Steve Major, renowned podcast host and “Timesheet killer”, sees more and more CPA firms every year lose money because they don’t implement value pricing and because they don’t ditch the timesheet.
“The timesheet is the #1 cause of depression in a CPA Firm.” – Steve Major
Most of your employees probably hate it, and there’s a reason. They’re people, not machines. Steve preaches on his podcast, Pricing Power, about how firms are missing out on almost 20% of profit each year because they aren’t being paid what they’re worth. Steve ran his own practice for many years and saw the opportunity to show other firms what they are missing.
In this episode of Growing Your Firm Podcast, David Cristello and Steve Major dive right into:
- The “myth” that time sheets shows productivity [Steve debunks the myth]
- The problem most firms experience that cripple them when they onboard a new client
- The exact timeline for how fast you can implement value pricing in your firm
The “Myths” Debunked About Timesheets:
Steve Major had built his own firm until the mid-2000’s then took off on his own to help firms become more profitable. Based in Australia, nothing makes Steve squirm more than when he hears how timesheets track “productivity.”
It’s not true. In fact, he goes even further to say that time sheets are the #1 cause of depression in CPA firms (yours too!).
“Firms based on time cannot charge Premium Prices” – Steve Major
Timesheets only create behaviors in a firm. The behavior is it gives the partners the “Illusion of control.” Because they can see everything everyone is doing, they can plan accordingly. The problem is it’s only a snapshot of time.
All timesheets do is treat your team as machines, not people. Because CPA firms are so eager to get to work on a new client, they never plan properly, such that they spend way too much time doing the unnecessary follow-ups, extra discussions, and more that only adds to the time. There’s only so many hours in the day, it’s hard to scale up faster when you are restricted by time. Timesheets treat all time as equal, it doesn’t plan on the future. Instead, it only looks backwards.
“How do I Make Sure my Employees are Productive When I Don’t Know the Time?”
Steve has a simple solution for this common question. “Look at the turnaround time.” You look at your email and notes to see when a project comes in. You then make a note when it goes out. If it goes out in 3 months, how can you get it down to 2 months or even 1 month?
Looking at turnaround time (instead of time) let’s you also see where the hiccups are. If it spends 3 weeks on someone’s desk, you know you should move it to another team member. You can realize this without the headaches of tracking time.
Where are the “choke” points? Once those get fixed up, it becomes simpler.
Going deeper, to check even more productivity, group projects or clients into different categories: perhaps larger and smaller. Watch the progress of these categories and see if the same issues are affecting both. See if there’s a connection between perhaps a team member is the one slowing it down.
These are easy ways to check productivity without the grueling process of keeping every hour of your day logged.
Mistakes Made When On-Boarding a New Client Most “Timesheet” Firms Make:
Steve’s seen this issue with many firms. They have a new prospect in the office and already they have their timer going. They’re already putting someone on the clock and thus already “jumping” into the work.
The firms are so eager to start billing, they miss critical steps. Then, the prospect gets hit with a large bill and no one’s happy.
Steve recommends: Take the extra hour or so to make sure you receive ALL the information. Many firms get a little bit, then do some work, then ask the client, get a little more, do a bit more work, etc.
It’s a bad process that wastes time. Instead, Steve recommends having a designated “project manager” in your firm.
The project manager:
- Looks at every new (and old) client
- Determines the scope of the project, what it needs, what the team member who will complete it needs
- Determines the price
With most firms now, it’s really just “Give this to the next team member and Good luck.”
That’s where inefficiency creeps in. The project manager, after seeing multiple similar projects, will soon be able to scope projects within minutes and the process can be replicated and recorded for others who might become the project manager.
“How Do I Know Who Is Doing a Great Job?”
Many firms use the timesheets as the benchmark for raises and bonuses. Steve already mentioned timesheets are the #1 cause of depression in your firm. Now, you tie your team members compensation to how long they are in the office?
“As partners in the firm, YOU KNOW who is not pulling their weight.” – Steve Major
When you are a good, present leader, you can determine (without timesheets) who is getting their work done and who isn’t. Team members will fill their work day with work without time. If you give them a deadline, they will work hard to meet it. It’s called Parkinson’s law.
Everyday, it’s worth having a 5-10 minute meeting with the project manager to see where every project is. From these quick meetings, you can see who is moving along and who isn’t. Daily huddles give members more incentive to get the work done.
How to Start Implementing Value Pricing in Your CPA Firm:
What you don’t want to do is go “cold turkey.” This would cause chaos on your team. Instead, Steve recommends a 3-6 month window of slow implementation. He recommends making sure you develop the systems, and workflow software to get the pieces set for the move to value pricing.
Keep the timesheets in throughout the 6 month move, but slowly remove them with smaller than larger clients. At the end of 6 months, they will all be gone. The problem: the employees are usually on-board for a swift removal of timesheets, but it’s actually the owners who take the most adjusting. Remember: they are used to thinking timesheets give them “control.”
Get everyone into the mindset of “outputs.” Timesheets are all about “inputs.” When you price each “output” correctly and get everyone thinking (and remembering):
Clients only care about getting a great output and in a timely fashion. Value pricing focuses on those pieces and not the “time” input.
Value pricing is getting more and more common in the CPA industry. The reason? It’s simply more profitable and it brings back the ENJOYMENT of doing accounting. Rather than stressing about keeping the minutes, you can focus on your clients and your work. When your team members are enjoying their work again, they will get the work done faster and better.
Have you tried or trying Value Pricing? Tell us your story in the Comments!