Utilization is like your firm’s fuel efficiency gauge; it gives insight into how your firm’s resources are being used.

But when you don’t have real-time reporting on firm management metrics, utilization can be tricky to gauge. You know that your people are busy — at least you think they are. But how busy? Are they actually too busy?

One scenario that is all too common in CPA firms is known as “ghosting” hours, when a staff member spends time on an engagement without charging the hours to the client.

This scenario commonly results in:

  • Underbillings to the client;
  • Inability to assess the true effort required to properly serve the client;
  • Inability to assess the efficiency or skill level of the staff member who “ghosted” the hours; and
  • Inaccurate evaluations of productivity for that staff member and the department.

Here is another scenario, which is considered intolerable in most firms: the staff member who charges hours to engagements but does not actually work those hours. For the firm that is armed with up-to-date productivity metrics, this fraudster is easy to spot. They are the ones who lead the group in hours charged but never seem to complete their assignments on time.

Are you watching your gauges?

Your firm can avoid these negative scenarios by keeping a close eye on utilization efficiency. Consider these two key questions:

  • Does each staff member and each division have a specific productivity goal?
  • Are you (and they) regularly monitoring progress compared to those targets?

First, let’s discuss goals. There’s a reason every road has a posted speed limit. While some see the “limit” as a mere suggestion or even a minimum threshold, we all agree to gauge our speed in the context of that posted sign. The same goes for utilization — and any other firm management metric. If your people don’t know what goal they should strive for, then they don’t know whether they should accelerate or ease up on the gas pedal.

In our firm, every billable person has a monthly budget they can monitor their progress against. Using their personal dashboard, they are empowered to hold themselves accountable rather than wait for their supervisors to tell them how they’re doing.

When someone comes into one of our employee-counseling sessions, they already know whether or not they are meeting expectations. In a busy accounting firm like ours, meeting productivity goals typically isn’t a problem. But we do have to watch for the opposite problem — working too much. When we see someone consistently putting in 200 hours a month, we encourage these zealous team members to slow down. And this analysis indicates that we might need to bring in other team members to even out the load.

The point here is that real-time data — at the individual, group, firm and client levels — enables better management decisions. A good performance management system should let you zoom out to see the performance of each division and the firm as a whole, and zoom in to the individual and the client level.

For example: Is your audit group exceeding productivity goals but falling far short in realization (i.e., dumping time into jobs)? Does the tax work for a certain client consistently require just 75 percent of the time of similar jobs but at nearly 100 percent realization?

These analyses are enabled by real-time, actionable metrics. And these analyses allow you to make critical decisions about the most profitable path for your firm — before that path is determined for you.

This article was published in Accounting Today on March 27, 2019.