Billable Time

[Nashville]

Much discussion about "giving away" services and time. I don't know any profession as a group more generous about this than tax preparers.

Typical: Phone rings, guy says, "I know you're busy but can you just answer a simple question?" "My brother-in-law [by the way, not your client] wants to put his farm equipment in a separate rental-type LLC - do you think he should do this?"

The above question is obviously not simple, but even if it is, it becomes very convenient to just answer over the phone and get on with your schedule and not bother to make sure that this amount of time gets billed out. Fifteen minutes isn't worth the trouble, but how many of these calls do you receive over the course of the year? I'm a small-time practitioner, and I must receive 100 calls a year.

Typical: You sit down in the evening to your computer, anxious to do some research and accounting on a decedent's estate you've promised by the end of the week. On your computer are 20 e-mails. By the time you throw out the spam and personals, there are some 4-5 of these e-mails from customers that you feel compelled to answer. By the time you've finished, it's not 6:00 P.M. anymore, but 8:00 P.M. Will this time get billed out?

Typical: I have an off-season exercise that I call "file maintenance." I recalculate the next years' depreciation on existing assets, update customers' contact information, create templates with new draft tax forms, rotate files and observe record retention, quality control procedures, etc. I'm sure ALL of you do these same things in some fashion. Of course, this is not direct billable time, but for my 150 customers, this may take me some 30 hours or more. Is your billable rate high enough to absorb all these additional duties that the customer doesn't realize you spend?

Typical: I will spend 32 hours in CPE seminars this year, and that doesn't include driving and travel expense. This isn't billable directly, but does your billable rate absorb this?

Speaking for myself, I have done a poor job of being fair to myself on all of the situations mentioned above.

Ask anyone who has worked in a lawyers' office. Part of managing the firm is to emphasize "billable time" and this includes time spent by the receptionist at the copy machine. We all hear about these billing practices when we hear "lawyer jokes" but fact of the matter, this is really essential to the economics of running a legal firm.

We can only ask and answer these questions ourselves. How are we doing??

[FEDUKE404]

Somewhat generous with "freebies"

EXCERPT: I recalculate the next years' depreciation on existing assets, update customers' contact information, create templates with new draft tax forms, rotate files and observe record retention, quality control procedures, etc.

I must be missing something here - for years I've initially made "one entry" for depreciation and the software takes care of it until a disposition occurs. My only annual work involves something that may vary, such as % use of listed property.

As for the underlying question, I never charge clients or potentional clients for a reasonably simple response to an inquiry (research work is a different matter). Such questions to me can frequently lead to continued/new business and I treat them as both a responsibility of doing business and in most cases a net positive.

Of course, during the chaos of tax season my "free" time is necessarily restricted.

As for the lawyer issues, I see red when I get an invoice, being charged $20 or so for a simple e-mail response like "I got your documents today."

FE

[Nashville]

Depreciation

FedDuke you obviously have fixed asset software. I use Excel, and have programmed very accurate cell indicator formulas. I can do additions and dispositions (self-calculating the effect on both) just as fast as entering in fixed asset software. Excel for AMT depreciation also. What does take longer is the re-indexing of spreadsheets every year that would not be necessary if I had software.

I paid for fixed asset software one year, and when I got ready to use it, Congress enacted "bonus" depreciation. What I foresaw was annual upgrades (like the QuikBooks tax table). I went back to my Excel sheets and squeezed in an extra cell to adjust for the bonus depreciation, if elected. Twenty minutes work, and inserted for all customers.

I rely on Excel whenever possible because I am the master of my own fate, and I am the surgeon when things don't work right. I have done weekly state and federal withholding tables, etc. on Excel. It's not slick, but it is totally in my control. Not being at the mercy of software updates and customer support.

[Snaggletooth]

Differing Opinions

Sounds like differing opinions on whether some of the examples should be billed out. I would think if they are not specifically billed out, they should at least be covered in the billed hourly rate.

[David1980]

I think of billable time and remember this one job interview I had at one of the large CPA firms where there was a lot of emphasis on billable time. Reminded me of the talk from the movie The Firm.

Anyway, I prefer building fees into the tax preparation and then offering the little extra simple things free throughout the year for customers. Makes tax preparation a little more expensive than what they may pay at another place but the random tax advice/information is free.

Now if it's not a customer calling and just a random Joe I'd be happy to schedule a sit down meeting to go over his situation and offer the tax advice. For a fee.

[Jiggers]

Billable time

While I bill 1040 tax returns by the schedule or form, and the items on each, and by the hour for other type of returns, I do keep track of all time for all returns and other work done (bookkeeping, payroll, etc.)

I use a small recorder that uses microcasettes. From the time I start work, until I go home, I record notes on what I am doing.

The first thing the next morning is to transcribe the work to my calendar and to individual client sheets for the work done:
7:00 am Previous day time sheet (end)7:24am.
7:24 am Plan day's activities (end) 7:35am.
7:35 am Joe's Farm & Feed September bookkeeping. 36 copies. On computer 8:20 for bank reconciliation (end) 8:30, printed 1 copy. (end) 8:40 phone ringing.
8:40 am Mary's Flower Shop called about her January 2009 estimate due. Will bring year-end information in Dec to calculate year-end projection. (end) 9:05.
9:05 am back to Joe's Farm & Feed. (end) 10:00.
10:00 am Went to post office to pick up mail. Starting mileage 14509.0, ending 14520.5. Also picked up package with bookkeeping from Don's Liquor Store (out of town client) (end) 10:30.
10:30 open and distribute mail........................

etc.

Get the idea?

It has really increased my billable time.

And it has helped my aging memory in remembering why a return or work may have taken so long!!!!

And it helps generate a good mileage log for reimbursement at the IRS mileage rate. Deductible by my business. Actually increased my mileage deduction.

[Davc]

We all hear about these billing practices when we hear "lawyer jokes"

I used to think some of them were jokes.

[Black Bart]

Say Jiggers,

...I use a small recorder...From the time I start work, until I go home, I record notes on what I am doing...

I like your idea of using a recorder to track billing time and think I'll try it out, but

...10:00 am Went to post office to pick up mail. Starting mileage 14509.0, ending 14520.5...
And it helps generate a good mileage log...increased my mileage deduction.

if I did THIS, well shoot, I'd have to reduce my estimated annual mileage by at least 5,000 miles a year.

[Burke]

FedDuke you obviously have fixed asset software. I use Excel, and have programmed very accurate cell indicator formulas. I can do additions and dispositions (self-calculating the effect on both) just as fast as entering in fixed asset software. Excel for AMT depreciation also. What does take longer is the re-indexing of spreadsheets every year that would not be necessary if I had software.
I paid for fixed asset software one year, and when I got ready to use it, Congress enacted "bonus" depreciation. What I foresaw was annual upgrades (like the QuikBooks tax table). I went back to my Excel sheets and squeezed in an extra cell to adjust for the bonus depreciation, if elected. Twenty minutes work, and inserted for all customers.
I rely on Excel whenever possible because I am the master of my own fate, and I am the surgeon when things don't work right. I have done weekly state and federal withholding tables, etc. on Excel. It's not slick, but it is totally in my control. Not being at the mercy of software updates and customer support.

Do you use ATX? Because this is in there.

[erchess]

Questions for Jiggers

I use a small recorder that uses microcasettes. From the time I start work, until I go home, I record notes on what I am doing.

Why do you use micro cassettes instead of memory built in to a recorder or some sort of memory sticks?

What do you do with the microcassettes when they have been transcribed? Do you need them as backup to what you record on paper or on your computer? Do you reuse them?

[joanmcq]

I worked at one of those big CPA firms (just under the big 4 or 5 or whatever it was then) and billable time was a constant stressor. There were spreadsheets sent around with everyone's hours so you could compare (even the partners). i related alot to "the Firm"!

[geekgirldany]

Really great suggestion on the recorder. I have a Sony that uses microcassettes. I got it for another reason several years ago. So I can put it to good use. I've tried software that tracks your time. Project type software. Sometimes I would forget to stop it if someone called.

I charge per form on tax returns and then any additional bookkeeping is at my hourly rate. I've made a new pricing schedule for next year. I used it on new customers that came late this year. Most did not say a word about the pricing. I also do not charge for things that I should be. One is estimating taxes for the following year. I have alot of customers coming in November to estimate taxes they may or may not owe. This will now be added in for new customers. Old customers I will charge them separately.

[Jiggers]

Reusing Microcasettes

I just record over the microcasettes after I have transcribed them.

[tacks86]

Joan, I used to work for relatively big firm also.

A co worker of mine once had a dream about a client's inventory. The next morning he went to work and billed them for the time.

[JohnH]

I'm billing time...
Pretty sure this link has been posted before, but it's still appropriate for this discussion:

http://www.youtube.com/watch?v=5TkuZ5oI9uY