Bloomberg Tax - What accounting firms can learn from law firms about timekeeping
Timekeeping is necessary in both the accounting and law industries, but the way it’s handled differs. If accounting firms took note from law firms on using technology for timekeeping measures, they’d surely benefit, say Linda Long and Jill Nelson of Intapp.
*This article first published on Bloomberg Tax
Despite the many differences in their professions, both lawyers and accountants despise the drudgery of timekeeping, which is a necessity for workers in both industries. Many accountants find timesheets onerous, whether they serve in tax (often billing per hour plus annual fees), audit (per project), or other services. They disdain the effort layered on top of providing the best service and meeting multiple clients’ demands and deadlines.
They also are likely to get it wrong when they use different workarounds, like putting eight hours across the days and dividing those hours equally across assignments. Or maybe they dislike some projects—like reviewing a client’s minutes or reviewing a cash basis balance sheet—so that every hour feels like two. In the end, this costs the accounting firms a bundle.
Accounting vs. Legal
Both accounting and legal firms use some form of time log. Accounting firms tend to charge on an engagement basis, relying heavily on past work and partner judgment to determine appropriate bids. They dismiss the need for historical accuracy as a future budget parameter. One mid-tier CIO recently quoted a common accounting firm conversation with clients on pricing: “What did we charge you guys last time? Can I raise it 10%, or would you leave me if I did?”
In certain cases, accounting firms may bill by the hour, albeit with a fixed cap. Timekeeping in the accounting world tends to be summary in nature, lacking true time transparency. This may seem like a time saver in the short term, but it all too often fails to capture details that could be used for operating insight. Most accounting firms do not take the time to interrogate what little recordkeeping they possess, which leads to problems with price, sales, and the ability to retain and develop talent.
By comparison, lawyers record in increments of minutes and bill according to an hourly rate with excruciatingly detailed narratives of activities reflective of work delivery and in compliance with client requirements. They capture, collect, and mine significantly more data and leverage that information for competitive advantage. In its 2017 survey of law firms, Intapp found that 76% of respondents already had some form of centralized, dedicated time management and pricing function. By timekeeping with modern, integrated technology, firms could reduce the time lawyers spend recording time and improve billable work volumes and realizations—all while improving accuracy to inform pricing and matter management.
Outside the Big Four accounting firms, the top 40 and even top 20 use less technology and a patchwork of timekeeping procedure. Even when they try hard to track history, staff and partners alike often scramble to make sense of where their time went, reconstructing their month by consulting calendars, notepads, post-it notes, and receipts.
How much time was spent reading? What was the purpose for this meeting, and who participated? Just how many 10-minute phase task segments are falling through the cracks each month? How much are employees actually using any of the technologies and tools that the company has already paid for? Although engagements tend to be tracked across a matrix of common phases, the associated accounting lacks the next level of detail, such as effort spent on standard procedures, detail testing, analytical procedures, and other tasks.
Even more, the delay in time submissions is often overlooked, while law firms hold to stringent deadline policies, offering cash incentives for timely submission and withholding pay for delinquency.
Drudgery Reduction and Data Opportunity
Whether it’s a law firm billing by the hour or an accounting firm backfilling hours to make sense of bids, two issues bear emphasis. Manual completion of time sheets is time-consuming and dull, sapping employee productivity, satisfaction, and engagement. Second, accurate data on workforce activities is a treasure trove of information that, if analyzed, can deliver insights into the efficiency of people, processes, and profitability.
Law firms have been investing in automation to reduce the drudgery of recordkeeping while also introducing the power of advanced data analytics. It’s a win-win if they can address morale and acquire vast caches of insight-driving data.
Their tools develop greater accuracy regarding effort-per-task and thus total estimated fees. Such confidence in their costing often helps them move away from “time and materials” pricing toward fixed fees—a form of risk-sharing favored by clients—and value pricing without profitability risk. A study by Hobson & Co. found that embedding an automated time process with a practice management system for a 300-lawyer practice was likely to add up to $900,000 of billable revenue in the first year. Primarily, it reduces time write-offs through greater awareness of specific tasks performed. The value created: a projected nearly $284,000 per year.
Secondarily, savings of $200,000 or more came from more profitable alternative fee arrangements and streamlining the process of time recording. Automated time projections also allowed competitively speedy bids—speed often counts in litigation, M&A, and similar complex legal matters.
Why Do Accounting Firms Resist?
In the accounting world, the Big Four and a selection of leading firms are seeing the light. Today, pilot programs featuring advanced technology and detailed time capture are taking hold.
Yet the cultures of many accounting firms view automating time management as an unnecessary fix to something that’s not broken. They resist a paradigm shift in RFP pricing and rely on partner expertise, memory, and manual input.
Partners often admit to worrying that detailed analysis of time and effort could reveal either bloated or thin budgets. Similarly, people at all levels of talent express fear that time transparency could reveal inadequacies in terms of skill, speed, or workflow management.
But when accounting firms take the time to consider the potential benefits, their resistance fades. The appeal grows even stronger when executives think about more accurate pricing based on more transparent discussions with clients, plus next-level planning that address workflows on discrete project segments and the ability to enter time anywhere on any device. Any improvements to timekeeping systems should seek to reduce the leakage of billable time, make bidding faster and easier with more confidence, build client trust, and reduce staff frustration.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Linda Long is a practice group leader for accounting and consulting at Intapp. She has served various public and privately held audit clients across multiple industries, and she is particularly experienced in internal control frameworks and accounting, as well as reporting requirements and guidance.
Jill Nelson is a senior director at Intapp and has over 20 years of legal tech experience. She looks after the business end of Intapp Operations & Finance, including Intapp Time, Intapp Pricing, and the intersections of those products with Intapp Terms.
Bloomberg Tax – August 23, 2022
What accounting firms can learn from law firms about timekeeping
- Accounting Today - Staying ahead of independence and conflicts problems
- Corporate Compliance Insights - 4 Key risk management trends for consulting leaders
- New York Law Journal - Why savvy law firms are prioritizing risk-aware business development
- Corporate Compliance Insights - Growing pains: mid-sized auditing firms are seeing an influx of new clients, but at what cost?
- Kreston Reeves selects Intapp Collaboration & Content for engagement-centric document management