2007 Review of Time & Billing Systems

Most
professional tax and accounting firms do not bill by the hour for all tasks.
Certain routine services, many tax return types and other tasks are often charged
at a flat rate, while more complex processes like business consulting, planning,
audits and extended write-up are time-based. Obviously, keeping track of the
time and expenses incurred for these latter tasks is important when you eventually
submit your invoice to the client. But assessing the time your firm spends on
flat-rate services is important, since it can help you justify the rates, adjust
them as necessary, analyze profitability, and determine the productivity of
the firm and
individual staff.

These analytical functions are really more of a practice management function,
but are essential and can often pay for the cost of a time and billing system,
which can be fairly inexpensive, anyway. As an example, let’s say your
firm charges $300 for basic 1040 prep. Is your firm getting the appropriate
return for your time? First, you need to find the average time it took last
season to provide this service, which a time and billing system will track by
job code. You also need to determine average administrative tasks per return
for things such as scanning, invoicing, filing, making copies, and other overhead.
With this information, you can easily calculate the average cost per 1040 return
and see what your margin is on these services. You can also break down the profitability
of other services and see which employees or departments are most efficient.

Time and billing systems also include invoicing systems that convert the tasks
you’ve completed into itemized bills for your clients, allowing for multiple
billing rates based on the client, the staff member, the project or specific
task. The AR functions built into the programs manage aging receivables and
often enable the assessment of interest and sales tax. Since a key component
of these programs is reporting and invoicing, most also include client communication
tools, such as templates for collections, cover letters and instructions. In
general, time and billing systems serve to streamline the invoicing and processes,
and provide quick access to key business indicators that show how productive
a firm is across its entire range of client services.

And all of the systems provide some measure of integration back into the major
small business accounting programs on the market, such as QuickBooks and Peachtree.
This allows professionals to migrate their invoicing data, client information
and receipts back into their internal firm accounting system. Many time and
billing systems also offer integration with Outlook for contact management information,
can output to Excel and Word for customization, and provide syncing with mobile
devices for remote entry of time and expense data.

But just as important as “user-friendliness” is to client-side
accounting programs, so too is it crucial to a time and billing application.
Although they can all be used after-the-fact, with time, job and expense data
entered at a later date, that process is about as effective as a client trying
to post transactions one or two days later. To get the most from a time and
billing system, all professionals should enter their time as soon as possible,
certainly the same day, if not immediately after a client engagement, phone
call or specific task. Some firms have an administrative person who manages
this process and, while not quite as precise as direct, live entry by professional
staff, it is still better than waiting until the end of the week and guesstimating
the information. Remember, even time spent tracking time and preparing client
invoices is billable to that client as an administrative cost.

Time and billing programs generally offer a “lite” version of
what full-fledged practice management systems offer, and often at a much more
attractive price point that can start at less than $300 for a single user. For
this investment, a firm gets insight into its productivity, streamlined billing
processes, better tracking of pass-through expenses, and more appropriate compensation
for client services.

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