The Timesheet Paradox for Accountants: Time for a Modern Timesheet Policy

By Posted in - Public Blog on September 16th, 2016 0 Comments

timesheet paradox timesheet policy for accountants

“Throw out your timesheets! Throw out your timesheets!” Accountants in public practice have all heard this advice over the years and you’ve either:

  • tried throwing out your timesheets and have stuck with it — you’re a raving fan of the concept and will happily tell anyone who’s willing to listen (as you occasionally wipe the foam from the edge of your mouth) that getting rid of timesheets has transformed your firm and its culture;
  • tried throwing out your timesheets and then reverted to keeping them again because you felt you lost some control over focus, ‘productivity’ and your profit margins on jobs — you were an initial fan of the idea but now you’re a little disillusioned by it or perhaps by your inability to implement the advice; or
  • you never considered throwing out your timesheets — you think these “throw out your timesheets” zealots are off with the fairies with no link with commercial reality.

Where do I sit on this spectrum? I see this issue differently in two areas.

Firstly, I think the “throw out your timesheets” mantra—in isolation–is bad advice. At best it’s clumsy. It’s the wrong choice of words.

Why is that?

Because it’s focusing on the wrong thing. It’s focusing on the mechanism rather than the principle.

The mantra should be, “Sell value, not time.” Whether or not you keep timesheets is immaterial to this principle:

  • Timesheets are just a mechanism
  • “Sell value, not time” is the crucial principle.

As Chin-Ning Chu wisely advises in Thick Face, Black Heart: The Warrior Philosophy for Conquering the Challenges of Business and Life what matters is not always what you do, but the reasons behind your actions. The same action could be the ‘right’ thing or the ‘wrong’ thing to do, depending on the context and the reason for doing it.

For example, “turning the other cheek”—that is, not retaliating when someone is violent towards you—is commonly quoted out of the Bible as a principle to follow in life. But, as Chin-Ning Chu advises, it’s not always wise. It is the right thing to do when it is done out of forgiveness and compassion, but it is the wrong thing to do if it is done out of cowardice. Chin-Ning Chu advises that sometimes the right thing to do when slapped in the face is not to turn the other cheek to allow the person to slap you a second time, but rather to slap them back twice. And harder.

Likewise, if your accounting firm keeps timesheets as a basis for tracking the value of a job—that is, what you intend to charge the client—well you’re misguided. The time it takes to complete an engagement should bear no relation to the price.

Imagine if your hairdresser or lawnmower man charged on this basis? They’d be rewarded for taking longer to do the job, when all you—the customer—cares about is the outcome. You just want the job done.

The same applies to your clients.

And of course there is a market price for any product or service; a price range that customers or clients expect to pay based on their previous experience or what they have heard that other people pay.

Obviously the reason so many businesses clutch onto “how long will the job take” as a basis for their pricing is profit margin control. They know that if they’re paying someone $50 an hour, that if they charge them out at, say, $150 an hour then they’re covering their direct costs, their overhead expenses and ensuring a profit.

But that approach leads to so much bullshit “busy work” and stress that adds no value to anyone. Things like:

  • tracking work-in-progress” (WIP) value based on the time logged on the job
  • nagging—er, I mean gently reminding—staff to submit their timesheets
  • stressing about whether to charge the full WIP amount to a client when a job has taken longer than planned
  • communicating with each other internally about whether to “write off” a portion of the WIP and charge the client the same as what they were quoted
  • if you are following the ludicrous “ban write-offs advice” put out there by some coaches to accounting firms (see The Write-Offs Paradox: Accounting Firms Waste Time Managing the Imaginary) then you’ll spend time communicating with clients about their larger than expected fees due to WIP blow-outs
  • and you’ll spend time saying good-bye to a number of these clients as a result of over-charging them.

No wonder accountants and their staff feel liberated when they throw out their timesheets. Traditional timesheets truly do suck!

But let me make a very important distinction on that last point.

This is the second area where my views on timesheet policy differ from most modern advisors who are advising accountants to sell value, not time…

Traditional timesheets built into time-and-billing software and typical practice management software should be thrown out. I agree with this. I do not agree that you should stop tracking how you invest your time.

Anyone who has had to complete traditional timesheets in an accounting firm—especially if you’re working under a misguided dictator who has banned write-offs and requires you to “bill” (that is, make your timesheets look like you have billed) six hours a day—again, see the The Write-Offs Paradox post for more on that ridiculous management approach—knows how horrific it is to work under an edict that you must account for your working life in 6-minute increments.

It’s no wonder that having to keep traditional timesheets like this depresses people and is often cited as a reason people leave the accounting public practice sector.

The underlying paradigm of traditional timesheets is just so fundamentally flawed — that you will be “billing time” based on this activity.

What’s the alternative?

I believe that every business should use a DIFFERENT type of time tracking tool that has a completely DIFFERENT purpose. It has nothing to do with WIP or billing.

Remember, it’s about the principle, not the mechanism. What matters is the motive, not the action.

What if tracking how you spend your time was easy and fun? Like a game? And what if you could see as an entrepreneur or manager or advisor or support team member in a firm, where you’re spending your time in your role?

You’d have clarity. You’d be able to see areas where efficiencies could be—or need to be–created; or where you need to be delegating more; or where you need to hire additional capacity. You’d have useful data for decision-making.

I’ll share which automated and fun time-tracking tools I recommend in my next post where you’ll also learn how to avoid an entrepreneurial state of ignorance I call The Hourly Rate Delusion.

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