The Wize Way

Episode 149: Timesheets are dead says the gurus - The 5 firm-saving reasons why you need to keep and be religious about timesheets if you want to scale

• Wize Mentoring for Accountants and Bookkeepers • Season 2 • Episode 149

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In today's episode of The Wize Way Podcast for Accountants and Bookkeepers, Tim Causbrook and Jamie Johns tackle the often-debated necessity of timesheets in the accounting sector. 

Despite modern trends towards fixed pricing, Jamie makes a compelling argument for why timesheets are far from obsolete and are essential for anyone aiming to build a business that can operate independently of its owner.

  • The reasons why we need to keep timesheets and why timesheets are not dead and, in fact, are critical if you want to build a business that runs without you.  
  • How to get buy-in from your entire team and build a culture of high performance using timesheets.  
  • How to handle the nay-sayers of using timesheets. 

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1. Take the Wize Accountants Scale Scorecard – Find out your potential to scale and the next steps you should follow – Start Your Scorecard

2. Download our famous Wize Freedom Strategy Map for FREE - Find out the 96 projects every firm owner must implement to build a $5M+ firm that can run without them - Download here

2. Need to Hire right now? Book a 1:1 FREE discovery call with our WizeTalent hiring coaches to help find your next team member the Wize Way – Click Here

4. Book a 1:1 Wize Discovery Session – Spend 30mins with our Wize CEO, Jamie Johns, a $7M firm owner who is ready to give you his entire business plan to build a firm that can run without you – Find out more here

Wize Mentoring:

From Wize Mentoring is The Wize Way Podcast for Accountants and Bookkeepers, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time- poor practice to a business that runs without them. I hope you enjoy and subscribe!

TIm Causbrook:

So, Jamie, there's a lot of confusion in our industry, across the world really, about whether or not timesheets even matter. A lot of firms that we talk to don't seem to think they matter or don't have them. Even firms that I've met who do have them, I think, kind of underrate how important they are in running the firm. I'd love to pick your brain a little bit on why we think they're so important at Wize. Give us the context and then we'll jump into some of the things we get out of having timesheets.

Jamie Johns:

Yeah, thanks, Tim.

Jamie Johns:

Yeah, look, I think to give the topic context is, if you're going to grow your business, then you need some form of way to measure performance.

Jamie Johns:

And I think I was moving away from timesheets at the time and I was, you know, I was influenced by the concept of value pricing, you know, fixed pricing as well, Tim, and then pricing up front and all those sorts of things.

Jamie Johns:

And so when my firm was smaller, you know, I might have had five or six people at the time, I could probably manage it, like Ed used to say, with brute force. So if I had, say, four people, I could be in the office, I could, you know, I could see what they were doing every day and you know myself, I was probably really driving the deadlines, you know, to get the work done and out the door and get the invoice done. But then when I started working with Ed, and you know I started sort of working more hours and just doing it by brute force and more clients and more clients. You know, Ed taught me this concept of bottom-up management which in essence meant that I needed a system to know, you know, how the team was performing, but at a greater detail how each individual was performing as well yeah.

Jamie Johns:

So the more people you get, the more chaos can occur, and you just can't spread yourself every where team like you and if you're doing 30 or 40 hours a week and then you start moving into 50, 60, and 70 hours. You know, I literally spoke with a chap the other day who was doing 70 hours a week and you know it's, it's just not sustainable. Yeah.

Jamie Johns:

So this sort of debate around timesheets has been around for a while now and I think to a big degree. Some people just don't like doing it. They just simply don't like the task of completing a timesheet, which is fair enough. There's all things that we don't like doing, like doing um, but also it probably, you know, some people may not like the level of um accountability it brings, because you're literally saying you know what you're doing every day.

Jamie Johns:

You know so. So you know there's there's a lot of debate about toing and froing and then you know well how does fixed pricing. Why do you need to do a time sheet if you're fixed pricing? Because the traditional, you know, time billing model is. Model is you track every six minutes, you track every hour and the traditional model is that's how you bill the client. Now if you talk to Ed Chan, he'll say it doesn't matter either way, as long as you manage the client's expectations and you've got bottom-up management, as long as you manage the client's expectations and you've got bottom-up management. So that's where you sort of get this dichotomy or argument or debate from different industry specialists who say that you know, just throw the timesheets out, you don't need to do timesheets. Versus, you know someone like Ed and Wize will say, well, if you want to grow your business to a certain point and have economies of scale and have a bottom-up system of management, then you need timesheets.

Jamie Johns:

So yeah, there can be a lot of debate around whether to do timesheets or not. It'd be interesting to see what our audience's thoughts are on the topic. Yeah, my thoughts are on the, but you know, like at at my own firm, you know everyone you know does time sheets and I think half of our revenue would be fixed feed. You know half of our revenue would be succeessful and the other half's time billing. So you know, and that's just simply because over the last few years, we've purchased firms who are still in that time billing model and it doesn't and it doesn't happen overnight to change that to a fixed billing model. You know, that's a change management thing. You've got to be careful with the clients. Yeah, so yeah.

TIm Causbrook:

Yeah, there was so much stuff you just said there that I'd love to unpack if we've got time. Yeah, there's so many things there. Yeah, Jamie, we always say you spoke a lot about you know the wisdom of building it right now. So when it scales it's still manageable, right?

TIm Causbrook:

Yeah, and we love to say it Wize, you can't manage what you don't measure. Would you say time sheets are a way of measuring people's productivity or capacity? I'd love to hear you take us through um. You know, we always say we've met some people quite recently, some firms that have way too many staff, and the way we know that's from productivity. But how do you measure if your staff are your biggest cost? How do you measure that? If you're not doing time shakes, how do you know if they're productive or not?

TIm Causbrook:

I'd love you to take us through a bit of that yeah.

Jamie Johns:

So I think some of the foundations when you're building a firm um is incapacity. So you know, if you start at sort of this foundation to work out well, what is the capacity of your business in terms of you know what work it can produce, so you know it starts with that uh foundation of the capacity planner. And so you've got to ask him, well, what's the capacity planner built on? You know well, it's built on sort of around three things what every person is getting paid, so salaries, you know. So, firstly, salaries. Secondly, what you know, what's the productivity of each individual person, so how much out of their 40 hours a week, or 80 hours a day, whatever it is, how much of that time do you want them spending on client work, so actual client work or productive work, versus non-billable work, which is easy to do, like admin and all that sort of thing. And then, thirdly, you know it's a function of the charge-out rate, you know. So they're really the three things. And so everyone often asks, you know well, how do you get their productivity level? Well, that depends on their role, you know. Are they, you know, essentially at a high level, a finder, a minder, a grinder? And depends on the team size. Then too well, how do you set the charge-out rate? So the charge-out rate is a factor of the salary, it's a factor of the salary of the person, because you sort of want to obviously cover the person's salary, Tim.

Jamie Johns:

So in terms of your invoicing, you want to cover the person's salary. The second one is you want to cover the overheads of the business as well because you'll have that. And thirdly, you want to allow some for the owner, the profit. So the charge out right should be a reflection of that. And you know the old rule of thumb that I've heard for 20 years is you know three times the salary. Now, that doesn't totally stick true in a team environment, and you know, and then offshoring, sort of changes, can you know, change that again as well, but the other factor of the charge out rate is or what's the market value? You know so if you're in a capital city, if you're in a regional area, you know. So the market value as well is also a reflection of the charge- out rate as well. So it's sort of those three things, and if you take those things into account, then you get the capacity of the charge-out rate as well. So it's sort of those three things. And if you take those three into account then you get the capacity of the business.

Jamie Johns:

And you know, it was like this week, Tim, we were in a session and you know a particular person. What happened was they just hired and hired, and hired. And I said to the chap, why did you keep hiring? He said, you know, everyone just kept telling me that they were busy. So I just kept hiring. The problem was, um, you know, we had no profit. You know we had no we our cost of goods sold. So in an accounting and bookkeeping firm, the cost of goods sold is the wages, which is the most important KPI there is. It's your biggest cost in your business and that's the one you've got to control. So you know, there's a great e-book that you know Ed and I, and the team had written called Accountant's Profitability Secrets. So if you're here and you haven't got a copy of that, put in the chat to grab a copy. But essentially, the Accountant's Profitability Secrets e-book is put in the chat to grab a coffee. But essentially, the Accountants Profitability Secrets ebook goes into this deep dive of why we track time you know why we track time?

Jamie Johns:

Because essentially, even if you fix the fee, you know you're not doing time sheets to track the amount of money that you're going to build a client. You're doing time sheets to track efficiency. Right, because the simple thing is in the fixed pricing world, if you do a fixed price, for example, and you allow, say, five hours to do the job but your team takes 20 hours, hours then where does the rest of that time go?

Jamie Johns:

You know. So essentially you're not going to make any money because you can't go back to the client and say oh sorry, Mr. and Mrs. client, we've gone over time in this job so we're gonna have to bill you more. Yeah, yeah, right, so you can't. You know you can't do it. They might do that once a year, in a in uh, adjusting the engagement, but that's in maybe nine months time. So what you've got to do, you know the bigger you get is try and make sure that you're doing jobs in time in the budgeted time. So you know well, why do we do time sheets? Because we've got a budget, you know. So the first art of delegation is what are the outcomes that we desire? And the first thing should be this is how long we've got to do this job. The reason we've got this long to do the job is so that we make this amount of profit so that the firm is successful and we can pay wages and we can pay overheads and the owner gets rewarded.

Jamie Johns:

So in the fixed fee environment, it's not to bill the client, it's to measure your own efficiency and you know, if you can't bill the client that time, Tim, that's what we call a write-off. Because you just got a write-off of the time, you still have to pay the staff for the other 15 hours, don't you?

Jamie Johns:

Yeah so you know, and while you might have a small team, you might be able to manage that by brute force in a smaller team, uh, but trust me, once you get to, you know 10, 15, 20 people, um, you just can't, you don't have the time, Tim. So you need that system of bottom-up management, uh, to understand the deficiencies of the weaknesses in the team, and then from there you can drill down into, for example, the clients that aren't profitable. Um, you know our KPI is that the wages need to be you know, 40, for example, of of the revenue and you know the gross profit needs to be uh 60 as the KPI. So you know, and there are tools that you can do that. You know there's a lot of practice management tools around the world. The one that we use, for example, is Xero.

Jamie Johns:

Practice manager, from my point of view, is very good because we can look at if it's set up correctly. You can look at the cost of goods sold per job, per every job. You can see what the cost of goods is. You can see what the gross profit is because when the staff put their time down, it allocates a cost per hour for the staff. Because you can put the salaries in. You can put the charge out right, you can put everything in. So you know things, people don't tend to track, they don't tend to track metrics when everything is really good and rosy, like when you know when there's money in the bank and everything's going well.

Jamie Johns:

It's more when you've got a team or individuals who aren't performing that you need to drill down and find out what's going on. Why are we taking double the time to do this job or to work on this client? And in that ebook, I think that we've popped there in the chat, you know, Ed and I talk about the eight or nine reasons that you might go over time or that you you know that you have write-offs because write-offs are the worst thing that you want to avoid because you're just paying staff essentially, you know, and not billing for their time, because you know all the people that I work with, you know, in the different countries, with wise mentoring, essentially when someone gets hired, what's the first thing you put on your job advertisement? How many hours a week do people get paid for time?

Wize Mentoring:

It doesn't matter who you are.

Jamie Johns:

How many hours a week do you want me to do? What's the salary? Well, you can break that down into a cost. You want bottom-up management so that you can run your business without brute force because you just don't get time. So you want systems that help you identify where you're making money and where you're losing money but at a job level. You have to do it at a job level. So, yeah, the flip side of it, Tim, is the old-time billing model. And, again, that's where you do the timesheet so that you can then bill the client bill yeah.

Jamie Johns:

Yeah, so you know, and if you can bill the client, that's fine, you know, and that's the old-time billing model. But the important thing is in all of this that you manage the client's expectations If you can. What do they say under promise? Yeah, yeah, and over-deliver, and over-deliver normally you'll keep people pretty happy, yeah, yeah, so that's some.

TIm Causbrook:

Hopefully, it's challenging your thinking or clarifying your thinking today. But the big takeaway for me, Jamie, is it doesn't matter if you're fixed fee or or time-based billing. It's essential that you manage and measure, whip write-offs um, and you need charger rates to do that and time sheets to do that, you know now, I was just going to say you know, sometimes people who fix fee will look at me and say oh, you know.

Jamie Johns:

You know, Jamie, I don't have write-ups or write-offs, but the fact is they do. It's hidden, right? Yeah, it's just if you don't know what you don't know, so if you're not tracking it, you're not going to know when you take too long on jobs if you don't set budget or targets for jobs and then you don't track it, and then you're actually in a worse environment because you're sort of you're driving on in your car and you've got your blindfolds on.

TIm Causbrook:

you know so yeah, yeah, it's so critical. You talked a little bit just today about some of the um roadblocks to implementing and we've heard them all Wize over the years, right, I'd love to hear hopefully, hopefully, we've been convincing anyone who's on the fence about timesheets if people are raring to go and they want to implement them, could you talk about, um, how to get buy-in from the team if they're not used to implementing if they're not used to doing timesheets? But also some of the other roadblocks we tend to find are software- related. You mentioned Xero, which I use as well in my firm. What would be your words of wisdom for implementing it from a technical level, like the software level, but also from the human level, with the pushback?

Jamie Johns:

Yeah, just like any change management, Tim. What you've got to do in terms of implementing it in your own firm is obviously to be convinced of yourself and why you need it. So you've got to believe in it yourself and why you need it.

Jamie Johns:

The the first thing, and that would be to do with anything that you implement in firm, including timesheets, anything that you implement at the firm, including timesheets.

Jamie Johns:

The next step or procedure that you can take then is really what you need to do then is go to the most senior people in your for, so the key, the people that are next line and are them that doing timesheets is the right thing do to help the business as a whole, and so in any sort of change, management or tough decisions, you want to make decisions. a a

Jamie Johns:

That that, the highest good for all concerned, but if you sort of just go along with what one person wants, it's not the highest good of all concerned. So so time sheets, in that sense, are the hot, are for the highest good of everyone concerned, and and this is to run a successful business without a successful business, no one wins. Yeah, so so make the, make the decision in that spirit the highest good of all concerned, and then go to your key leaders, and so, whether you're a small business or you're a larger business, consider who the most influential people are time, in your team, and I would go to them one-on-one and win them over until they agree with you and in that process, like Ed Chan taught me, was me, was you know you want to. Um, sometimes you have to lose the battle but win the war and what ed might mean.

Jamie Johns:

Like that you got to drip on people. So sometimes you know you might introduce something to your firm like timesheets and it. It might be so foreign to people that Tim just, you know, in the first instance they just reject it and email they say, oh, I don't want to do that and whatever. So really, as the leaders in your firm, you have to then sort of pull away and don't let it get out of hand, don't let a storm in a teacup grow bigger. Just pull away and say, okay, well, and then you know in your mind that in two weeks' time you'll bring it up again at a lunch you have with a person, that in two weeks' time you'll bring it up again at a lunch you have with a person you know, because often you'll have circumstances or problems in your firm that will, if you turn them in reverse, well, what's the solution? You know. Well, if we knew how much time that person or the team was doing on that job, we might be able to work out how we can do it more efficiently. But if you don't track it, you don't know out how we can do it more efficiently. But but if you don't track it, you don't know.

Jamie Johns:

So you've got to influence the, the key people in firm, first those sort of most important or senior people under you. Don't do that in a public environment, tim. Do to everyone it individually, privately, face to face, not text, not emails. Do it human to human, convince them, Tim each person, and then you know, as you win the senior people in your firm. Then go to the next level of people and you know, and most people who have just joined the firm or whatever, it just depends on the circumstances they will be, you know, more as convinced to move Ed over to say timesheet, for example.

Jamie Johns:

But I would do it privately, privately, one-on-one, face-to-face, um. And obviously, when you all come together, Jamie maybe in your, in your weekly team meeting, you've already spoken everyone and everyone's like oh yeah, we had that discussion two or three times, so we're on board. But, tim, if you consider the reverse, you've got you know, you send an email like the jam Johns of 15 years ago. I'd send someone an email at four o'clock in the morning and say hey guys, we're moving to timesheets now let's go, everybody, let's go. You know, like you know, ed said well, you know, your troops are about 10 Ks behind you, jamie, and he said you've got to be like Napoleon.

TIm Causbrook:

You socks off and you give it to your troops. Yeah, yeah and that's not words of wisdom, jamie, as you said, for any change of bringing in the firm, not just time sheets, what you just outlined.

Jamie Johns:

Yeah, and look you know, it's just about accountability. People who don't you know Kristy's don't have fear and they don't mind about, like, where they put their time. or

Jamie Johns:

Yeah about sort of trying to, hey, christy's wasting her time or you know whatever. It's just about trying to run a better business. Um, for, for everyone, you know, for you know it's. It's sort of like that value circle, like you want to help the staff perform better, be more efficient. It's about efficiency at its core. Efficiency. You want to be able to charge the client a fair price in return for you know, a fair reward to the owner. So you want to sort of like everyone wins and you know any policy or procedure can be measured against that backdrop around you know everyone's. Does the client win, does the team win? Do the owners win?

TIm Causbrook:

and you want win-win all the way around yeah, it's so important for getting getting behind, isn't it just giving the like, giving the context why we're doing this? Because accountants are intelligent people, if you explain to them why, versus just no context, here's an email. Everyone, we're doing this now. Yeah, it's just a much easier way, isn't it?

Jamie Johns:

That's right. No, In any policies procedures. Ultimately, want the highest good of all concerned and you to win, and that's the important thing. It's easier said than done, but you've got to try.

TIm Causbrook:

Yeah,, no, , great phrases there. And then, um, just real quick on the software. Do you American have any, any kind of words for people who have software constraints? Given how important timesheets are, what would you say to them?

Jamie Johns:

yeah look, the. The bottom line is, you know, even sort of working more recently last couple years with american firms, a lot of the you know, even sort of working more recently last couple of years with American firms, a the web of the firms you know would talk about these issues and they'd say, oh, my software Tim doesn't do this. And so I sort of ran a little project where I had one-on-one calls with you know, the product specialists of Tim different software companies and to my surprise, around 80% of the software companies that I interviewed said no, no, we actually do this. And then I remember some comments said that you know, a lot of firm owners are so busy they don't utilize the power, they don't utilize the power or the features of the existing software that you use.

Jamie Johns:

So it's important to go back to whatever practice management system you're using because it's, you know, at its core. It's practice management system, right Time in billing in that sense, and you know whether it's fixed pricing or invoicing on You've got to find out whether your software does it. That's what I would say, tim. And secondly, if you find out from the horse's mouth and say that your software does it, I would say, tim.

Jamie Johns:

And secondly, if you out from the there are mouth and that your software doesn't do it, then you know, um, in the spirit of bottom-up planners and being able and determining charge- an efficient firm There are then I would move to something, um, that can Hopefully, do it. So, whether that means you dump whatever you're using and move to another thing or to something else that does track it and will track write-ups and write-offs and, uh, the profitability per job, um, you know, that's that's sort of a more of a strategic, fact-finding decision in that case. So might, just might need, you need another app to use and everyone's going to love that because everyone loves apps.

TIm Causbrook:

Yeah, yeah, totally. Um. I mean, there's so many uh areas in the business. We went through a fair bit of Jamie today with hiring capacity planner, profitability margins, determining charge out rates. There's so many areas that are touched on by timesheets. Hopefully that gives everyone on the call the sense of how important they are now I remember years ago, when I had junior staff starting, they were quite conscientious.

Jamie Johns:

There are ago, when I had junior staff starting, they were quite conscientious. And I remember one of the staff said to me, jamie, what makes a good accountant? And I said, oh, a good accountant is someone who has quality work fast. Easier said than done. But out of process whenever I was delegating.

Jamie Johns:

There's five steps to successfully delegating, but one of those steps when you're delegating is to tell people,. well, how long should it take Tim to do this task right? And so that little sort of job calculator there, for example, is just. It's a great way to break up the job in. You know all the stages of the job, in all the stages of the job. So, particularly if you're preparing, whether you're doing bookkeeping or whether you're financial statements or whether you're preparing concept can be the same.

Jamie Johns:

It's essentially at its core how much time should it take to do these different areas ? core, tim, I would say it's micro-training. Right, you have to micro-train people so you don't micro-manage them, you know, and they're two totally different things. Micro-training just means that you invest in people and you delegate effectively. So every time you delegate a task, you must give them how many hours it should take, and, uh, you know you might only use that, that, that job calculation sheet, you know, half a dozen times with a person and then after that you've created new habits. Um, and it's all about creating new habits, that, um, you know you unconsciously do, as you move forward, what I call unconscious competence. You know you just move to unconscious competency and um, yeah, that's not a bad tool, jamie, for new managers as well.

TIm Causbrook:

Yeah. That's right. It's you're newly promoting people, it's just as helpful as the the grinders right yeah, that's right, yeah, it's.

Jamie Johns:

It's always a team effort, you know, and, um, you know. That's why that ebook that you've put in the chat is important, tim, because you know a lot of our problems, particularly in fixed pricing, with firms not making money, is that they don't. They don't scope it properly. Yeah, like you've, you really got to scope out a job to know how much time it will take. And you know, when you meet a new client, you know we always ask for read-only access to their Xero. You know we ask for the most recent copy of their financial statements and tax returns, depending on whether you're doing the bookkeeping or whatever. So it's a bit like, for example, you go to a builder and you say, look, can you build me a house? And the builder says, well, you give me a plan.

TIm Causbrook:

Yeah the architect.

Jamie Johns:

Are, Well, you need a plan, because the first thing that you're going to do if you build a house is I want to know what the house is going to cost. Yeah, yeah, so a client's no different. Tim, what's it going to cost me? And if you say no, I'm not showing you my zero and I'm not showing you my financial statements, we just walk away. Yeah, because you my financial statements we just walk away Because you know you're trying to give a fixed price.

TIm Causbrook:

What are you going to guess it's too much risk?

Jamie Johns:

It's just far too much risk. And a lot of people say, oh, can you just give me an estimate? I'll say, no, sorry, I can't, you know, I'll go through the process. Yeah, so you know, and that also, you know, that sort of weeds out sometimes clients that mightn't be a good fit for your business either. Not everyone has to be a client, you know.

TIm Causbrook:

Yeah, have an abundance mindset around that.

Jamie Johns:

Yeah, for sure so many words of wisdom.

TIm Causbrook:

We'll wrap up there, Jamie. Is there any

Jamie Johns:

Yeah, I might have said this before, but I'll say it again yeah, set aside one hour a day to work on your firm. Yeah, nothing will change unless you work on your firm. So that would be the best advice I could give. Tim, jump in your calendar, put one hour, and if you do the right things in that one hour, that one hour will expand because you'll be delegating, creating policies, knowing when to hire, not the hire, and, yeah, that's the best advice I can give.

TIm Causbrook:

Yeah, great advice.

Wize Mentoring:

Thanks for tuning in. If you liked this episode, please remember to subscribe and leave us a five-star review. For more practical Wize tips on how to build a business that runs without you, head over to wizementoring. com/ podcast to download a free copy of the Accountant's 20-Hour Workweek Playbook. We've included a link in the show notes below. See you in the next episode!