The word ‘timesheet’ comes with connotations of being the most bureaucratic and boring task ever created for a professional services firm, whether you’re an architect, engineer, designer, planner, surveyor, accountant or lawyer. In fact, for the purposes of this article lets change the moniker to the ‘meter’.
This tiny daily task is the bane of architecture, engineering and construction design teams globally and almost everyone looks for a silver bullet to reduce the burden of entering timesheets.
So, let’s look at the ‘meter’ as something else altogether – let’s look behind those pesky entries and see what value they bring, what insights they uncover, and what valuable outcomes they could provide to every professional service firm.
Time is money, but profit is gold
It’s true that the business model of professional services is about billing based on time for an outcome. More important, though, is the way the fees or rates must cover not only the raw wages cost, but also cover the business overheads (non-direct technical wage costs) and allow for a profit.
Law and accounting firms usually work on a three-way split on their fees – a third to wages, a third to overheads, and a third to profits. The design industry is not that straightforward. The businesses that follow best practice usually reverse engineer the hourly cost of staff – taking off annual and sick leave, public holidays and even non-billable time expected of meetings, training, and so on – and dividing the total wages by the estimated number of billable hours to give an accurate cost for the hours worked by billable staff.
Covering overheads is simply calculated by taking the total costs of the business including administration, office, IT and the total staff bill and dividing it by the technical staff that are billable, giving what’s called the overhead factor. This factor, multiplied by the raw wage rate for staff, gives us a rate per staff member that needs to be achieved just to break even.
Lastly, there is a profit factor applied to the breakeven rate to add a margin for the work and a return to the practice. A profit (it’s not a dirty word).
The application of these financial controls as an algorithm means that each simple timesheet entry is calculating the cover of real wages, the recovery of the overheads of the business through to breakeven, and even profit per hour. Without profit, the business is at risk.