't know that because of Parkinson's law - work expands to fill the time allotted to it. You don't charge the client per hour - you calculate the cost of the job and staff productivity by reference to hours spent and staff cost and then you know how much you need to charge to make a profit.

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By ireallyshouldknowthisbut
05th Oct 2021 14:06

I do fixed price work on a "menu" basis for SA. Always the same price, I might discount if its quick or the client is having a lot of the menu. My discretion. This makes quoting a doddle and its all on the website, very transparent.

I do quoted work based on time for advice. Usually my estimate of time, then a fixed price.

Very occasionally I do "on the clock" for which i keep a time sheet.

I assess my business performance by turnover per month and days worked.

I review clients for fees every year when doing their final accounts and roughly if they are "low, medium, or high" and adjust the following year if there is a pattern. This gut feel taking into account actual time and perceived time (ie stress) and if i like the client or not, what I think the market price for the work is (ie what someone else would do it for) and how things have gone in earlier years. I sack clients I don't like or who wont pay what I think they should.

I am not sure how time sheets would help other than highlighting how long I spend on here.

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By Justin Bryant
05th Oct 2021 15:43

There is nothing novel here. I've said more or less the same thing here a few times. In summary, just use fixed fees for most jobs you can easily price (this will be 90% of jobs - we all know what a typical SA100 or CT600 will cost) and use flexible/adjustable (possibly time-based) fees re others that you can't. Also, put extra effort into not employing duff staff in the 1st place and there are other ways to detect and weed out underperforming staff.

It's incorrect to say cost is irrelevant, as your competitor's costs will determine their prices and hence your maximum prices.

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By mugelbbub
05th Oct 2021 17:32

There is nothing wrong with Time Recording. It is recording solely for the purpose of time charging that is the problem.

Having been using value based pricing for twenty plus years I maintain that ANY Project oriented business still absolutely needs to know how long tasks take. Utilisation, Proof of Concept, Benchmarking, Process measurement and Improvement, Capacity Planning, Scheduling, Project Planning and Management, Recruitment, Pay and of course Costing are all perfectly valid beneficiaries of recording activity/tasks and time (amongst other complimentary tools).

Using Timesheets for time charging, but for certain types of work, I don’t get at all.

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Replying to mugelbbub:
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By David Winch
06th Oct 2021 19:11

I agree with you 99.5%, @mugelbbub!

The only issue I have is that "timesheet" seems to come with the baggage of recording what you're working on in units of between 5 minutes and an hour.

With value-based charging, you do need to estimate your 'delivery cost' and historical information will help you. If salaried staff are involved, this will include hours and/or days of their salary. However, your cost estimate only needs to be rough and approximate.

If you are working on both parties making a 1,000% RoI then, even if both your estimates - of perceived value and of delivery cost - are out by a factor of three and working against each other, you will both still be making over 300% RoI, which is still pretty attractive!

David Winch,
Sales, Marketing and Pricing Consultant, Cambridge

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By adam.arca
06th Oct 2021 12:54

"Clients don't buy time." That's absolutely true, of course, they buy solutions to problems.

How does their adviser arrive at that solution, however? He expends time and that makes time an entirely valid way of charging for the solution. In contrast to what certain value pricing fascists are trying to say, no one who uses timesheets thinks they're the only way, though: they're simply just another tool that's available.

Like most people who charge by the hour, I do also use fixed prices where the job is sufficiently well scoped. When I was trying to move over to value pricing a few years ago, my experience was that scoping was the biggest issue as clients seemed to think that a fixed price which was stated to cover X, Y and Z should also effectively cover A, B and C. Whereas a client now who asks for extra work knows it's going to cost him extra and that ensures a) clients only ask for work they really value because it's going to cost them and b) we all know where we stand.

Perhaps it was me and I didn't handle the value pricing transition very well, but personally I feel much more comfortable now that I'm back with timesheets.

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By petersaxton
08th Oct 2021 19:40

"In a typical practice that uses timesheets, time costs will be allocated between the clients the firm has based on charge-out rates. This includes the profit you expect to earn (a completely arbitrary mark-up that has nothing to do with the value to the customer)."

Who says that time costs have to include profit?

What is wrong with using employee costs and an allocation for overheads? The accountant who wants to know the profitability of jobs can compare the costs to the revenue. Then they will be doing what most efficient businesses are doing.

I'd be very worried about any loss making business who refused to understand why they are making a loss and insisted they are more interested in doing a good job for the client.

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By Kaylee100
19th Oct 2021 13:46

A couple of controls time-sheets gives is where a client - on a fixed price - decides to not prepare their records as before but get progressively worse as the years go on. Simply because the fee will be the same, so why bother? Or they call every 5 minutes for help (often the same questions as before which they've forgotten the answer to - so rings again...and again...and again). I expect that we all know which jobs are unprofitable with or without time sheets but - in my mind - that is not good enough evidence to know what to adjust the fee by. Time-sheets can be useful to use to explain to clients the increased levels of work required leading to an adjustment of fee. They do not have to be used to beat-up employees with!

With fixed pricing you are assuming we provide a Starbucks coffee to every client - we don't. Maybe our practice has very different clients to yours.

I still agree that we could fix price on 50-75% though.

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