Anyone who’s familiar with public accounting knows that the hours can be crazy, especially during tax season. Work weeks well exceed 40 hours and force some people to work Saturdays and even Sundays. Unlike most jobs, those working in public accounting must complete the majority of their work in three and one half months during the year. Even when the hours calm down after busy season, the demands of the job can still exceed 40 hours a week.
So the question is, will there ever be a time when public accountants work 40 hours a week year round? Will there ever be a real work-life balance in public accounting? At the moment the answer seems like a definite no – there is simply too much volume in such a short period of time.
But what if the future of public accounting meant fewer hours and increased profits? What would a 40 hour work week look like for accountants and how can this become a reality? This article will detail just how that might be possible.
The Accounting Formula
Yes, we all know assets minus liabilities equals owner’s equity. But the formula in public accounting is billable hours times billable rate equals total revenue. Partners in public accounting are always chasing billable hours and break down everything they do based on their billable rate.
What is the cost of watching Game of Thrones on your night off? Well, that just depends on your billable rate. Want to earn more revenue for the year? Simply increase those billable hours. So let’s do the math:
If you wanted to binge watch every episode of Game of Thrones it would take you 63 hours (this is not advisable). Let’s say you have a staff member with a billable rate of $200 an hour. This means the cost of watching Game of Thrones is approximately $12,600 per employee. If 100 employees watch Game of Thrones then that’s $1.26 million dollars in potential revenue. So the math is simple, work more hours and earn more revenue.
Billable Rates Don’t Allow Work Life Balance
It’s pretty clear that you can’t have a work life balance when your top line revenue is dependent upon the number of billable hours in a day. Therefore, you can’t have a public accounting firm that charges an hourly rate while reducing the number of hours their employees work.
The only way public accounting firms can create a work life balance is by dramatically changing the way they price their services. What if instead of charging by the hour they charge based on the end product. For example, if you determine a return is going to take 10 hours to complete at an average billable rate of $200 then the return will cost $2,000. So why not charge $2,000 regardless of how long the return takes?
Changing The Accounting Formula
What if public accounting firms ditched billable hours, charged the same amount they charged their clients the previous year while attempting to significantly reduce the number of hours to complete the same task? The results would be similar profits while working fewer hours.
But how is this even possible? Technology, automation, and time efficiencies. Having the mindset of billing by the hour doesn’t allow accounting firms to focus on efficiencies. There is no incentive to reduce the time on a job because that would mean decreased profits. But if you charged clients based on the end product regardless of the time it took to complete then you’d have more incentive to boost efficiencies.
So instead of increasing billable hours by 10%, public accounting firms could boost efficiency by 10% and create similar outcomes.
Accounting in 2050
Let’s spell out how the future of public accounting looks. Imagine sitting with a client and having 90% of their return completed with a click of a button. Their W-2, all their brokerage statements and every K-1 is linked to their tax return. Instead of getting paper documents, you get electronic statements that are linked to tax software.
The conversations with your client will be vastly different. The majority of the time spent will be on value added services like planning for the future and advisory services. The client will be willing to spend the same amount of money or more simply because more time will be spent growing their wealth through tax planning rather than tax prep.
Higher profits, happier clients, and more of a work life balance: this can’t just be a fantasy of public accounting – it must be the reality. Why? Because technology will quickly make compliance work a commodity. Accountants will have to spend more time on advisory services and less on scanning, prepping, and reviewing returns.
Having a work-life balance is not only possible but will be the future of public accounting. Technology will drastically change the way we work and the way we communicate with clients – the firms who realize this first will end up reaping the majority of these efficiency gains.
Focusing on reducing hours, not increasing hours, seems counter-intuitive. But of all professions, accountants should understand how valuable time is to the bottom line.