do you know your turnaround time?

cutting it is the shortest route to happier clients.

by frank stitely
the relentless cpa

todd rundgren sang, “i don’t want to work. i just wanna bang on the drum all day.”

i agree with half of that. i don’t want to work. however, i want someone else to bang on the drum all day for me. i’m not that ambitious.

the key to achieving hall of fame-level laziness is delegation.

more: tax season client meetings: kill them now | leadership growth is a two-way street | 12 subjective factors for pricing your next engagement | the six pillars for finance transformation | three strategies to keep emerging leaders engaged
exclusively for pro members. log in here or 2022世界杯足球排名 today.

if i have no ambition to do anything, but want things to get done, someone else must do them. similarly, effective practice management is putting the right people in the right places accomplishing the right tasks at the right times. that’s a pretty damn good definition of effective laziness as well. there’s a subtle genius in that.

for example, our firm was looking at acquiring a really nice firm, where the two partners were working 100-hour weeks during tax season. as a result of the acquisition, they wanted to work fewer hours. they were preparing the vast majority of tax returns themselves, so we suggested having them act as reviewers instead. that would also transfer knowledge of the clients from them to us – a central objective of any successful acquisition.

one of the partners told me, “reviews are a snore fest.”

yes, they are. but there was no way for them to work fewer hours if they were still preparing the same tax returns. time doesn’t work that way, unless you have discovered some way around einstein’s theory of relativity.

the downside to working 100-hour weeks is after a couple of weeks, you may work 100 hours, but only get about 60 hours of actual work done. productivity suffers. you are better off working consistent 60-hour weeks during tax season. that means proper staffing and delegation. in 30 years, i have never worked a 100-hour week. i’m lazy.

there’s a science to laziness. the equation to help you achieve hall of fame laziness is:

turnaround time = wip / capacity

why is this equation so important? there are only four ways to increase client satisfaction:

1. lower prices
2. provide more value
3. increase quality
4. provide better service (better turnaround time)

the first three are likely going to cost you real money. the last is potentially free. find ways to decrease your turnaround time, thus turning your increased efficiency into a competitive advantage. as a side benefit, happier clients provide more referrals and more revenue. the cost to acquire a client by referral is zero.

turnaround time measures the time from the beginning of a client project to the final delivery. typically, turnaround time is measured in days, but other units of measure, such as weeks or hours, can also be used. what matters is using consistent units in the equation. turnaround time is a moving target, like a balance sheet. for example, turnaround time for personal tax returns might be one week in january, but four weeks in mid-march.

so, what is a good turnaround time? good turnaround time is defined by clients.

if your turnaround time is bad enough, you end up in “what’s the status of” hell. you know you’re there when you can’t get any work done because you’re spending all your time answering status questions. you can’t make project statuses better because the statuses are bad. you run from client emergency to client emergency. not happy times.

the days of extending half of your client’s tax returns to spread out the workload are gone. they passed along with waiting six to eight weeks for product deliveries. blame amazon or whomever you choose. the standard has changed. after two weeks, the phone begins to ring.

now we have a standard, at least for tax returns, against which we can measure our performance. in mid-march, not many established firms are turning around tax returns in two weeks. i know we aren’t – yet. but we are headed there.

let’s define “wip.” wip stands for work in progress. wip is our investment in uncompleted projects. there are two ways to quantify wip: wip at cost and wip at standard billing rates. the latter is more common, as most practice management software uses this definition.

for example, if you have five hours in a tax return and the standard billing rate is $200 per hour, the wip invested in that project is $1,000. if you bill $1,500 for that return, you have a write-up of $500. if you bill $750 for that tax return, you have a write-down of $250. obviously, write-downs are bad. they result from spending excessive time on things like needless phone calls that could be avoided.

a firm’s wip is measured at a point in time just like any other balance sheet item. wip for accountants can be compared to wip for construction contractors. the only difference is that accounting wip is all intangible. less wip is better, as it means projects are being completed faster and turned into cash flow. total the wip from all projects in process, and that’s a firm’s wip.

next, let’s define capacity. capacity is very simply the amount of work a firm gets done in a unit of time. you must use the same unit of measure for time as you used for turnaround time. if you use days in measuring turnaround time, you must use days in your capacity calculation. in this example, we are using wip at standard rates, so we will also use capacity at standard rates. for example, our capacity might be $2,000 of billing per day at standard rates.

once wip and capacity are established, you have turnaround time. if we have $20,000 in wip and $2,000 per day in capacity, we divide the wip by capacity and get 10 days as our turnaround time. yes, this is an estimate, and turnaround time varies greatly during tax season. however, if turnaround time is more than 14 days (two weeks), clients are going to call. welcome to “what’s the status of” hell.

wip will increase as tax returns are delayed by phone calls. similarly, capacity goes down. turnaround time increases. it’s like running in quicksand: you’re running faster and sinking deeper. as wip and capacity change, intentionally or unintentionally, turnaround time changes.

posted on december 20, 2022