Ditch the timesheet! (How to effectively measure profitability & productivity)

If you're an accountant do you still use timesheets in your practice?

In my last mentoring session I did a poll. There were about 50 accountants there and more than half said that they still used timesheets in their practice.

Now the vast majority don't use timesheets for billing purposes. So they're not billing based on time but they're still keeping timesheets because they want to measure profitability, productivity in the workforce. Now I question that and say that timesheets are not a good measure of productivity or profitability on your clients and here are the reasons why.

You see if your goal is to add value to a client's affairs and that's what you're pricing your services on. Because you're pricing using fixed fees, using value pricing to get to a fee that represents value for money for the client but then your employees are tasked with and focused solely on the inputs in terms of what it is that they are doing. There is a disconnect between what the employees are doing and what you are promising to deliver for your clients.

So I would suggest that rather than using timesheets, do away with the timesheets and get the objectives of your team, of your employees in line with your objectives of how you want to create value for the client and what value means to them. So instead of tracking time which just encourages busyness and utilization look at other metrics like customer satisfaction.

How satisfied are your clients?

Measure that through the number of Google or Facebook reviews that you get. The number of testimonials that you get because that's an indication of whether clients are happy with what you are doing or not.

How fast are you turning work around?

You can look at your turnaround times. It's important for clients to have things done quickly so your turnaround times in terms of phone calls, emails, accounts, VAT returns. Measure that, so get your employees focused on an objective that is aligned with your client's objectives or what they deem value to be.

How proactive are you and your team?

We know that what clients value most is for us to be proactive. So get your team focused on the outputs which demonstrate proactivity on their part on working on your client's affairs. So for example, we have a proactivity tracker. So we track every day how many proactive approaches, how many emails or phone calls on a proactive basis we have done for clients.

So there you have it, three ways of changing the way you measure so you can get rid of timesheets in your firm.