You Are Spending Too Much Time On Accounting

11/2/2014

PERCENT OF NON-BILLABLE TIME

Are you spending too much time on accounting?
One of the late realizations that I had after 20 years of using a powerful accounting program is that it was costing much more per year than it should. It wasn't the $1,000 per year subscription that cost too much; it was the time required to USE the accounting program. A true accounting program, like we were using, is very fussy. If it were a person, it would be considered “high maintenance”. In our case, the time spent on accounting was time that could have been spent on billable tasks. We could have easily afforded to farm out every accounting chore for what we were “spending” in lost opportunity.

Here is how I look at time allocation for accounting now.

If 66% of all time represents the ideal proportion that should be billable time, and I have seen that target mentioned a lot, then 34% is what is left for ALL administration activities. So what part of that slice should be devoted to the accounting tasks of time compilation, invoicing, expense tracking, project accounting, and payroll? It turns out that even for small firms automation is necessary to keep the time investment under control.

This table shows how I would allocate time for all the administration tasks:

Paid Time Off
General Office / Clerical / Record-keeping / Correspondence / Office Supplies / Library
Business Development / Marketing / Sales
Software Management / Acquisition / Deployment / Training / Maintenance
Special projects
Bookkeeping / Time Collection / Invoicing / Paying Bills / Payroll / Project Accounting
Financial planning / Banking / Insurance / Tax preparation
Professional Development / Professional Organizations / Continuing Ed
Facility / Housekeeping / FFE management / Network and server admin
Benefits Admin / Time Off / Office policies

This table is based on a five person firm. The spreadsheet is available for download if you are a subscriber. Try out your own assumptions.

In our case, we used up just about all of our admin time, leaving little for accounting. Just 1.2% of our firm's time was available for accounting.

If you can do accounting in the 1.2% allocation, that would be ideal. Can you do accounting in 120 hours a year for a 5-person firm? That's 2-1/4 hours per week! 10 hours per month! We were spending 6 times that amount of time. Our system was costing us about $60,000 a year in lost revenue. Even if the time couldn't be billed, it would have made a HUGE difference in our marketing efforts.

To keep accounting time under control, here's what you CAN’T do:

You can't use timesheets that aren't entered directly into the bookkeeping software
You can't use invoice templates requiring monthly maintenance of the account status
You can't spend time tracking down reimbursable expenses and mileage
AND you can't afford to be using true accounting software

And one thing you should be doing, you should know your profitability on each project so that you can make informed decisions about the work you pursue.

So what is the answer? MyCorbu can save you lots of time on Timekeeping and Project Accounting.