WTS Tax & Finance is a consulting company that specializes in taxes, financial and legal advisory, accounting, and payroll services. It employs 25 consultants and accountants who service more than 400 clients.
Results with Time analytics
- Increased profitability by 15%
- Improved billable time utilization from 55% to 66%.
- Creating more work transparency toward clients and management
- Identifying the activities that can be outsourced
How we improved client profitability
An insight into our client list containing spent hours and expenses per client was a true revelation for us.
Certain clients had expenses higher than what we were invoicing.
For example, we used to spend an average of 50 hours per month on a client. According to the reports, the cost of engagement was $2000, which means the average hourly cost rate was $40.
That was a lot of invested time compared to what we were getting from the client.
We knew our fixed fee for this client was $2100. hence, it was easy to calculate that our average billing rate was $42. That is an unacceptably low billing rate for us, and the margin received on the client wasn’t satisfactory either.
There were a lot of similar examples.
Even some of our smaller clients got us into the red.
What to do with unprofitable clients?
These insights gave us a great opportunity to improve profitability.
By having transparent reports on spent hours, we were able to give strong reasons to our clients for the proposed price increases. If the client doesn’t accept – no big deal.
Most of the clients have accepted the pricing adjustment, knowing how engaged we were, and that they’d be paying the same fees as other firms.
We simply terminated the collaboration with certain clients once we knew talking to them wouldn’t make an impact.
What to do with the profitable clients
We used to make a gross margin of 60-70% with certain clients and weren’t even aware of it before starting to use Time Analytics.
It turned out that we weren’t as dedicated as we should have been to some of them.
Hence, these insights allow us to invest in profitable clients. We started conducting more calls and invested more resources in identifying up-sale or cross-sale possibilities.
Increasing profit based on the improved pricing policy
TA shows us how much our projects cost us. This is how we see how profitable we are.
This kind of information is valuable for determining the prices for new clients as well.
For example, we used to have an accounting client from the IT industry and used to spend 20 hours a month on them. We knew how much this engagement cost us. When we got an inquiry from another client in the IT industry with a similar number of employees and business model, we knew what to expect. We determined the price based on the expected expenses and increased it by the targeted margin.
In the bottom line, our net profit rate increased from 26% to 30%, which is a 15% change. More or less we engage the same resources (hours) to reach higher margins.
Increasing client satisfaction due to increased transparency
TA helps us list all activities done for a client per team member, task, time spent, etc.
We edit this data in Excel and create an invoice appendix.
Clients always appreciate transparency, that is, knowing exactly what has been done for them.
Task time analysis-based saving
These reports have shown us that our employees waste a lot of time on translation. When it comes to tax advisory, 10% of the tax consultants’ time was spent on translating the reports. That is why we decided to calculate whether hiring an external translation agency would be more profitable for us.
Once we got the inquiry from the translating agency, we understood that having the precious tax advisor translate is insane.
This was a great source of saving for us.
Time Analytics helps us a lot to identify where we are wasting time on micromanagement and administrative tasks.
As a result of the analyses, it is extremely easy to deduce whether it makes sense to outsource different activities.
What are the challenges that come with implementing Time Analytics?
whenever a company mentions time tracking, that doesn’t sound well from the employees’ perspective.
No one likes tracking activities so the employer can conduct monitoring over them.
When we were implementing Time Analytics, we first explained that the platform isn’t a tool for tracking employees. Instead, we made it clear that we’ll be tracking what needs to be additionally billed to clients. It would show where we, as a company, are losing time and money, as well as the way to invoice more for the same resource engagement. When things are set up like that, we – the partners – as well as all the employees open the possibility for additional earnings.
Really, the time tracking system doesn’t have a clock-in/clock-out option. It doesn’t matter if someone is logging eight hours a day if they aren’t being productive. Hence, TA tracks only the factors that matter.
Additionally, TA doesn’t offer employee monitoring or screenshots, nor does it show whether someone is logged in to Facebook or Instagram.
Setting up the projects and the clients
Firstly we’ve set up all clients, projects, and tasks.
When it comes to choosing projects, we’ve decided that each service line should represent a specific kind of project. For example:
- Financial reporting
- Financial advisory
- Legal advisory
- Tax advisory
- General and administration work (not related to client work)
We have defined tasks within each of the projects. For example, when it comes to Accounting, the tasks are accounting incoming and outgoing invoices, preparing and submitting tax returns, client communication, documentation work, writing reports at the client’s request, etc.
The tasks are defined in advance, so time tracking is more efficient later on. This means that not all team members can enter an arbitrary task name, but they have to be agreed upon with the manager.
Setting up the team
The next step is adding all team members.
The key elements of this step are calculating the pay rate and the overhead rate.
The total cost rate for each employee is calculated based on their pay and overhead costs divided by the total number of employees.
It is important to enter these items, as later on when the employees log their time on any project, all costs are allocated to that project according to the entered billing rates. So, the reports will show us how much each project, client, or even task, costs us.
Finally, we organized a short employee training with the TA team. The tool is very simple to use; the key is to enter the right tasks, project types, as well as cost rates.
Of course, the TA support team is always available. We have found their help especially useful when implementing the tool.
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