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Scope creep 1: What is scope creep?
Scope creep is one of the biggest problems in our profession. But what does it mean? In the first installment of his four-part series, Mark Wickersham explains scope creep in the accounting world.
Scope creep is when changes are made on a project resulting in more work which was not envisaged at the outset (when the price was given). The end result is often write-offs and doing work for free.
Scope creep is an invisible cost; if it appeared on your profit and loss account it would probably also be your biggest cost!
It’s crucial to increase your awareness of scope creep so you can learn to identify it when it happens. Once you learn to spot the signs, you can then effectively deal with scope creep to ensure that you aren’t doing jobs for free, overworking, being taken advantage of by your clients and losing money on the job.
This is the first of a four-part series on how to deal with scope creep. In this series we will look at…
- What is scope creep?
- When to deal with scope creep.
- The four types of scope creep.
- How to deal with scope creep.
So, what is scope creep?
Let’s start by making sure we are clear on what we are talking about.
Many people have different definitions for scope creep - or have no idea what it means at all!
Let’s say you have a project – it could be bookkeeping, payroll, annual financial statements, anything – and as you are working through the project, other issues crop up that take more time than you originally envisaged.
When you finish that project, it ends up taking you more time and costing you more money than you originally thought it would.
The scope of the work changed, and you weren’t prepared for it.
As a result, you wound up doing more work and possibly even making a loss on the project.
If you kept timesheets you end up writing time off.
This is scope creep.
It’s a huge issue in our profession, and some people don’t even realise it’s happening.
It’s a hidden cost, and it’s one of your biggest costs – especially if you are still using timesheets.
When I was in practice myself in the late 1980s to the early 1990s, I would end up writing off so much time.
I would diligently record the time for a project, which was usually audit work or preparing end of year financial statements for a client. Then as I was working on a client’s affairs, other things would crop up, usually when the client said, “Whilst you’re working on my accounts, could you just…”.
In my eagerness to please the client I would comply with their request, and more time would go on the time sheet.
Then at the end of the project I would run off a work-in-progress (WIP) report to see the total time before raising the bill – often I would look at the WIP report in a state of shock. “There’s no way the client will pay that,” I would think to myself!
Commercial judgement would set in and I would write off a chunk of time, hoping I’d make up for it next year.
Effectively I was giving a discount, even when the client hadn’t asked for it!
I know I’m not the only accountant that’s done that – it’s common in our profession. In fact, in the early 2000s when I was working at AVN, I conducted a number of benchmarking studies in the UK and discovered that on average write-offs are 8%.
That is huge!
I did a series of workshops a few years back for a UK network of multi partner firms. One of the workshops was a full day on identifying and dealing with scope creep. These were big firms with annual fees of £2 – 20 million.
During the lunch break the head of the network came to speak to me and informed me one of the firms in the room admitted that every single year their firm wrote off around $2 million, which is staggering.
That money is coming off the bottom-line profits. That’s how big an issue this is.
Sometimes, we tell ourselves that we’ll write the time off just this once and make up for it next year. That never happens.
Scope creep is a huge issue – it’s a significant hidden cost, and we need to tackle it.
Now we understand what the problem is, in the next part we are going to look at the best time to deal with scope creep.
If you have found this useful and want to learn more about value pricing, marketing and business strategy, I run a free live training session online every month with a different topic chosen by you. I also take Q&A at the end to answer your burning questions live. Click here to register and I will send you an invitation to the next session.
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Mark Wickersham FCA is a Chartered Accountant and public speaker. He is well known for being an excellent profit improvement expert in the accounting community.
Mark is also a widely published author on practice issues. In May 2011 his first book, “Effective Pricing for Accountants”, was a number 1 Amazon bestseller.
In 2015 Mark...