Here We Go Again!

More drivel from WebCPA! In an article entitled In search of lost time: Five ways CPAs can increase their billable hours – and their profitability, Brett Owens (who I am sure is a very nice person) states:

The numbers tell the story and it all boils down to time management. If you bill for your time directly or on an hourly basis, diligent timekeeping is something you must do in order to get paid for all of the work you perform for clients. If you bill on a fixed-fee basis, accurate time records help determine how profitable specific clients and projects really are – and if they’re unprofitable, time records help us realize the viability of a client for the long term.

No, no, a thousand times no! Oh, when will this obsession with Marxism end!

Value (or cost) does not equal rate times hours. It never has and it never will.

4 thoughts on “Here We Go Again!

  1. Ed: I agree that value (to the customer/recipient) is not necessarily a function of effort (by the supplier). However, effort (a.k.a. “time”) is often a necessary component of delivering value, and that effort DOES have its own value. If you’ve ever considered something a “waste of time” or “not worth the effort” in retrospect, then it’s clear that you place a value on this limited commodity. However, its value is variable and circumstantial. (“I have nothing better to do” vs. “Nothing is worth missing my son’s valedictorian speech.”)
    It seems to me the delta between supply and demand values is the heart of effective capitalism. (But, yeah, I’m pretty sure that’s not what they’re thinking either…) -Jon

  2. Ed, I also agree that value does not equal rate times hours but unfortunately in the accounting world, it does play into cost. Since we don’t pay employees based on the value they provide, we do have to keep track of the “accounting profit/loss” at a project level. At the end of the day, we need to look at the value we provided and what it took to get there, therefore we do need to track the time so we can analyze it. Hopefully it can be used as a learning tool to help us provide more value in the future and not take so much time to do it. Time records don’t provide the viability of a client but the viability of our consultants and how much value they can produce in a specific time frame. – Dan

  3. @Dan –

    I run a consulting practice and I agree somewhat with what you are saying. The problem is … clients don’t care about our costs – they care about what they are getting for the money they spend. If you and I can’t provide services in a cost-effective and efficient manner so we make a profit, they will go somewhere else.

    To put it another way … if you look at clients as driving the price (instead of our costs driving the price), it behooves each of us in the service world to do things better and faster and keep our costs lower. That means: improve internal processes, improve internal skills, encourage teamwork to play to individual strengths, etc. The side benefit of doing these things is that your organization becomes a stronger, more competitive, differntiated organization with happier staff.

    Obviously, I have drank the kool aid on this matter.

    One last point: we measure profitability at the firm level – not the individual project or consultant level. There are usually a lot of reasons a project can go upside-down and usually it’s not the result of a single consultant. If it is, you can usually single out the bad performers without looking at time tracking. In fact, I would suggest that bad consultants look “better” in traditional T&M billing – they bill more hours than the seasoned veterans.

    Who do the clients really want on their projects at the end of the day?

  4. Way late on the reply to this, but give me some credit for sticktoitiveness.

    Great reply to Dan, Peter. I would also add that counting the number of hours a person works on something is not an indicter of the value they provided either. Cost allocation can be done in ways that are much more effective and efficient.

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