Many, but NOT all accountants, charge fees by reference to the time they spend working on a client’s affairs. Most accountants in practice still complete timesheets to show how much of their day has been devoted to each different client and to each different aspect of management, administration, marketing or other ‘non-billable’ time.
Thinking back to when I was in practice it was many years before I realised that a timesheet may have uses as a management tool but that it did not ‘prove’ how much time had been spent doing anything. It was a guide, nothing more. In my talks to accountants, eg: “How to make more money from your smaller clients” I ask accountants what they would bill in a variety of situations. The answers prove that the timesheet is a guide and that the ‘time costs’ that it reveals are rarely the same as the fees billed (or that could be billed).
In previous posts on this blog I have considered related topics such as: Timesheets and value pricing professional services; How do you set charge out rates?; Clients will pay high fees for good advice; and Setting fee rates – using costs incurred or value provided?;
I am astonished to find that I have, todate, made no previous direct reference to either Ron Baker or the VeraSage Institute ( a “revolutionary think tank for professional knowledge firms”). I’ve been aware of Ron since first reading his book ‘Professionals Guide to Value Pricing’ in 2001.
Today I rectify that omission and do so by reference to a new post on the VeraSage blog: All accountants charge for their time. NOT!
The blog post refers to a Q&A found on a number of accounting firm websites (possibly as it comes as standard in a template web page):
“How do accountants charge?
All Accountants charge by time. The longer it takes to prepare your Return the dearer it’s going to be. Some businesses sell hamburgers. Real Estate Agents get paid commissions, and ACCOUNTANTS SELL TIME.”
This is a sad misconception. It’s based on a misunderstanding and it’s a misleading myth. Accountants may try to determine SOME OF their fees by reference to time. They may try to charge fees by reference to their time records but TIME is not generally what accountants sell. If it were then the corollary would be that TIME is what people who want an accountant set out to buy. And they don’t.
In my view accountants sell (or should focus on selling) Trust, Confidence and Peace of Mind. Indeed a quick Google search reveals an increasing number of firms who state this on their websites. These are 3 of the key qualities, if not THE 3 key qualities, that clients seek when they want to appoint an accountant. If prospective clients do not quickly trust you, have confidence that you will do the necessary and give them peace of mind that they can rely on you, you will not keep them as clients; indeed they may not appoint you in the first place.
What do you think you sell as an accountant in practice?
Well said, Mark.
This has to be the way forward for all suppliers of professional services.
If I add £100k, even £10 million, to your bottom line within a 6-week period, are you worried whether I spent one day or one week doing it? Of course not! Your only concern is the ‘value outcome’, the ‘rate of return’.
More of the same please.
David
I couldn’t agree more, Mark.
That was one reason I decided to charge per minute of completed video, rather than per hour it took me to make the videos. My customers don’t care how long it’s taken me to make each video, they care about its quality and how effective it is.
What’s your position on accountants who use timesheets to track the productivity of their staff, and who pay their subcontractors by the hour? I’m just curious.
M
Mark – I fully agree. Its about time (sic!) that accountants woke up and stopped this awful timesheet process which drains the life out of most firms! When I worked in practice I estimate I wasted about 15 minutes each day filling in time sheets! Multiply that by the number of fimrs and ……..well you get the picture!
I have never charged time but a value based on what I believe the client is prepared to pay (the perceived value). Of course many of my products have a price tag attached to them but it has never been based on time.
Have just become aware of (and read) a terrific presentation on this topic given by The Hon Wayne Martin Chief Justice of Western Australia in 2010.
Titled: “Billable Hours – past their use-by date” the presentation contains a full analysis of all the pros and cons re timesheets vs value based billing.
Well worth a read if you’re interested in the topic.
http://www.supremecourt.wa.gov.au/publications/pdf/Perth_Press_Club_Law_Week_20100517.pdf