VeraSage

Matthew Tol

If these guys EVER mark up a timesheet or if anyone in these firms (assuming this in not one of the fixed price engagements)ever fudges a timesheet, then it would appear that they are practising fraud.  Simple as that.

Ed, not all Aussies are as myopic as these guys.  Some of us can actually see a better future.  Please don’t let these guys be an example of us.... Have to admit I can’t speak for the Kiwis (but no-one can understand them anyway!)

Ed Kless

Great point, Matthew. When you think about it all time sheets are frauds. Did you really work on a customer matter for exactly one hour, please!

I do not judge all Aussies by these folks, I think Ron is probably right you are ahead of us in North America. I just couldn’t help but take shot at him.

Ron Baker

There are still fervent believers in communism, usually teaching in American universities. They are sort of a museum to a miserable past. I hope they never go away completely, just to remind people of how degrading life was under that set of ideals.

I feel the same way about these seven firms.

Btw, one of our colleagues calls billing by the hour “mail fraud.”

Matthew Tol

Just on this point.  We sold our house a while ago and agreed (up front) with the Real Estate Agent what the commission would be.  The Agent sold the house and achieved a far higher price that we expected - we were more than happy to pay the commission.

Only thing is, it only took them three hours to sell the house and there was only one inspection!  We really did not care a zot because we were more interested in the result than the process.  In short, we appreciated the value they provided.

When our colleagues start to realise that their customers want outcomes, not a list of what the acountant did, they’ll be able to start seeing the possibilities.  Until that times comes, my business (and our more progressive clleagues) will enjoy cherry picking their disgruntled customer bases to bolster our revenues.

As for marketing your services based on the time you spend - please, get a bit more creative than that!

Tom "Bald Dog" Varjan

I find it ironic that advisors on wealth creation (http://www.wealthadvisers.com.au) talk about peddling time chunks.

They build wealth by selling a limited commodity.

Maybe besides the time chunks, they could also charge for the puffs of air they take while preparing the tax return. That would speed up their wealth creation process.

Chad Bordeaux

I am shocked that anyone - even someone billing hourly - would put THAT on their website.

Not only are they billing wrong, but they are not very client-friendly either.

Ed Kless

Chad, I know, it is absurd, isn’t it.

frugalCPA

I’m just finishing up grad school and have not yet worked for an accounting firm. I’m intrigued by this conversation. Can anyone explain to me why the website is so wrong (I don’t think it’s right, I’m just curious to know how others bill if not by time, since I understand that’s how the Big Four do it, no?). I must be missing something…

Ed Kless

@frugalCPA - Thanks for join in the conversation. The short answer is that it is wrong because hours are efforts not results and customers pay for results. In addition, billing by the hour is based on Marx’ Labor Theory of Value which has been fully discredited.

I invite you to read some more posts on this site, we have destroyed all arguments for billing by the hour. The best place to start might be Ron Baker’s booklets for ACCA found at the bottom of this Web page --> http://www.verasage.com/index.php/resources/C55/

frugalCPA

@Ed Kless: Thanks! I’ll check it out.

Matthew Tol

frugalCPA - it is all so logical when you have a think about it - as Ed says, our clients want results, they don’t want to pay for the time that it takes to get them.

If I can put it another way - imagine you’re going in for a surgical procedure.  You need it.  When you speak with your surgeon, are you really going to care how much time the operation takes?  You’re interested in the outcome - not the process. 

Similarly with Professional Knowledge Firms (PKF’s) - our clients are coming to us to get a result - to them the process doesn’t matter. 

Let’s then compare two firms - one of which uses timesheets and sells time, the other of which is based on value billing.  The first firm will have no incentive to complete the job quickly or efficiently as they will be cutting their revenue by doing so (less hours = lower fee).  A value billing firm will sit with the customer, work out the value that is being created/added as a result of their work and intellectual capital and then agree (in advance) a price for the work to be done.  They then get on with the work - if it takes them 5 minutes or 50 hours it doesn’t matter - the focus is on the result for the customer. 

The timesheet model firm would have that if the result took 5 minutes to generate, then the bill will be 1 unit by hourly rate.  If they billed more time than it acutually took, then they would be practising fraud (per my post above).

For the above reasons, the timesheet model is basically useless for both customers and firms (they take a HELL of a long time to manage and maintain), it disincentivises outperformance and acts as a fire blanket on creative passions within a business. 

You’re coming in to the profession (it is a great profession) - why not be in the vanguard and help us spread the word that the old ways aren’t relevant (they never were!)

Good luck!

Garry Beavis

Spot on Matthew.

When I was employed with firms I can recall the monthly chore of doing the client billing where we would review the work in progress, the write-offs and write-ons and then pretty much ignore the numbers. The fee would ultimately be based on last years fee plus an increase for inflation.

What was the point of keeping timesheets, other than to check on the productivity of staff who fudged the timesheets anyway.

Thinking back to these times I wonder how much money we left on the table by not recognising the value we provided?

Time is irrelevant when you are providing a valuable result for the client - we just need to recognise that the value and results come out of our own knowledge and experience, not by how long something took to do.

Ed Kless

Amen, Brother Gary!