Most companies are not getting nearly what they should be getting out of their accounting software. As a consultant who has worked with many companies, I’ve seen what the typical small business owner looks at. It’s in the questions they ask me. Many just want to see a profit and loss. As they get a bit more sophisticated, they’ll want to see the balance sheet. When I once asked a client to look at the statement of cash flows with me, he asked, “who do you think I am, Warren Buffet?”
When your company grows a bit bigger, the “owner” will now be regarded as the “CEO.” When I think of the difference between what the small business owner wants, and what the CEO wants, I think of the reports they want to see.
Shouldn’t you be running your company like a CEO?
To run your company effectively, you’ll need to look well beyond the basic financial statements. That is a start, but how did you get there? Are you getting the most that you can from your employees, without burning them out? Could you be even more profitable? Are all of your clients profitable, or are there some who are requiring so much of your company’s resources, that they really aren’t worth keeping as clients?
Have you been using BillQuick for a few years? If so, do you realize the goldmine of information you are sitting on? You are gathering data, about your jobs with greater efficiency and accuracy, than ever before. Every hour spent on every job, which can be measured against every dollar billed on every job. How much of your employees time is being spent on admin vs billable work? This analysis alone can help you identify opportunities to increase profitability, without spending a dime.
Concerned about going to flat rate pricing?
I was hired by a company a number of years back, to set up three Quickbooks company files. All three companies were manufacturing concerns with assemblies that needed to be tracked. He told me he thought it was about a $5,000 job. That was much more than I thought I needed, but I agreed, once I realized that there were many items that would need to be set up in QuickBooks, to manage the manufacturing process.
Once I got started I set up a template for the client, to give me the items I needed. All of the components, and all of the final products, repeated alongside each component. If I had to enter this manually, it would have taken a team of people well over 40 hours to complete this job. The spreadsheet had more than 7,000 lines.
I didn’t need to do this manually. I have many years of experience, and I’ve made it a point to invest a ton of my own time to learn many apps that help me get things done much more efficiently. Who should benefit from that? The client, or me? As the result of my experience, and knowledge of how to use the apps, I was able to complete, what would normally take over 40 hours, in about one hour. If I was billing by the hour, compared with the $5,000 value the customer stated, I would have lost a small fortune on this job.
It was, as a result of this experience that I understood the benefit of fixed fee, or flat rate pricing. I can get better and better at my job, and get things done more efficiently. As I do that, my effective hourly rate goes way up.
If you charge by the hour, the better you get at your job, the less money you make. How does that make any sense? You’re supposed to get a raise when you do your job well.
Once you make the plunge to fix fee billing, you’ll want to analyze the hours closely. This is so that you can manage things, and look for ways to reduce the number of hours it takes, thereby increasing your effective hourly rate. Who says you can’t bill out at $1,000/hour? How quickly can you get a $1,000 job done?
My $5,000 job didn’t take just 1 hour all told. It included a day of training for his accountants to get them up to speed on how to use QuickBooks. My effective hourly rate was $625. That’s more than most lawyers bill!!
I want to show you two reports in BilllQuick.
One will help you analyze your employee realization rates. This will give you an idea of whether or not your labor pool is working as efficiently as they can be.
The other report will look at your project's’ realization rates. This will help you understand which projects.