Three Obstacles to Profitability You Should Avoid During Busy Season
Kristen Rampe, CPA / Feb 23, 2020
“The quickest path to profitability is high leverage and high billing rates.” – an observation noted in the 2019 Rosenberg Survey (p52).
While you’re in the middle of busy season, take a quick moment to consider how you can actively, today, contribute to profitability.
We’ll share ideas on how to overcome these common challenges you might be facing in your accounting practice. And at the end of this post we’ll provide a link to download a handy chart for reference.
Three obstacles to strong leverage and billing practices:
- Not capturing value provided. While your billing rates may be set for this busy season, it’s possible you have an opportunity to make sure you’re capturing all the value you’re providing to clients. Ever work a 12-hour day and only have 6 hours of client work and 1 hour of admin work to account for it? Likely a large number of small tasks (related to client work) have gone untracked. And for good reason. It’s a hassle to keep track of the 25 different client emails you responded to that required no other time during that day!
- Fixing others’ mistakes. This causes challenges because team members develop more slowly, and leverage is harder, if they don’t know what they’re doing wrong, or how to better perform their work. Small typo fixes aside, if you find yourself often making many changes on someone’s work product, it’s time to address this (for yourself, and for them).
- Not billing for value provided. When it comes to billing, write-offs are easy. Many CPAs feel better when offering a discount or writing down hours because the client “wouldn’t want to pay for that.” In the off season, you can work towards more clarity in scope and pricing with clients, but in the middle of a busy time, a key to profitability is keeping write-offs low and realization high. According to the 2019 Rosenberg Survey, top performers in realization were averaging 99%! Top performers in utilization were at 61.5%.
Ask yourself these three questions:
Did I work more billable hours than it appears at the end of the day? If so, try one of these:
- Working backward. Start by identifying total hours spent at work, then account for any non-client-related work and personal time. The difference between the total hours and non-client hours must be captured and charged to client projects.
- Asking for administrative assistance in capturing this time. Can you sit with a team member for 10 minutes at the end of each day and rattle off what else you did, for them to enter into your time-tracking system?
- Consider value billing where appropriate and allowed for your client engagements. More work can be done on pricing practices outside of busy season, but if you have the flexibility per your engagement to bill “for the value of the work provided” versus strictly by the clock, you can be more flexible on capturing that value. Perhaps any email correspondence you spend on a client in a particular day gets a minimum 15 minute “charge” to the client. It’s likely the interruptions took at least that much concentration away from equally important responsibilities whether it appeared so or not.
Am I spending too much time correcting others’ mistakes? If so, consider:
- Asking staff to sit with you (or screen share if you’re not in the same location) while you are fixing the mistakes. They can learn by watching you make updates.
- Or, asking staff to sit with you while you conduct your review; you can ask questions as you go along, and they’ll learn even more.
- Better yet, sit with staff, at their desks, while you do your initial review and have them make any changes/updates. Set clear expectations for proof-reading and self-review if the errors you’re finding “should have been caught” by the team member.
Am I writing off more than my peers? If this sounds familiar, try:
- Setting a personal (or public) goal for realization that’s better than your actual number for last year. Write it down and put it in a visible place.
- When billing, get permission from someone else before writing anything over $___ off. It could be a manager on the job, a peer partner, your spouse, or anyone who will give you a double check as to whether you should really be discounting your work. Again.
- Quitting the habit. Ok, there will be times when that new guy on your job took 14 hours to do a 4-hour task. And it’s important for many reasons to capture that he took this much time. Of course, it’s probably more important to sort out what management issue caused this to take place, but nonetheless a write off here makes sense. At the very least though, you can stop writing off your own hours. I’m willing to bet that everything you do as a partner (that gets charged to the client) adds value in some way.