Help me understand how keeping track of hours relate to what is actually billed to the client when we are preparing tax returns faster with “auto flow” or “sure prep”? Am I mistaken that we still charge what a tax return is “worth” regardless of how quick we prepare it? Seems like keeping track of hours is just a way to keep us busy, and the reward for finishing under budget is just more work at the hopes of a “bigger” raise.

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Because we still need to know if it is a good engagement/fit? If you charge a fixed fee, but then have some changes in the engagement and we blow the budget out of the water for a year or two, then we know we aren't getting what we want to be getting out of our associates time and that client - either the staff is struggling or we are under charging the client. It also provides us data when pricing future jobs.

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I agree, it should be more about production and I too would like 10 returns done 70-85% as opposed to 4 returns 95% done. That’s a conversation of don’t try to be “perfect” and be more concerned with getting it completed as accurately as possible. We still look at time, but the focus is more on, 10 returns can be completed in a week. Some will take more time and some will take less time, but I think it removes the pressure of being within budget or eating hours and with a production incentive they will want to complete more returns if they want to complete more returns.

All of the time saved from sureprep is replaced by bs admin time

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Lol, sounds about right

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It's called opportunity cost. Macro level: teams will be paid the same in terms of salary and the client will be charged the same in fees. So the longer it takes to do something that's another project you cannot take on, and another engagement the firm cannot take on..and therefore no additional revenue.

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If we don’t track how long something takes, how do we know how many resources we need to hire year over year when the work is more efficient? People eat time and then complain we don’t have enough resources. How can we justify the additional support if we don’t have the data to support it. Another option would be to measure output (# of returns) but there are too many variables that go into that.

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You still estimate how long each each return takes, but measure production instead of hours spent on the project. For example 150 - 10 hour returns worth $2,000 each. I would want a person making $100k to finish those returns during the year. I would be monitoring how many returns get completed each week and month. As a business owner I want to make money and I think production is more important to set a budget and dissect what went wrong when it’s a shot in the dark anyway with new staff, tax law changes, assumptions that prior year preparer was accurate with hours reporting.

If you were running a business and the business was making money, wouldn’t you want to know what projects were contributing to income so you could do more of them? Conversely, if you could identify projects that were losing you money, you could do less of them.

If not for measuring direct inputs of time, how else would you identify growth opportunities?

Each tax return is worth a set price so you see how much revenue they bring in during the year. My friend operates this way and he has 5 staff and his tax returns are worth $3,500-$7,500. All he cares about is that they bring in at least 3x their salary and he also has production bonuses as an incentive to get more down work done if they want to. He also doesn’t have time sheets. If someone is only bringing in 2x salary then they see if the tax returns should be charged more or if they are just inefficient, but with the tax returns being in a niche industry and most are really similar it’s usually easy to figure out.

Congrats, you figured out how the public accounting pyramid works!! Your prize is a carrot at the end of a stick!

Exactly the point I’m trying to bring up, because staff already see this and staff used to want to be at the top of the pyramid so they put up with it for 10-15 years, but they don’t want to be on top of the pyramid if this is the path required.

Keeping track of hours is mostly a burden to staff as the price is 90% set before the work has started. PA firms use these metrics to ‘manage’ staff without actually having to assist, grow, and develop staff. It has always been learn as you go, slave to the clock type of job.

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