Episode #046 What Bookkeepers And Accountants Are Doing About Non-Billable Time
Discussing non-billable time with Amy Hooke
Last week, Amy headed down to Accountech to facilitate four Intuit Table Talks on her favorite topic; pricing! A group of bookkeepers and accountants got together to chat about common issues, raised questions, shared ideas and compared strategies about how to reduce non-billable time.
All who attended came away with new learnings, things to try and ways to look at things. In this episode, Amy summarises the key takeaways that emerged across the four groups and shows you how YOU can approach the issue of un-billable time and write-offs in your own bookkeeping business, whether your on hourly billing, packages or a hybrid combo of both.
Host: Amy Hooke
Guest speaker: None
Topic: What Bookkeepers And Accountants Are Doing About Non-Billable Time
Teamwork | Project Management, Helpdesk Software, CRM and Chat*
Health Check Masterclass | Scope Jobs Accurately and Quote Quickly
Integrapay | Direct Debit and Automated Payments*
*These are partner affiliate links, which means if you purchase a service via these links we receive a small commission at no extra cost to you. We only recommend products and platforms that we personally use, have tried and trust.
Amy Hooke: Good morning, welcome. Thank you for joining me today. We're going to be talking about dealing with non-billable time and how to recover your time, and specifically I'm going to be talking about how I led the Table Talks at the AccounTech Exhibition last week for Intuit. They were hosting some Table Talks and asked me to come and speak on my favorite topic, which you know is pricing. We chatted about common issues that bookkeepers and accounts who were at the table were having with their pricing, specifically with their non-billable time. What we did was so I shared a bit about how I do things in my business, but what I did was really facilitated the discussion amongst the group, got everybody else talking about their struggles, their strategies, their ideas, and we really had a lot of fun with it. Actually we came away with some really interesting learnings about the topic.
Actually there were a couple of you on there, there were a few on there that actually surprised me. What I've done is I've done a really pretty comprehensive summary of everything that I learned across the four groups so that I can give you a bit of an insight into what you would have learned if you were there. I thought probably the best way to start this off is to actually go through the statistics of what the four tables looked like so that you know the type of people who were sharing their ideas and have contributed to the content of this podcast.
There was four tables over the two days, and so these are small tables, they're set for maximum of 10 people so we had 27 people attend the Table Talks. The breakdown of those people were so we had… Let's have a look here. We had 27 in attendance, 17 of them were bookkeepers, but specifically I guess all mostly BAS Agents, although I didn't necessarily always ask so I just noted if they were a bookkeeper or an accountant. Yeah, 73% were bookkeepers and 17 of those six were accountants, all of the accountants at the table were offering bookkeeping services as well. One person was an accounting practice manager, so a very large accounting firm, I would say maybe a large small firm or a large small medium firm you could say, so a practice with 80 staff. She'd come along to help get some strategies for the practice but she was in that practice manager position.
Then we had two employee bookkeepers that were actually employees of the bookkeepers who were at the table. Then we had a really interesting one, which was actually a franchise owner, not anything to do with bookkeeping or accounting, this was a franchise owner who was running a franchise for people in the electrical industry I believe it was, and so they have been running sort of an internal bookkeeping practice for the franchisees to help equip them do their own bookkeeping or to get some support with the bookkeeping if they want someone else to do it. That was a really interesting business model.
Out of all of the 27 at the table, so 18 of them had staff, so quite a lot of them had staff. I was quite surprised about that. We had seven solo practitioners, and then we had the two that were employee of the bookkeepers in attendance. Then we had eight of them had between one and five staff, six had between six and 10 staff, two of them had 20 staff each, and then one of them as I explained before their practice has around 80 staff, so a bit of a bigger practice there and that was an accounting firm. We had three people from WA, one from U South Wales, one from Queensland, and 22 from Victoria. Mostly locals there but yeah, the first table we had quite a few people from interstate. Then from the group we also had a mixture of men and women. We had nine males of which four were accountants and five were bookkeepers. We got 33% male and 67% female, so 18 females, 12 bookkeepers, two accountants, two employees of the bookkeepers, one accounting practice manager, and one franchisor.
I thought that was pretty cool, we had quite a diverse mix of people and mixtures of backgrounds, male and female accountants, male and female bookkeepers, so that was really interesting as well. Another thing that stood out to me is how little people were still only on an hourly rate. We only had one person who's only billing on an hourly rate. Obviously very small percentage with the ones that were bookkeepers, they're not actually… I'm sorry, the employee bookkeepers so they weren't counted in this numbers. Then we had four who were only offering packages, 100% packages so that's 14% of the group. Then we had 84% of the group on a hybrid. Hybrid is a mixture of hourly and packages, so that can look different for different people. What that can look like is some of them would put their clients onto hourly and then lock them in on a regular price to turn it into a package. Others would quote a package and then do various jobs on hourly, and so there was a bit of a combo there.
I was actually surprised how little were just 100% only on hourly rate so that was really interesting because you get the feel out there that a lot of bookkeepers are still on hourly rate, whereas actually most bookkeepers have made the transition to packages although not 100% there. A lot of the feedback I was getting is that they were saying about 80% of their clients are on packages now. That was very, very cool because obviously that gave me a lot of insight for the way that we're supporting our clients at Savvy and our community as well with the Pricing for Profit program and that kind of thing.
It really made me realize part of what we're doing now is in helping bookkeepers to move from hourly billing to packages, but we're now running into new issues such as this topic of unbillable time and being able to manage scope changes. There's all sorts of things that come with the territory of when you're offering packages versus an hourly rate. The challenges are different and so I found that very insightful, helpful information for me to help you guys at Savvy but also really interesting knowledge about the industry. Obviously it's a very small sample size. I mean I'd love to be able to get a bigger picture of that, but for now I thought that was quite interesting that those people who were at AccounTech fit into those categories.
What I did was when we first started we kicked off the group with… I quickly introduced myself. I let them know that I did run Savvy and that I did help bookkeepers with their pricing, but I also had my own bookkeeper business and that we were 100% on packages and have gone through lots of the different processes. I let them know that I'd be sharing from my experience and that I have three staff. I have a different model when it comes to how I pay my employees, so I explained that, I explained to them that I do things a little bit differently and that there would be a variety of different people at the table and that the whole talk wouldn't be led by me and my expertise but I would facilitate the discussion and get people thinking about different ways to think about things. That was really cool, so we had 45 minutes each. I kicked it off by getting everyone to introduce themself, tell me where they're from, tell me how many staff they had, whether they're an accountant or a bookkeeper and that's obviously where I got all of my statistics from.
Questions covered by groups
Then from there I got them to throw out what are some of the questions that you want to get answered during this workshop? One of the obvious ones was how do we drive down on billable time, and now the question was how do we recover unbillable time? Another big question was actually what software should I use to track my time, or actually more accurately it would be which is the best software to use to track my time? Because a lot of people are already using software to track their time, so looking at potentially switching. Another great question that we got was is packages a better way to reduce unbillable time? Is package billing actually better then hourly and obviously that was the one person that's still on hourly.
The other question that we also got was how do I automate my processes and specifically my administration billing, and then also which apps in general are going to give my practice more efficiency? Another question was how do I get my clients to appreciate the value, and how do I scope a job and what do I put in my engagement letter? Now as we went through the sessions, obviously I took down a note of the questions that people were answering, but because it wasn't a [inaudible 00:09:18] I'm just going, “Okay, these are the answers to all of your questions.” What I did was I put the discussion out there to the group and asked lots of different questions. There was no specific answering of one question, like this is the question, this is the answer, but what came out of there were a whole bunch of key learnings, which I've summarized into groups and categories of what they're about.
Then I also made a note of some common issues or interesting issues that people were mentioning. What I'll do is I'll just go through those common issues, all of the key learnings in the order that I've noted them down in. Then at the end I'll finish up with what I think was, for me, was a key… And actually it was for the group as well. I did ask them what they thought and there was a key takeaway, which I'll share with you right at the end because it actually surprised me. As I started to bring that up and discuss it with the group they were like, “Yes, this is definitely the key takeaway.” Potentially one of the biggest factors in reducing or recovering unbillable time or non-billable time.
1. The more experienced, the less billable time you clock
I'll start off with the common issues or some interesting issues that were expressed at the table. One of the comments that was made by one of the accountants was that the more experience the accountant is the less billable time they have. I found that really interesting because it was the opposite for bookkeeper businesses. With the bookkeeper you got the more highly experienced person who's the BAS agent, and then you've got… They tend to have the most billable time, but then you've got different business models arising there. What we worked out that that was coming down to was that the accountants who were more senior, they're getting a lot more distractions, they're getting interrupted by staff, they're managing teams and things like that, so it's not necessarily to do with their skill level once the accountant becomes more qualified they're sitting in the break room eating Scotch finger biscuits instead of doing their work. It's not that all but obviously their time is split between lots of different things and also they might not be necessarily always focusing on client work.
Tying into that, the accountants did express obviously writing off time, especially when a new staff member would start potentially, what they would do is they have an idea of what they want to charge the client already, so even though the time's getting tracked, what they're doing is they're actually writing off time to have the invoice match what they're planning it out to be. From my experience working in an accounting firm, I started out in an accounting firm, I worked there on and off for about 12 years, but also managed their bookkeeping practice, and even after I left there I used to manage their WIP, their work in progress. We used to manage it in an Excel spreadsheet. The staff used to all record their time sheets in a spreadsheet, they'd print it out and then it would get scanned and sent to me and I would manually data enter it into the spreadsheet.
Sometimes I wouldn't receive the time sheets to actually enter them, sometimes for months or even at one time even up to a year afterwards so I was always way behind in the data entry. I always thought to myself… I said to the business owner, “How do you actually bill your clients if you're not getting this up to date?” We always had this dream to get it up to date but it just never happened. He just said, “I just charge them 5% extra on whatever they got billed last year.” I thought, “Gosh okay, so why do you keep this work in progress?” It was more just to have it there for, I don't know, for accounting purposes. Obviously you can put your work in progress on your balance sheet. Maybe it was just there in case of an audit, I don't really know but anyway, let's not go there.
I mean I just did but anyway let's keep moving forward.
2. People aren't sure if the rate they used to create their packages was right
Another common issue that was coming up was really people not sure. They've gone to packages and they're not sure if the hourly rate that they've used to create the package is right, they don't know if the package amount is right, they're not even sure how to analyze that.
3. Once time is lost, is there a way to get it back?
Then the other common issue was once the time is lost is there anyway to get it back? I found all of these fascinating. Anyway, these are the key learnings. The key learnings or the key takeaways were firstly number one, track your time and review your time regularly, you and your team's time.
That answers one of the first questions that people were asking, which is about time tracking apps and everyone was comparing their different apps. We had Toggle, XPM, the accountants tended to be use Sage, the bookkeepers tended to be using XPM, but we had a few other ones in there like TSheets, and Toggle personally at Off The Hook Bookkeeping I use Teamwork Projects. That's a new system that we've setup there, which has an in-built chat program, which is pretty cool. Everybody shared their ideas and talked about the pros and cons of the different apps and how it fits into their workflow.
4. Reviewing your tracked time
The next thing was once you're tracking your time you have to review it regularly. The way that I do it at Off The Hook is we do a monthly review and then an in depth quarterly review. The monthly review is a light review and the quarterly review is a deeper review where we go right into it and we send the client a report and a scope adjustment if needed. That was one of the big things. We had a lot of people tracking their time and not really ever making the time to look at it. Really you have to set aside time to actually sit down and look at that, at least to have a time tracker that allows you to do some kind of analysis. The reason that you need to be able to analyze your time sheets is so that you can look for opportunities or spot underperforming staff or perhaps a client if they're not profitable or looking for tasks that can be automated or taking too much time.
Another really cool takeaway , which I thought was great, one of the accountants brought this one up, was plan your work and work your plan. That's not how he said it but that's how I've rephrased it. He said something really interesting. He said mostly we don't find out that the time was non-billable until after the work has already been done and then it's too late. What we took away from that discussion is that it's really important to actually plan ahead and set goals for the client, that way you know what you're aiming for, and then that way once you start to reach 50%, 75%, 80%, 90% of those limits that you've set you can actually start to review that and get in contact with the client if need be or have a chat with the team if you need to do that. That was really excellent suggestion that came from one person sharing their idea.
The other thing that came out of that, which is actually connected, is to estimate your costs and your margins. One of the first questions I asked is who has something that they can use as a high level plan of their business? Can you get a high level snapshot of your practice and what each person's capacity is, what the client requirement for work is. Is it something that you can update easily and keep a track on that and is it something that you can use to plan your resources? If you plan to do some marketing, where you need to hire more staff, or if you've got staff that have been over capacity, how many new clients would you need to fill them up and that kind of thing. Quite a few people said that they didn't have anything like that. A couple said that they had but they hadn't been looking at it very regularly, and a couple mentioned that they do try and look at that as much as possible.
You would be surprised but a lot of are not really aware of what their costs are, they're not really aware of what their margins are, and so that can actually become an issue because there's a bit of a blind spot there and so you're finding everything out way after the fact and sometimes it's too late. You've got to be a bit proactive with clients, especially if you're on packages and you need to change the scope.
5. What is unbillable time?
The next question I asked them, which brought about the next key learning was what is unbillable time? What are the causes or the sources of the non-billable time? The biggest one that came up in every group was discussion time, speaking to the clients, clients calling. A very common sentiment was that clients just feel like they can call up whenever they want and have long discussions. Then we had a bit of a back and forth discussion about whether you should allow your client to do that. We had some very strong opinions saying, “Hey, I'm not your friend, I'm your bookkeeper.” Then we had other people who were obviously they chat and chat to the clients and they lose track of things. Then we had a couple of others who are like, “Every time a client calls I hit the timer straight away and make sure that I'm timing it.”
That was a really interesting one because for me at Off The Hook Bookkeeping we actually put discussion time into the scope. What we do is we create, depending on their level of package, we allow a portion of discussion time that's relevant to that specific size of job, so depending if it's a weekly job obviously they get a lot more discussion time. If it's only monthly or annual or quarterly or whatever then it's less discussion time. We make sure we outline that and we also say what discussion time is. We let them know that discussion time includes quick emails, quick phone calls, and any kind of short chat conversations that have to happen in between the month where the client might have questions, and we also let them know that longer discussions can be arranged for an additional fee.
Then from there we also have, for people who know they're going to need more discussion time we actually have small, medium, and large support packages for people that need that. That was a really big one, how to do that, how to control that, how to still… You've got to be really careful with that because obviously you don't want your clients to feel like every second that they call you you're hitting the timer. You don't want to make them afraid to call you, you want the clients to trust you, you want them to be able to come to you and ask for help when they need it, run things by you if they're making decision. Really it's very important you've got to balance out the whole discussion time thing. You've got to let them know, “Hey my time is not unlimited and yes if you take advantage of my time you do need to pay extra. However, we do give you room to move there and we'll include some discussion time which you are not being charged for, it's factored into the package.” That gives them the confidence to know that you're not hitting the timer every time they call and to not be scared that they're going to get all these hours on their bill for discussion time.
The other usual suspects were training staff, learning software, and then there were things like double handling, so there would be disorganization and lack of process leading to double handling, sometimes two people overlapping on the same things. Obviously mistakes can happen and they need to be fixed and written off not at the clients cost. Then some other things were travel time and also just what we talked about before, which was the lack of practice planning. That's what everybody really felt across the board that were the causes of non-billable time.
Another obvious one is really administration time, so there's a bit of a discussion going on about which administration time should be billed. How should the administration time actually get charged to the client? For example, if they're paying for a specific small fixed fee service for administration time how do they track that? Do they get the staff to… Is it actually worth getting administration tasks to put five minutes to this person, five minutes to this person, how does that actually work? A number of people were finding that they simplify it and they have the staff for whatever the type of task is they automatically allocate five minutes, and there were some that just dill the administration time at all and a mixture in between. Yeah, that was a really interesting one anyway, knowing the causes of the non-billable time is definitely something that can help you reduce it because you know where it's coming from and you know the areas that you can tackle.
Another one was scope jobs and amend the scope quickly. You probably know that I'm a big fan of this, I'm always talking about the importance of scoping jobs properly, and for me that involves a bookkeeping health check, having a proper engagement letter that actually covers, helps the client to understand what a scope change is, what causes it to arise. Because you want the client to know that they're not powerless against scope changes. Scope changes don't come out of nowhere, there's usually something that happens and often it's something that they do. I shared with the group this is what we do in our engagement letter, we let them know what causes the scope changes and we let them know what will happen once the scope has changed. That was really helpful for everybody, nobody else in the group had actually been doing that. A couple were doing bookkeeping health checks, nobody had really discussed scope changes with the client and let them know ahead of time. It was a bit of a blank area for a lot of people, so hearing that was really helpful.
Obviously we talked about this before, tracking time on small things and phone calls. I think a lot of us obviously we can get… Sorry, I apologize. Actually accidentally skipped to the wrong list so I've just read the wrong one out so just ignore that, we'll get to that one in a minute about tracking all of your admin and little tasks. Aside from having a solid engagement letter, you also need to review monthly and quarterly, which I mentioned earlier in this episode. Then also letting the client know ASAP, putting it in writing, and another one if it's to do with the scope change and amending the scopes quickly is putting the bookkeeper in charge, making the bookkeeper responsible for knowing what the scope actually is and putting them in responsibility for it.
Now my model's a little bit different in that I pay my bookkeepers a percentage of the package and they get paid a fixed fee as well, so it's a little bit of a different scenario to everyone else at the table who had employees and they're paying them on an hourly rate. For me it was about the bookkeeper taking ownership. I don't feel that I should have to pay higher bookkeeper and pay them a decent amount of money and then have them a bit wishy washy with going over time or not really paying attention to it. I just think well I'm your client as much as they're my client so I want my bookkeepers to actually pay attention and take ownership. What I do is once the client signs a proposal, I send it to the bookkeeper and I say, “This is the proposal and this is the percentage that you'll receive,” and they know what the limits are. They all know.
If I've quoted the client four hours a week, they'll know that they're to work four hours a week and if it's consistently going over they need to pay attention to that and they need to actually notify me. I say let me know as soon as you can and I'll let the client know and we can amend the scope. Because otherwise what's going to happen is that if they take longer and longer to do it, then their hourly rate's going down so there's an advantage of them to come to me and say, “Hang on a second, this is getting out of scope.” The other thing about that is that it encourages the bookkeeper to be more efficient. If they become more efficient I'm happy to still pay them that original percentage and then their hourly rate goes up, so there's an incentive there for them.
Now obviously with Off The Hook we're still quite in early days so it's a model that I'll obviously have to keep reviewing as the business grows, but for now it's working and also it allows me to be able to have contractors as well because they're actually doing a fixed scope work, which is really great for the type of business that I run, which is 100% virtual.
6. Finding opportunities to recover unbillable time
The next key learning was really about finding opportunities to recover and this is the one that I accidentally jumped lists before, so some of the opportunities that we found to recover the non-billable time was to actually charge for travel and make sure you're charging for reimbursements as well. As I accidentally mentioned before, tracking time on small things and phone calls so that's really good. It sounds really obvious but sometimes that's where the unbillable time is getting lost by not tracking things. That comes down to planning as well sometimes. I think one of the biggest culprits is switch tasking. When you're constantly switching tasks throughout the day it becomes very hard to track those little things. If you're really clear like this is the client that I'm working on in this time slot then that can help, but obviously once you're more at the manager level you are going to be switching a lot so you have to be conscious of that and have a really good app for being able to switch between those tasks.
Another one, and this is something that I've just started implementing at Off The Hook is charging for bookkeeping health checks. I started to realize hang on a second, to do a bookkeeping health check I can do a really quick one if I want to, but to do a pretty decent one you're looking at 30 minutes, sometimes 40 minutes, you could take up to an hour if you really wanted to. You do that and then you put the quote together, it can take you about 90 minutes so we've decided to start charging $200 for our bookkeeping health check. Because it comes with a report and a recommendation for the client that they could then go and either implement themself or they could hire another bookkeeper to do it and that work would already be prepared for them. They are receiving a big advantage from that and they're also receiving my expertise so I'd like them to pay me for that time and so we started implementing that as well.
Obviously it's going to reduce the amount of people that come through, but it's actually good because the quality of people who come through is great and you've got people who are really serious, they're not just ringing everyone to see who's the cheapest. That's something that I recommend doing if you're doing health checks if they're quite comprehensive and you're giving them a report. If you're just checking in the file, quick check in the file and that kind of thing that's a bit different, but I think you can definitely charge for your health checks. Another way to recover is I'm a huge fan of the BAS lodgement fee, so I charge non-time based fees, which are lodgement fees. The reason for that is it's like an insurance, it's giving them extra time to lodge their BAS, they're covered by the code of conduct, they're covered by the safe harbor laws, they're covered by the fact they can see that I have X amount of years experience, and that I've got a minimum level of qualification, and that I've got insurance. It really is just a protection there for the client a well.
Just as a little incentive there, say you have a need to amend that specific BAS, I've already launched the BAS for them but that's a good way to recover unbillable time or any other non-time based packages. We do a couple of template packs, we do for clients STP, single touch payroll packs so that they can onboard their staff so we can set them up with that if they want it. There are other types of templates and training videos, anything that's productized you can do that, you can add those extra things in to your proposal. The other thing is support packages for discussion time. I did mention this earlier but support packages for discussion time are really important. If you've got someone who likes to regularly contact you for feedback or they have questions or they're doing a bit of their own bookkeeping and they need to ask question like, “How do I do this? How do I fix this?” Then you can sell them support packages.
We normally do those, we do two, four, and eight hour packages and then once they use up their time they can actually purchase more. Yeah, there's different ways to be able to package that in or to cover that time. Another big one is to automate your admin and your billing. Automating your admin obviously requires you to understand the admin processes and the workflow and then looking for spots where you can automate it or systematize it or even just batching can actually help, having your staff do similar tasks together rather then doing things randomly throughout the day as they crop up. Then automating billing. I'm a huge fan of this. Get your clients on direct debit. We use IntegraPay. IntegraPay is great, you can set them up, you send them their first invoice, as soon as they pay their first invoice they're automatically setup on direct debit and then from there you just debit their fees and IntegraPay reconciles it in zero, it's very good.
Anytime that you can reduce in your admin and billing time is really going to save you, and so to not have to reconcile. We used to use Ezidebit, it's really annoying to reconcile the transactions and it takes that extra step out there to be able to automate that in a better way and also knowing that those payments are going to get collected takes that piece of mind. Yeah, that's a really good idea to be able to automate that. I mean obviously you know I'm a huge fan of being on packages. Just knowing that that recurring package is going out is going to save you a lot of time. Just the time that you're sitting down combing through time sheets and preparing invoices, if you can reduce to only having to do that once a quarter I absolutely love that. You do your quarterly review of your clients. That means you don't have to do a review every single week or every single month when you're doing their invoicing, so it really actually helps with that as well.
Then another one is charging for research and software learning. If a customer wants me to research an integration I don't think, “Oh I don't know how to do that integration. I don't know how to use that software so therefore I'm going to research it for them and learn the software for free.” Because then what happens is obviously they receive the benefit from that, so what I would do is just say, “Look, I'm happy to do the research for you and map out a bit of a workflow or I can go through that and give you a recommendation,” and then I charge a fixed fee for that. I charge them for that research time as a fixed package where they get the… I can go and compare softwares for them and that kind of thing. Look, you're not expected to know every single software but if a client wants you to learn then you can offer to them to learn it. They can either take it or leave it. I'm sure once they go out there and try and learn it themself they might not necessarily want to and then they can see the value in the package that you're offering.
7. So many people don't know how much of their time is non-billable
Another key takeaway was be realistic about it. When I say to you, “How much of your time was interesting?” Because I said to everybody, “Do you know how much of your time is non-billable?” Hardly anyone knew. I think only one person knew that their time is 80% billable. Everyone's turning up to a talk on non-billable time but nobody actually knew what their non-billable time was. It's like okay, if you're trying to reduce it you need to know what it is. But not only do you need to know what it is, you need to know what are you actually aiming for. That was an interesting one.
I heard a number the other day, not from the bookkeeping industry, someone outside the industry told me that you should be turning over $250,000 per employee. That's five times, five times my turnover margin on your employees. I thought, “Gosh, what industry are they talking about?” No one would be anywhere near that in the bookkeeping industry. I put that to the table and everybody was shocked and said, “No, I don't think that's correct.” Then the accountants across the board said that they thought it was 3.3, so whatever the staff salary is that they should be bringing in 3.3 times as much of the salary as income. For bookkeepers they said that it was about two and a half times. That's quite interesting actually because that works out to be more like $150,000 per employee.
If you've got a bookkeeper on $60k and they're an employee then you've basically got $150,000 per employee. Whereas if you put that across to the accounting firms that's nearly $200,000 per employee on that $60,000 salary. Obviously that's, I guess that's four mid level bookkeeper or accountant. Maybe an entry level accountant or mid level bookkeeper. Whereas if you've got somebody more senior you could be paying a more senior bookkeeper in your business let's say $90,000. If you times that by 2.4 that's getting closer to this number that this woman said to me, which is $225,000 of revenue per employee. I don't actually agree with this, I don't think it's correct, I don't think it's… Yeah I don't think it's necessary and to me it feels like a bit of a number pulled out of thin air.
I'm really big on actually sit down and work out what you need for your business because every business is different. What I do when I work with my clients in Pricing for Profit is that we go through and we look at their personal… We get them to do a home budget. We don't check it, it's not homework. I mean it is homework but we don't actually check it, but just to confirm how much do you actually need to pay yourself? A lot of people only pay themself a certain amount because they've either just picked a number out of thin air or it's the amount that their accountant told them to pay for tax reasons, but they've never actually looked at what their spendings are and whether maybe they'd like to change their situation in terms of their earnings and their expenditure and things like that. Normally we pick numbers from thin air and go for it.
I think it's really important to sit down and look at things like that. We look at home budget, we look at business budget, we look at potential what the growth of the business budget would look like in the future. We look at the team members and how many hours billable, non-billable hours that they're doing, what's the total practice capacity? We look at the income that's being generated from the current clients on an hourly rate and then we compare that to what they would be generating if the business was on packages. We factor all of this in. We look at their software subscriptions that they're billing on. We analyze the base rates. We really go right deeply into that, but not only that, we look at the target market, we look at the niche, we look at the competitive landscape and the advantage that this particular bookkeeper has over others. We look at the area that they're in, the location, the industry that we're working in. You can't go yeah, however many employees you have just times it by 3.3 and that's your goal. To me that's… No offense to anyone but I think that's stupid.
I think what you need to do is you need to understand your business and your goals and where you are now and where you want to get to and what it's going to look like, and then you make your decisions based on that. You work out what your margins are, you work out what your profitability needs to be, you work out how much you need to charge per hour based on what your goals are. It really comes down to doing your homework and not copying others. I think it's a bit of a habit in the bookkeeping industry to go, “Oh someone said this on Facebook, I'll copy what other people are doing.” I don't think that is a good idea. I think we need to consider the uniqueness of each individual business and all those different factors and to actually look at that.
The other bit about being realistic is when I ask bookkeepers that I work with how much billable time do you want this stuff and this stuff and this stuff to have? They're like, “Oh yeah, 90 to 100.” It's not realistic, you're never going to have 100% billable time. I think we also need to think about okay, just to look at it realistically and factor in the things that are not going to be billable and actually not need… I don't know if I know any other people from any other industries that try so hard to be 100% billable then bookkeepers and accountants, I think it's quite interesting. Obviously we're wanting to look at the bottom line, you're wanting to look at your profit, you're wanting to look at other factors as well like your team, are your staff happy, are your clients happy? There's so many other things aside from billable percentages that matter in a business. I think we need to be realistic and take a broader view and think, “Okay, maybe there's other things aside from just billable percentages that we need to worry about.”
Sure, billable percentages are really important with decision making but it's not the be all and end all, and if you're not 100% billable it's fine, you'll be okay. You can still have a very profitable business with businesses that are not 100% billable. In Off The Hook Bookkeeping I would say we're around 80%, 85% billable. No maybe a little bit higher, maybe closer to 90%, and then you look at a completely different business like Savvy. At Savvy we're 25% billable to 20%, that's our KPI to be 20% billable. You've got all different sorts of businesses and it's not realistic to put billable time as the main thing. You got to look at whether the business is profitable, whether it's doing good in the world, whether you're achieving your goals through that. There's lots of different things to think about.
8. Get your team culture right
Finally, the last key takeaway was to get your team culture right. One of the biggest sources of the time being non-billable is to do with your team. Making sure that your staff are in the right roles and that your staff know what they're doing. Also making sure that they're a right fit for the job, for the team, for the culture. One of the people who was there mentioned that when they test staff they don't do skills tests they do personality tests. Now I don't know if I would use personality tests as such but I think there was so much wisdom in what this person was saying because I think that there are things that more than technical skills that are important when you're looking for an employee.
Sometimes we miss those things because we're looking for the smartest person. If you can find a person with a good attitude who's willing to learn, they can end up being a far better employee then somebody who knows all the technical knowledge but maybe they're really difficult to work with or maybe they don't like to collaborate with the rest of the team, maybe they hoard their knowledge. There's all these different issues there. The other thing that came out of that was to set targets and KPIs for the staff. Like what I mentioned before, I make my staff responsible. “This is your job, you need to be responsible for your billable percentage, you need to keep an eye on it. You need to monitor it and make sure that we go out of scope. Don't come to me and ask me what is the client paying for? Go check the engagement letter.” I leave my business quite open like that. I trust my employees and on that foundation I'm able to have my staff take responsibility for their own thing instead of having to always come back and rely on me for everything.
Now that said, if you're going to have targets and KPIs you can't be full on about it. Because you'll upset people and you'll hurt people and you'll crush people and you'll make them feel like you're really mean. What you don't want to do is micromanage people. I've said this a number of times before. If you find yourself micromanaging somebody it could be a good sign that they're not a good fit for the role. One of the things that I've noticed is a tendency, and I used to do this myself, if I'm trying to setup too many systems and processes to help one specific staff member, they're not a good fit for the role. They either don't know what they're doing or they're not proactive enough, they're not able to manage their own tasks. What we look for at Off The Hook and at Savvy is we look for people who are proactive, they take ownership, they love what they do, they enjoy work for the sake of working, they thrive off getting results, and they love doing stuff, they love finishing stuff, they love taking things off the list.
Obviously not all your staff are going to have that kind of attitude but you've got to find people who are a good fit for the team and then be willing to give those people ownership and responsibility to the level that you trust them. Yeah, that one really stood out to me. As I said, I was going to share the key takeaway from this whole two days of four Table Talks. It was really that non-billable time isn't about time and it isn't about money, it's actually about people. Because if you dig down into what causes the non-billable time and whether non-billable time is coming from and what the non-billable time actually is, it's always to do with people. It's always people and their time or when it's to do with money it's the clients and their money but it's still about people.
From that, the key takeaway is that one of the best ways to reduce your unbillable time or recover non-billable time is to have the right team, the right culture fit, the right people, and to set expectations, and to delegate responsibility, and to communicate regularly. It's all to do with people and communication. At the end of the day it's not really about time trackers and processors and work in progress and write-offs and all of those kinds of things. What's the right number to multiply things by? It's not about any of that. It's about people, it's about your relationships with people. If you can get those right then you're on a really good foundation to actually be able to get your non-billable time under control and to have a bookkeeping business or an accounting business that is really doing well for yourselves and for your team but also for your clients as well.
Anyway, I was very inspired by that last one. I said to the group, “What do you think? Is this what you think it's about?” Everybody was like, “Yes, definitely.” It's so true and they could see that yeah, they could see the wisdom in that and they could all see where the people and the team had been causing that. Now obviously not everybody has a team, as we did explore, but then there's always you. If you're the solo practitioner it still comes down to people, it still comes down to your relationship with your clients, it comes down to how you manage your own time and how you structure things in your own business. I still feel that that applies across the board even for the solo practitioners out there.
Yeah, so anyway I hope this has been really helpful. I'll track a couple of helpful links for you in the project notes. I'm using Teamwork for my time tracking in projects, I'll pop that in there. I'm using IntegraPay as well, quite a few bookkeepers using IntegraPay. Then also I'll throw in the health check masterclass, which you should check out if you need help scoping jobs. The other thing that you may or may not be aware of is we do engagement letters for bookkeepers and we also do all the authority docs. If you need any help with your documentation we can help you with that as well.
Anyway, thank you so much for listening. I hope this has been super helpful. Please hit subscribe on the podcast so that you'll get notified, or if you want email notifications go to thesavvybookkeeper.com.au/podcast and pop in your name and email address and we'll email you every time a new thing pop up, a new episode comes up. I'd love your feedback. Pop on over a review for me. I always get a happy smile when I see reviews whether it's on the Facebook page or on the podcast app, that would be amazing. Thank you so much. I will see you next week. See you then. Have a great week. Bye.