Why we don’t need consultants!

In the April 16-May 6, 2007 issue of Accounting Today, there is an article by Ted Needleman, a former editor of Accounting Technology, a consultant and a freelance writer based in Stony Point, New York.

Of course, the title itself is offensive: “Time and billing software: Do you know where your money is?” But what’s worse, is this totally unsubstantiated, spurious, economically illiterate, and just plain stupid contention by Ted:

While you might argue that it’s the expertise of your staff and the product that you sell, the actuality is that what the client pays for is the time your staff spends on their behalf. Value billing is a great concept, but even after all these years of trying to move clients over to this method of billing, many clients still want to see how much effort, in the form of time, is being spent on their account.

Regardless of the rates and service levels that your staff provides to your clients, one great truism prevails—time is a non-renewable resource. Once it’s spent or wasted, there’s no getting it back.

That makes time a precious commodity and resource, one well worth using wisely. The time component of time and billing is designed to do that. By keeping track of the time spent on practice matters, you can make sure that not only will you bill for every precious minute and second, but you will also (hopefully) be able to see where time is wasted or spent poorly.

This is nonsense on stilts. I wonder if Mr. Needleman asked Porsche how long it took to make his car? I wonder if he cares how long a plumber spends fixing his sink, or is he more interested in results over efforts?

Customers don’t buy time, Ted. If they did, I’m sure they’d buy it from someone cheaper than a CPA. And yes, time is a non-renewable resource. So what? It is for Bill Gates and Microsoft, too, but you don’t see them doing timesheets. You don’t see Pixar doing timesheets. Why not? Because they don’t think they sell time.

Review all the time and billing programs you want. They are the buggy whip of the knowledge economy, and I personally like the idea of you investing your intellectual capital studying dinosaurs, like a paleontologist. We need musuems. But don’t think majorities determine truth, they don’t. At one point, we thought the earth was flat. And today, a majority of CPAs and time and billing software developers think CPAs sell time. They are wrong, and we’ve proven it.

The world around you has changed. Wake up. Study the firms out there that don’t subscribe to your dogmatic faith that customers buy time and are interested in efforts. McKinsey doesn’t. Accenture doesn’t. And every day, more and more accounting, legal, advertising, and IT firms are joining them.

This is not just a theory, it’s also practical reality. And by the way, the billable hour and timesheets are also a theory, just the wrong one. We have replaced them with a better theory. It’s just a matter of how long it will take to reach a tipping point.

You continue to embrace a status quo that is dying. Wealth doesn’t reside in hours, it resides in intellectual capital. This applies to you as a consultant and to a CPA firm. You are what you think. Would you rather follow Microsoft’s pricing paradigm or that of time and billing software vendors?

To ask the question is to answer it. Unless you’re a consultant, apparently.


  1. To go one set further, has anyone ever asked these software companies to see their timesheets for the creation of these products?

    The answer (as an employees of one of the companies) is, “No.”

  2. Ted Needleman says:


    I guess it’s easier to blast someone indirectly, then to challenge them face-to-face.

    The truth is, most professionals charge by the time they think they will spend. You can call it value pricing or whatever you want, but even if you quote a client a price for results, that price is still figured using the time that you anticpate spending on the project (plus a factor for when the project goes south.)

    Sorry to burst your bubble, but while I don’t care how many hours goes into building my CR-V, you can bet your ass that Honda does when they come up with pricing it.


  3. Ted,

    Consider this face-to-face, my friend. I did mean to send my post to you and Accounting Today, just never got to it.

    Sure, most professionals charge by time. So what? Does that make it the most optimal method? Does that mean no other method exists?

    Why are you ignoring the thousands of firms out there that don’t base price on time? And why are you ignoring the hundreds who don’t keep timesheets?

    Sorry to burst your bubble, Ted. But Honda came up with the price of your CR-V BEFORE they built it. It’s called price-led costing, and it’s replacing cost accounting around the world.

    If you read any of my pricing books, you’d know that.

    What good would it be for Honda to know the time and cost to build it if you couldn’t afford to buy it?

    I suggest you engage in a little homework, and a little more humility, on this topic before you debate anyone on this Web site. We are pricing experts, not neophytes.

  4. Ron:

    I’d be glad to read your book.

    You need to understand that I don’t set the editorial direction of Acctg Today. That’s done by Bill Carlino, the Editor-in-Chief. The articles are targetted towards the readership of the magazine.

    But I’m not exactly a neophite on the subject either. I’m well aware of alternative methods of pricing and billing. I’ve even run a small CPA practice for years before I took over as Editor-in-Cheif of Computers in Accounting, which eventually turned into Accounting Today.

    I’m sorry if I came accross as snide.

    At the same time, in order to show a profit, a practice of any kind has to bring in more than it costs to run. And time-based costing (if not neccessarily billing) is still the most often method used to determine pricing.

    You might want to forward your blog to Bill at Accounting Today. He might be interested in having you present an alternative view.

    After 4 million published words and 2 books in the last 30 years, I have a pretty thick skin.

    I’m glad I ran accross your blog. I was actually looking to see if an old column I wrote for Modern Electronics was still posted anywhere, and up popped your comments.



  5. Ted,

    I love this. You did not come across as snide at all, though I might have given my debating style.

    I love people who are logical, can reason, and a thick skin is a must!

    I, too, ran a CPA firm, and we used 100% Fixed Price Agreements, and Change Orders for when a project went beyond the original scope. We also did not have timesheets. We priced everything up-front, before we did the work, period.

    This pricing method has several advantages: you learn up-front, before committing any firm resources, whether or not the client likes your price and sees the value. It forces you to discuss the value of your work, and the results, not the inputs and costs (this is exactly how McKinsey does it–“we’ll only work for you if we can justify our price by at least 3 times value.” Forces you to discuss value).

    This, in turn, allows you to decide if you can invest in the costs it will take to do the job profitably. This is price-led costing, and it’s used by most of the Fortune 500 today (Toyota is so good at it, they don’t even have a standard cost accounting system, which my book explains in detail). In effect, you are doing the timesheet (costing) BEFORE you do the work. It also speeds up accounts receivable (since you agree on payment terms up front), and eliminates write-downs and write-offs, barring an extraordinary event.

    This is how customers buy everything else; they know the price in advance. CPAs are subject to the same economic laws as everyone else. The cost of pricing in arrears is slow A/R, write-downs/offs, not meeting customer expectations, and the biggest: leaving money on the table because you are not focused on value. Unfortunately, this type of error is not captured on the P&L or in cost accounting reports, or realizations, it just disappears forever.

    We have thousands firms around the world doing Value Pricing as we teach it, quite successfully. Most still keep timesheets, but as they get better at pricing the timesheet becomes superfluous. CPAs aren’t going to become better pricers by being more accurate cost accountants (their costs are fixed anyway; it doesn’t take a rocket science to do cost accounting in a professional knowledge firm).

    They are only going to get better at pricing by focusing on value. You can read about some of these firms in our “Trailblazers” section on the Web site.

    Of course, this is a huge paradigm shift. It can decades for a profession to accept a new theory–see germ theory in medicine or the tectonic plate theory among geologists. This is not a technology issue; it’s a belief issue, which is why it’s so hard to change and why you can still say, with complete accuracy, that most CPAs bill by the hour.

    But we are changing that, albeit slower than I’d like.

    I’d be happy to mail you a copy of my book, just let me know where to send it.

    I will forward my post to Bill. He’s been bold enough in the past to print several of my articles.

    Thanks Ted, I appreciate you candor, and I look forward to a continuing exchange. VeraSage is a think tank, which means we accept great ideas from wherever they emerge, and the clash of ideas is what produces better ones.

    I hope we can sit down and have a beer someday–on me!

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