Do you run an accounting firm? How utilized is your workforce? What percentage of their time do they spend on non-billable activities? How much is that tanking your organizational productivity?
If you do not have responses to these questions, it is high time you started taking your accounting firm’s employee utilization data seriously. Read on to understand how employee utilization data can help you grow your accounting business.
Understanding Employee Utilization
Employee utilization refers to the amount of time a worker uses for productive, billable work, usually expressed as a percentage. As a critical metric of billing efficiency, your employee’s utilization rate helps establish whether you are billing enough to cover your expenses and overhead. Thus, employee utilization data informs many business functions and influences your business operations. To compute employee utilization, divide the billable hours by the eligible working hours.
How Employee Utilization Data Drives Organizational Success
The craze about employee utilization data points to their key role in driving your firm’s success. Employee utilization rates reflect operational efficiency. So, it is important to track these rates and determine ways to increase them. But how can employee utilization data help your accounting firm achieve success?
Employee Utilization Data Increases Profitability
This is a no-brainer. Employee utilization rates are directly proportional to organizational profitability. For instance, from a revenue viewpoint, let us assume that you bill your clients a $150 hourly rate. In May alone, at a 60% utilization rate, your firm will make $15,120. Yet, an 80% utilization rate would rake in $20,160. Thus, you would earn an extra revenue of $5,040. Moreover, if five of your employees improve their utilization rate by 20%, your firm will generate $25,020 of extra monthly revenue. If you seek to increase your accounting company’s revenue, consider improving your employees’ utilization rates.
Employee Utilization Data Guides Business Decisions
On many occasions, established accounting firms have hired Helios to offer them outsourced accounting services. We offer monthly bookkeeping and accounting maintenance services. In addition, we prepare utilization summary reports that give a glimpse into monthly workforce utilization rates.
Such a report reveals a firm’s average utilization rate for its billable workforce, which helps explain its losses. Quantifying utilization rates shows where demand is highest. It also helps you identify organizational growth opportunities as well as the areas that might need more personnel.
A consistently low utilization rate shows that your workforce is underutilized. Conversely, a consistently high utilization rate shows that you should add more resources. Additionally, evaluating each employee’s utilization rate informs your accounting company’s hiring, promotion, demotion, and firing decisions. Making informed decisions will help your firm increase its revenue.
How to Improve Employee Utilization Rates
Any company serious about achieving its goals should always examine its utilization rates and determine how to optimize its workflows. To increase your employees’ utilization rate, do the following:
Use a Reliable Time-Tracking Software
To map your utilization rate well, you must track how your resources use their billable time. Time-tracking can be taxing but incorporating it into your workflow is a genius move. Better still, you can make it a part of the platform your employees use. With a reliable time-tracking feature, your employees can record their time easily. This will give you the correct reflection of their utilization rate.
Use Better Reporting
On its own, tracking employee utilization rates can only help you so much. Therefore, you should link it to other key metrics. For example, you can link it to realized rate or profitability. This will help you place your employees’ utilization rate in the context of your organizational operations.
Determine Utilization Rate Benchmarks and Communicate Them to Your Resources
Most agencies do not have a baseline utilization rate. Instead, they rely on industry benchmarks that are mostly inaccurate and overlook their contextual realities. In this situation, you cannot determine the quality of your utilization rate. Compute your benchmark rate and share it with your workforce. This will show your employees their current standing and inspire them to hit the benchmark figure.