All Accounting Firms Should Track Their Time… Even If They’re Value Billing: Here’s Why

by: Margaret Wood June 29, 2021 10:00AM

Managing one’s own time is one thing–but managing one’s own time AND their staff’s, in-office, and remote team’s time is an entirely different ballgame.

Managing one’s own time is one thing–but managing one’s own time AND their staff’s, in-office, and remote team’s time (some of whom are dealing with distractions and less-than-ideal working conditions), is an entirely different ballgame. But tracking employee time should not be synonymous with distrust or micromanagement.

Most firms track dozens of KPIs to manage their practices—most are focused on non-billable vs. billable hours. They follow every employee’s data to monitor what they are doing on a min-to-min basis. The question is: is this data helping managers and partners make better decisions?

Here we discuss the following:

· Best practices dealing with efficient billing practices

· Benefits of time-tracking

· Why accounting firms should track their time even if value-billing

Realization — Is your current system capturing all the revenue?

Accounting and managing a company’s funds is not only one of the most critical tasks; it is also one of the most daunting. Accountants face the dire need for accuracy; even a small oversight or inaccuracy can result in a considerable loss for the company.

The most controllable cost to an accounting firm is time. Team members have been known to manipulate the data (their timesheets) to hit their target numbers. 

Consultant Rob Nixon says it best: “Excessive focus on … metrics promotes the wrong behavior. Team members’ hog’ work, ‘pad out’ timesheets and are generally inefficient.” 1  

For value-billed projects, tracking actual hours spent on a client’s project is essential to ensuring the firm is fairly compensated for its work.

Handling multiple accounts a day, a.k.a. “Client Hopping,” is quite common for accounting firms with a significant number of clients. However, dealing with disruptors, an unexpected client phone call, an emergency meeting, or an urgent problem that needs to be resolved ASAP may cause you to lose track of time or not track the time spent on those other issues. Consult calls also take up a large portion of the accountant’s workload. Using time tracking software and billing clients for this time is an excellent means to keeping those callers in check.

Again, unless time is tracked, accuracy can easily be lost and can impact what clients are billed. Relying on memory and guesswork can be very costly. 

As managers, there are countless responsibilities to deal with on any given day. For instance, preparing for an audit demands a specific focus; when that work gets interrupted, a shift occurs in your mind. This shift is referred to as context switching 4, which can cause significant losses.

A study by the American Psychological Association 3 demonstrated that people lose time for all tasks when switching between multiple tasks. 

Automating time tracking with time and billing software for accountants ensures the data recorded is available to outsourced accounting and bookkeeping functions, making data visible and traceable.

Benefits of Tracking Time

If every client is treated as a “project,” project status is transparent and readily available when using tracking software, providing more comprehensive forecasting and planning resources.

Tracking software provides cross-platform availability—accessibility from an office computer, phone, laptop, or tablet.

Today’s time tracking software offers more functionality and analysis tools, aggregates time spent on a project to date, and provides insights on per-client profitability. The software also offers exportable reports for clients, providing transparency of time billed.

Tracking software also has the capability of showing which clients contact you the most often, their inquiries, and the amount of time spent on each call; it can also store all the information for future analysis.

By measuring employee productivity and efficiency based on time spent to complete a given task, analysis can disclose hotspots attributable to lack of skills, practical difficulties, vague instructions, or any number of other reasons, all of which signal opportunities for improvement. 

Many of today’s accounting processes are now automated. However, there may be specific situations that require traveling to public offices or notaries, and an employee may spend time waiting in lines, commuting, and even getting stuck in traffic. Tracker software with GPS options is excellent in these cases; they eliminate the need to document locations and names manually.

Effective Project Management

Time tracking software helps create transparency and endorses responsibility by allowing project admins to set timesheets visible to all team members on the project. As a result, all team members can see each other’s tasks and how much time has been spent on them—keeping each other in check. In addition, tracking relieves some pressure of personally monitoring everything.

Effective Project Management boils down to making sure the work is proceeding on schedule. Tracking time presents a clear picture of the progress of any given project, making it easier to manage projects and tasks. 

Turn all this time data into actionable insights to improve. 

Tracking time throughout the day can be worthwhile in assessing one’s rate of progress and reasons for any delays; it can also help team members make proactive help requests, develop alternative approaches, prioritize crucial tasks, and alert seniors to hotspot issues.

What can firms do to change? 

By misusing data, firms may be impacting their firm’s culture.

According to the CPA Journal, “…data should be the starting point to understanding the functionality of the firm. It is not about micromanaging time. It is about understanding how much time it takes to do something. 

Use data as a question—not an answer. 

  • Why are some accountants billing more hours than others?
  • Why are some team members more profitable than others? 
  • Why is the audit department more profitable than the tax department? “2

Often, data is used as a measuring stick—to determine whether a team member is performing well. For example, a project’s success is often measured by the number of hours it took to complete and whether it hit a budget target. 

 Tracking firm-holistic numbers rather than measuring based on time alone may yield better data. This requires identifying what data is essential. All  data initiatives measure time to some degree:

  • The time it takes to process tax returns,
  • How quickly the team responds to emails, 
  • The amount of client contact required. 

Individual numbers should only be examined when looking for outliers.

Accurate time tracking has become a necessity, especially with the dispersal of teams. Moreover, even if everyone is back in the office, there is a high probability that there will be a need for remote working capabilities over the long haul. Thus, solid, comprehensive-time tracking software is even more critical in remote settings to ensure the continuum.

Whether the firm bills clients hourly or value-bills or the firm has employees who work from home and seem to be spending too much time on specific projects, time tracking software creates an attestable record of the time spent on accounts.

Conclusion

Time tracking is not meant to be another task. But tracking time can help business operations make more cost-effective decisions. Automating time-tracking can be a valuable business investment—especially with the proper integrations to your general accounting system.

Replacing conventional data points with data that aligns with the firm’s primary goals can lend themselves to managing a firm more cost-effectively, leading to an increase in the most critical metric of all: the bottom line.

Sources

  1. (“Secrets of High-Performing Firms Revealed”)
  2. Why Data Is Killing CPA Firms
  3. American Psychological Association
  4. context switching

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.