46: From Hours to Outcomes: Why We Stopped Tracking Time

In this episode I discuss the controversial topic of time tracking in accounting firms. Drawing from my years of experience, I challenge the industry standard of tracking time by client and argue for a focus on outcomes rather than hours. I share my journey from time tracking to adopting value-based billing, and how this shift has improved efficiency and profitability in my firm. I also address common concerns from peers and provide insights on managing team workload without time tracking. Join me as I advocate for breaking away from outdated practices and embracing a more purposeful, client-focused approach in the accounting industry.

Chapters

• 0:00 Introduction to Beth Whitworth and Her Mission
• 0:38 The Problem with Time Tracking in Accounting
• 2:57 Industry Pushback and Personal Experience
• 4:33 Adopting a Value-Based Billing Approach
• 7:59 Managing Without Time Tracking
• 10:28 The Benefits of Outcomes Over Hours
• 13:44 Addressing Common Concerns
• 22:48 Conclusion and Final Thoughts

Transcript

 I am Beth Whitworth race car driving quilt making CPA firm owning wife, mom, and boss. I'm here to help you build a business you love by sharing all of the good, the bad, the ugly, and the excellent sides of working in this industry. It's not always easy, but after many years, I can finally say it's worth it.

Let me guide you on your journey to accounting with confidence.

Hi, and welcome to Accounting With Confidence. I'm Beth Whitworth, and today we're here to talk about. One of my soapbox topics, which is not keeping track of time in an accounting firm. So this episode is about focusing on outcomes over hours, and I just have to tell you, I get more pushback on this particular concept.

Not from my clients, not from my team, but from my peers on how you have to be able to keep track of time by client, which has been the industry standard for eons, and it is something that is not necessary. They'll argue with me to the death that they have to have those numbers for some reason, and I'll talk about some of those reasons.

But I am one who, yes, kept track of my time for 28 years. So I have been in the accounting industry for 29, and from the very beginning you had to keep track of time in six minute increments. And back in the day it was before there were great time tracking systems. And so you were constantly having to write in your daytimer, you know, what clients you worked on, what were you doing?

Because when you put that time into. The billing system, you had to put a description. What were you working on? Was it billable time? Was it non-billable time? Was it what specific client work? So that whoever was generating the bills could say, oh, that was in scope, or not in scope, or it was more than budget or whatever.

So it was very, very detailed and predated the timekeeping systems that we now use. But even. I kept track of time and felt that everybody who was working on client work had to keep track of time. Even when we stopped saying, wait, we stopped billing by the hour. So the industry standard was always, you're billing by the hour and back in the day you billed about once a month.

So, because that's how long it took everybody to get their time in. You, you know, the end of the month comes, they're okay, get all your time in for the month because we need to get bills out by the fifth or the 10th, or whatever that was. And so they were only billing once a month. And now obviously things have changed, but I spent a lot of time defending the fact that we no longer.

Keep track or need to keep track of time by client. So last year after I went to the conference in June to scaling new heights, I. Came back because I had gone to a seminar. One of the sessions was with Ron Baker and Carlos Garcia and maybe Hector Garcia was there. I don't remember. And they were talking about not keeping track of time.

And at that time I got a copy of Ron Baker and Paul Dunn's book that's called Time's Up. I will admit I haven't read it. It's I've, I've scanned some things. It's, for me, it's not my most fun kind of nonfiction book to read, but listening to him, it made me realize that you don't need to keep track of time keeping you.

Track of time is just like when we're preparing financial statements and giving them to people after the end of the month, it's historical. So getting that time from your team members of what they worked on, it's a little too late and it's history. It is not something that you're impacting in the moment.

So what I found after I went to that session. He said, you don't need to keep track of time, and I'm like, okay. It finally sunk in after however many years I've heard this from him. It finally sunk in. So even without reading the book, I came back and said As of July 1st, 2024, we are no longer keeping track of time by client.

Now I work with a permanent part-time team, and so they get, they get paid by the hour, and so we did still need for them to clock in so that they could get paid and track their PTO accrual and all that kind of stuff, but they were just clocking in and putting it to. A SG time. I mean, it didn't matter. I didn't care.

I didn't need a description because what was happening in the past was a lot of time was being spent in tracking the time, describing the time, checking the time, correcting the time there was, there was a lot of time. I don't even wanna think about how many hours I spent in my lifetime reviewing and fixing and using time reports.

So what I've determined and what I keep getting the pushback on even this year, so here we are, a year later, go back to the conference and I had more than one person, more than one person push back on me on, no, you still need to, we, we, they'll say that we as, as in their own firm, we still need to keep track of time because I need that metric for insert the reason so.

I got a lot of argument that saying, yo, no, you cannot actually gauge profitability of a client. You can't actually gauge efficiency of a team member. You can't accurately know if you are actually making money. You know? I'm like, yeah, you can. So what's wrong with using time as the metric is? Like I said, it's after the fact.

It's never quite right. Nobody's actually keeping track of their time to the second, and everybody has a different personality in tracking those types of details. So you would think all accountants would be good at it. That is not correct. All accountants are not good at keeping track of their time, which means they spend some time going back and guessing.

What was I working on? How long do I think I worked on that? Ooh, I don't know that I should put the whole time I worked on it because that might look like I spent too much time. 'cause somebody's looking. The other thing with time, it's easily manipulated. So like I just said, you think that's not gonna look so good to your manager or the owner or whoever's doing the billing.

And so you say, okay, I need to get paid for all my time, but I'm only gonna put 30 minutes here and I'm gonna put the 30 other 30 minutes over here. 'cause I didn't spend as much time over here, but I know I had more room to put time there. It's easy to to to manipulate. And for me, the level of micromanagement that it kind of forced me into things like making sure the right billing code was used.

Was it a tax code? Was it an accounting code? Was it a payroll code? Was it billable versus non-billable time? Was it on the right client? Oh, whoops. They chose the individual instead of the business, whatever. There was so much just. Detail in that I'm not the detailed accountant, so keeping track of time and reviewing time and billing for the time was something that I didn't love.

I never loved it. So I was got fully behind Ron Baker's statement of stop keeping track of time. We have been saying for, I would say the last three to four years that we no longer. Bill by the hour. That's what we tell our clients. We don't, somebody says, well, how much are you? Well, it depends, you know, it depends on what you need.

I'm like, well, but what's your hourly rate? We don't have one. Oh, really? You know, you, you've gotta have one. No, we don't have a bill, hourly bill rate, but we were still keeping track of time by client. So technically we could have, you know, used that to figure out how much we were gonna bill for, but we weren't.

And as I thought about what Ron Baker had said in his session, I thought, okay, well, you know, let's get fully behind this. Not only do we not have a hourly billable rate. We can't come up with one for you. We don't keep track of time by client. We needed to be able to say that and to fully get into this mindset that we bill for the value we bring to you, not the time we've spent on the work we do.

And that was, that was kinda the last piece we needed to really drop, was keeping track of the time. And like I said, the pushback came mostly from my peers, my not from my team. My team embraced it. My team became more efficient. We didn't get pushback from clients because they had already been seeing that we were just billing them a subscription and had been for many years.

We just kind of always had that in the background to be able to run those metrics that my peers are saying they have to have in order to gauge the profitability of a client. How do you know if you're making money on a client? And what I have determined is that for practitioners that are so used to keeping track of time, they're using those hours as a safety net.

They can go back to them and say, Ooh. You know, I, I didn't build that very well. I didn't build that subscription correctly because these members of my team worked on it, and based on what I paid them and the overhead calculation and all of those things, I didn't make money. I can see what they turned in for time less.

What I billed for that for this client is it's not profitable. And what I say to that is, as a value-based firm, I'm not worried about. Making money on every single client. I am worried about profitability of the firm. Let me say that again. Every single client, every single month does not have to be what you would say profitable, where.

Revenue minus the direct expenses, minus the overhead turns into a profit. Would that be great? Yes. Does that always happen? No. But as a firm, if you are value-based billing, you are making decisions when you go to Bill that. What value you are bringing to the client, how do they value that? And there are times when you make some judgment calls.

I know for me one of those is that I will help the small not-for-profits be able to keep their books accurately. Am I gonna charge them $5,000 a month? Absolutely not. I'm gonna charge them a nominal fee and I'm going to have someone doing that work that yes, I'm paying on an hourly basis, but. It's not so much work that if I'm losing.

$20. Do I care? No, because this other client that I'm, we're doing a whole lot more work for that we are bringing more value to that we are, you know, somewhat walking hand in hand with them for their entire back office or doing reviewed financial statements or anything like that. We know that, that the value of that is higher and the profit on that job is probably going to be higher.

Even though, yes, it does take more time, but it's, that's not what we're billing for. So for those people who keep telling me, they have to have that time by client so they know how profitable they are on the client to kind of test whether or not they actually did their proposal, their quote accurately. I say, don't worry about it.

I say, you need to care as a firm, firm wide. You need to be profitable, not by client. So the other thing is if you know your margins are so close that you need to be keeping track of every single client like that, then you probably aren't charging enough that you need to go back and revisit what is the minimum monthly fee you are willing to charge for a client.

Maybe that needs to come up. Maybe instead of $300 a month, it's 500. Maybe instead of a thousand dollars a month, it's 3000. Whatever those metrics are for you. If you are finding that keeping track of that time is a requirement in order to figure out if you are profitable, then you have probably not built in enough revenue into that job.

In order to essentially make that profit and give the value, you need to value yourself enough that your clients are valuing you, so that small increases should not be impacting you that much, but if your margins are that close, you need to be charging more. The other piece that. I hear from my peers is, well, how do I know what my team is working on?

How do I manage their workload? How do I see where they're spending too much time? And for us, we manage all of that with our team by are the deadlines being met? We can see that inside of our practice management system, so we can see everything that has a deadline. We can see everything that goes overdue.

We can make sure that we are communicating, we're asking, have the conversation. Just because they're not keeping track of time doesn't mean you don't also get to talk to them and ask them questions and say, Hey, you know, how much did, do you know about How long did that take? Did that take longer than you thought?

Do you have. Capacity. You know, ask those questions. You want to make sure that you're hiring people who you can rely on for managing their workload, and a practice management system will help with that. But you also need to communicate your expectations. Keep in mind that if you were doing it, you're probably doing it faster.

So you gotta build some of that into that. But if you're worried so much, if they spend an extra hour on something. Then I think you're focused on the wrong thing. I don't care how long something took, as long as the deadlines are being met as closely as we can, the clients are satisfied in getting what they need in a timely manner, and the work is right.

I don't want somebody to be worried about that clock running, and so this month they run into an issue. They're like, oh, my computer was having issues. My internet went out. The client was on vacation, so it took them longer to get me something. So it took me longer to do things or whatever it was. I don't want that to impact how correct they get the information because they're worried about the clock running.

I want the focus to be on getting the best correct outcome to the client. And you can gauge that by communicating, by our deadlines being met. Ask the client, how about you? Say, Hey, you know, hey, X, Y, Z company. How is, uh, so and so doing for you right now? How? How is that working? If they say, Hey, we're getting everything on time, everything's great.

That's the outcome. That's the value you're bringing. So I mentioned that we stopped keeping track of time a year ago. Nobody misses it, including me, because even when I was working on client work, I would try to keep track of my time and I know I had. Members of my team who were very put very detailed notes in everything, and they don't have to do that anymore.

And that means that the time that they're working is actually more on client work rather than on the administrative part of keeping track of time. So I don't know that I would ever go back. To it, I, to, to keeping track of time for any reason. I firmly believe in what Ron Baker spoke about and one of I, this little note fell out of the book.

So this little note was notes I took while I was in that session and he essentially had a diagram of, you know, when you are tracking time and doing things based on time, that is more income driven. As opposed to impact driven, I want to be impact driven. It is more profit led versus purpose led. My purpose is to help small businesses have information to make good business decisions in a timely manner with accurate records.

I, that's a purpose. The hours based is transacting the. Outcome based is belonging. You know, you have this purpose, you have this. You wanna make this impact on your clients, and you want this sense of belonging, not transacting between your team, because every time they were putting in time to that client that's transactional based, it doesn't feel like they belong now.

Now we're able to say, we're all working together on this. It doesn't matter how long it takes. The hours based is based on inputs and obviously the not hours based is based on outcomes, which is why I am so focused on outcomes over hours. And really when it comes down to it, when you're dealing with the hours, you're very focused on yourself.

How much time did that take me to get this done? How much time is am I gonna get? Shown as billable, how much time versus non-billable, how is that going to reflect on me as a member of this team, as an accountant or whatever? Whereas when you're working with things without that time restriction, you are something it's, it ends up being about something bigger than yourself.

What did you do today that helped move? One of our clients forward that impacted one of our clients because you were there and you were able to answer their question? Or was it something that you were able to learn? You know, because we're not worried so much about billable versus non-billable, go learn something.

You can bring that to your team. Great. So it has been very, very eye-opening for someone who's been in the industry for a very long time, and it absolutely feeds into my passion for breaking that old school model of typical accounting CPA firms. Where hours are a badge of honor where you have to keep track of every single time that you have to have at least a 80 to 90% billing utilization rate.

They're all those pieces that I don't believe in. I actually do not believe in them. So since we stopped keeping track of time, our profits are up, the team is more efficient. We are definitely focused more on the client outcomes versus the clock, and spending time tracking that, switching between jobs and putting in the descriptions.

And I can honestly say to my clients. That we do not have a billing rate and we cannot, we do not track time by job, so feel free to call me. That's part of your subscription. If you have, you need a meeting with me, you need to find out something, you know, something changed in your world or your, you have a question.

So many people used to be afraid to call because they're gonna get that bill at the end of the month. We don't do that. It's built into the subscription so that they have value. There is value to them to have somebody not on call, because obviously I'm not on call 24 7, but during business hours they can email me or they can, they can reach out and schedule a call because they're not afraid of what is that going to cost them.

So I encourage my peers to stop arguing with me that it doesn't work. It does. I mean, I ca, I'm an example. I think Ron Baker is obviously industry leading strategist in this, and yes, it took me a long time to get to that belief, but after a year, I will say we're not going back. We are not gonna keep track of time by client and I honestly don't think that anyone.

Needs it. You know, it could be, you know, if you're saying, Hey, I don't know what my, my team's working on. Ask them if they're not working on the right things. Let them know. Give them expectations. If you think they are not getting things done efficiently or effectively, make sure they have the right tools.

And if all of those things are in place and you still think that you are not getting what you need, then they're probably not the right person for your team. You might need to make a change there. So, like I said, I've gotten so much pushback on why it is required that you have to keep track of time by client or you're not going to be successful.

Be profitable, know if you are billing the right amounts, you know, any of those things. And, and for that, I say no, take it from me. Outcomes, over hours is the way to go. Alright, so anybody that has any, any feedback, I, I'd love to hear it. What, what are you using? You know, if you're still tracking time, why are you hanging onto that?

What is that crutch that you know? Why are you using that? What are you using to track? Because it is historical, it's not gonna help a client going forward. Knowing how much time your team members spent on their work the last month, so. Anyway. Okay. That's me hopping back off my soapbox. I know I get on these things.

You can tell when I'm super passionate about industry divisive things like my permanent part-time or a hundred percent remote or not keeping track of time. So those are things that I. Absolutely feel need to change in the industry, and so I put that out there. Okay, everybody, always remember I am here to empower you to build a business that you love.

Anything I can do to help you do that, I surely will. Okay. I'll talk to y'all soon. Bye-bye.

Thanks for listening to another episode of Accounting with Confidence. My hope is that my experiences can help you navigate the realities of owning and operating your business. Please subscribe or follow the podcast on your favorite podcast listening platform so that you never miss an episode. Feel free to leave me a text by using the, send us a text message link in the show description and let me know how I'm doing.