Another Skirmish in the Value Pricing War

Source: CPA Trendlines

In this article, Greg Kyte responds, with tongue planted firmly in cheek, to Frank Stitely's article “The Problem with Timesheets? Not Enough Timesheets!”. Here are some of the highlights, reprinted with permission:

• Frank Stitely's article, a courageous response to what he refers to as “the value billing Taliban,” was flawless from start to finish.
• I agree 100 percent with his statement that “hourly billing reduces the chance of losing money on a project” because no one who tracks time ever goes over budget. If you give your client a fixed price and track your time, then as soon as hours spent on an audit equal the budget for the audit, that's when you know there's no fraud.
• He was totally right that there's no possible way to do cost accounting without time tracking. If you know you have 10,000 billable hours in inventory and your average billing rate is $150 per hour (to cover costs and partner profit), and as an entire firm you complete only one tax return for the year that takes five hours to complete, then your costs for the year are $750. Without time tracking you might have been misled to think that your annual costs were $1.5 million. But that would be stupid.
• I agree that it's impossible to evaluate employee performance without a timesheet. That's why every single service industry tracks time. Waiters, maids and drycleaners all track time meticulously.
• You said, “If you charge $4K for a tax return and someone else will do it for $2K, your price goes down or you go out of business even if the return is worth $10K to the client.” Exactly! Nothing differentiates one tax return from another, one taxpayer from another, or one tax planner from another. These guys don't understand that services we sell are fungible commodities. With insights like Frank Stitely's, we can all come closer to winning the race to the bottom.

For the complete article, read “The Problem with Frank Stitely? We Need More Frank Stitelys!”

From CPA Trendlines, January 6, 2013, http://cpatrendlines.com.