Computerized Time and Billing

Reports

Thanks to microcomputers, time and billing systems now available are both powerful and relatively inexpensive. There are many software packages on the market, with a variety of features available. Consequently, before selecting a package, an evaluation of your firm's needs is in order.

A major benefit derived from use of computerized time and billing is more effective management of employee productivity. Each employee can be analyzed by individual hours available and individual hours billed. Usually a ratio of hours billed to hours available can be readily computed. Productivity is evaluated according to client, type of service, employee, and responsible partner. Furthermore, the software may provide for analysis of effective rates charged versus standard rates. This would allow the firm to evaluate its billing rate structure.

Today's software typically provides better control over client work- in-process and accounts receivable. Most software can provide a client history including amounts previously billed. If firm billing policies include client credit limits for work in process and accounts receivable, the software may facilitate tracking the client's total charges so these credit limits are not exceeded.

Most software offers a variety of report formats, and these can usually be further customized.

For example, a typical package would provide a detailed work-in- process report beginning with information such as date, firm name, client name and phone number, previous account/receivable balance, client contact person, primary and secondary accountant assigned to the client, department category, rate-code, fee-format, and cost-format.

In the main body of the report you would expect to see the dates services were performed, accountant code, department category (e.g., 3-- combined service department), transaction code (e.g., 53--general management assistance), hourly billing rate, hours worked, dollar amount, and billing adjustments (up or down). The software automatically computes totals for each CPA and computes totals for costs.

A summary recap at the end of the report would reflect current fees, current costs, and total work-in-process.

Time and billing software usually provides for a variety of billing formats--from no customization to large amounts of customization. One recommended format provides a detailed list of different services for a particular client with only one dollar amount for the total fee. On the other hand, some clients prefer and request an itemized listing of fees for each service. Figure 1 provides an example of the recommended format. As shown, the total bill amount is $875; the amounts for each individual service are not shown.

Another useful report is the activity report for each individual CPA. A typical report reflects month-to-date and year-to-date totals for billable time charged to clients and time spent on non-billable activities such as training, vacation, and administrative matters. The average rate for all hours billed is also computed.

Uses of the Activity Report

The activity report discussed earlier has two major uses. First, the report is helpful to firm management in evaluating employee productivity. Management evaluation may include analysis of billable and non-billable hours. These amounts may be compared to employee budgeted amounts established at the beginning of the year. Second, the report is helpful in budgeting for the upcoming year. Budgeting may include preparing employee time budgets or estimating future cash flows. The report is a good starting point for estimating future staffing and monetary requirements.

Selecting the Right Software

Package

A number of time and billing software packages are currently available. A decade ago only the larger firms could afford these computerized systems. Today any size firm can easily afford a system, due to drastically lower prices for computer hardware and software. Time and billing software ranges in price from $99 to over $2,000.

While the different software packages all provide some basic features there is a wide range of special capabilities and features among the various packages. All packages should enable you to track these essential items:

1. Type of service provided;

2. The client for whom the service was provided;

3. Time expended per client/service;

4. Who provided the service;

5. The value of the time expended at the firm's established billing rates; and

6. The realization rate for the time billed relative to established billing rates.

The starting point for a successful computerized time and billing system is a smoothly functioning manual system. Implementation of a computerized system should follow the basic system development steps shown in Figure 2.

Features to Consider

The ideal system for a particular firm may not include every possible feature currently available. Besides the additional cost of special features, there is also additional complexity.

Your firm's own characteristics or needs must be assessed before beginning assessment of individual software packages. Firm characteristics to consider before selecting software include the following:

1. Number of clients;

2. Number of personnel by level of experience;

3. Types of services and fee structure;

4. Billing methods;

5. Frequency of billing;

6. Variations of bill content;

7. Billing rate categories (by individual, by specific job, etc.);

8. Types of internal reports (e.g., dollars/hours by employee);

9. Connection to other systems (e.g., payroll, accounts receivable, job scheduling, etc.); and

10. Firm engagement letter format.

Based on experience, you should make a list of the items that are essential to your firm's practice. This list may be used as a reference point when discussing time and billing software with various software vendors. If your firm's needs are clearly identified, then the software that best meets those needs can be selected with relative ease.

Features of the software package that you should consider include the following:

1. Compatibility with hardware in current use;

2. Vendor support (local supplier or "800" number);

3. Menu-driven (ideally these can be bypassed as the user gains proficiency);

4. Pop-up menu or "windows" (this memory-resident feature allows the user to use the time and billing software during, and without disturbing, use of some other software);

5. Import/export capability from/to other programs (e.g., Lotus or dBase);

6. Clear, easy to use manuals;

7. On-line help (context-sensitive, on-screen help menus may be just as important as printed manuals);

8. Field entry controls (e.g., automatic warning when a user enters alphabetic data in a numeric field);

9. Processing speed;

10. Graphics (visual images often facilitate information analysis); and

11. Customized reporting (the ability to tailor reports).

In assessing features of a time and billing system, the needs of your firm must be carefully considered. The importance of customizing reports varies from firm to firm. For most system features there is usually a positive correlation between additional features and the price of the software. However, a relatively inexpensive software package may be totally adequate for the needs of your firm.