Skip to content

This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

Close
AICPA-CIMA
  • AICPA & CIMA:
  • Home
  • CPE & Learning
  • My Account
Journal of Accountancy
  • TECH & AI
    • All articles
    • Artificial Intelligence (AI)
    • Microsoft Excel
    • Information Security & Privacy

    Latest Stories

    • Incorporating prompt engineering into the accounting curriculum
    • Create a dynamic to-do list with Excel’s checkboxes
    • Another way to manage authentication texts
  • TAX
    • All articles
    • Corporations
    • Employee benefits
    • Individuals
    • IRS procedure

    Latest Stories

    • Treasury posts preliminary list of jobs eligible for no tax on tips
    • Taxpayer’s circumstances do not warrant equitable tolling
    • When does debt become worthless?
  • PRACTICE MANAGEMENT
    • All articles
    • Diversity, equity & inclusion
    • Human capital
    • Firm operations
    • Practice growth & client service

    Latest Stories

    • Treasury posts preliminary list of jobs eligible for no tax on tips
    • California issues draft guidance for climate risk disclosure
    • Business outlook brightens somewhat despite trade, inflation concerns
  • FINANCIAL REPORTING
    • All articles
    • FASB reporting
    • IFRS
    • Private company reporting
    • SEC compliance and reporting

    Latest Stories

    • SEC accepting Professional Accounting Fellow applications
    • SEC names new chief accountant
    • SEC ends legal defense of its climate rules
  • AUDIT
    • All articles
    • Attestation
    • Audit
    • Compilation and review
    • Peer review
    • Quality Management

    Latest Stories

    • AICPA unveils new QM resources to help firms meet Dec. 15 deadline
    • 8 steps to build your firm’s quality management system on time
    • Auditing Standards Board proposes a new fraud standard
  • MANAGEMENT ACCOUNTING
    • All articles
    • Business planning
    • Human resources
    • Risk management
    • Strategy

    Latest Stories

    • Business outlook brightens somewhat despite trade, inflation concerns
    • AICPA & CIMA Business Resilience Toolkit — levers for action
    • Economic pessimism grows, but CFOs have strategic responses
  • Home
  • News
  • Magazine
  • Podcast
  • Topics
Advertisement
  1. newsletter
  2. Cpa Insider
CPA INSIDER

Want to make more money? Focus on revenue-producing behaviors

Firms foster bad habits—and often hurt their top and bottom lines—when they put too much emphasis on metrics such as billable hours and utilization.

By Jennifer Wilson
April 4, 2016

Please note: This item is from our archives and was published in 2016. It is provided for historical reference. The content may be out of date and links may no longer function.

Related

March 7, 2016

Consulting services can grow your firm—if managed properly

February 1, 2016

New client services top list of CPA firm priorities

January 20, 2016

Millennials can play a role in move to value pricing

TOPICS

  • Firm Practice Management
    • Practice Growth & Client Service
    • Firm Operations

Delivering valuable services to clients is the lifeblood of your firm’s revenue stream. Managing the flow of those services and ensuring the firm’s revenue growth is critical. But in the pursuit of revenue growth, too many make the mistake of overemphasizing the billing measures of chargeability and utilization, an approach that can cost you in ways that aren’t always immediately evident.

Before we explore those costs, let’s start by addressing a foundational billing philosophy. In my perfect world, firms would embrace not-to-exceed, value, and other non-hours-based pricing methods. I believe that disconnecting our pricing, packaging, and revenue production from the hours worked should be a strategic imperative for all firms. But that’s not yet happening consistently in firms today.

In the real world, most firms still tie their revenues to hours. They budget chargeable hours and utilization (billed hours divided by total hours worked) by person, by level, and/or by service line. Chargeable hour goals are then usually set by level and by individual. Smart firms ensure their budgets are in line with industry norms that can be derived using benchmark studies such as the AICPA Private Companies Practice Section (PCPS) Management of an Accounting Practice (MAP) Survey.

For those firms still focused on these metrics, I implore you to be wary of overemphasizing them in your performance measures and reward systems. When you focus too much on chargeability and utilization, the following negative consequences will almost surely occur:

  • You’ll give people an incentive to slow down their work or to enter “un-valuable” hours into your time and billing system. By focusing on chargeable hours or utilization percentage without also focusing on an individual’s realization, you encourage your people to complete their client work in more time than it might actually take to finish, instead of motivating them to be as efficient as possible. This can inflate your chargeable hours, but the “extra” hours have no real value to your clients, so they cannot be billed or recovered.
    • To counter this, your firm must always combine any chargeable goal with a realization goal. Realization can be calculated by taking the net hours billed divided by gross billable hours accrued or, more typically, the net fees billed divided by gross fees accrued for an individual. Tying your people’s chargeability to their ability to realize value from that time is critical. Also, consider setting up a nonbillable “training” code for each client engagement so time can be entered and tracked for learning that happens on the job, including rework, without penalizing the individual or the overall engagement profitability.
  • You’ll encourage your people to hoard chargeable hours and inhibit teamwork. As individuals increase their responsibility within a firm, their chargeable hour goal should decrease, because they should be focused more on managing work and less on delivering work. When a firm overemphasizes chargeable hours or utilization goals, we typically see higher level people hoarding work to ensure they hit their billable hour goal. This results in work not being delegated, a decision that can slow the learning and development of lower level staff people. In addition, the firm may experience a lack of teamwork evidenced by people keeping and delivering work that they are not well suited for, instead of sharing it with those who are better suited for it, all in an effort to meet the hours objectives put before them.
    • Centralized work scheduling within each of your service lines and clear budgets of hours by level for each engagement can help you reduce the risk of work hoarding or working at the wrong level, but many firms do not have these structures in place.
  • You’ll discourage practice-building activities and behavior. This repercussion concerns me greatly. As individuals progress in their careers, they begin to manage client relationships, engagements, and team members, and they participate in valuable practice-building activities such as recruiting, staff development, and business development. When you over-reward chargeability, these critical practice-building activities become a burden to your team members. They look for ways not to volunteer for important firm initiatives because the firm rewards chargeability or utilization, not nonchargeable hours spent enhancing the firm. Without these practice-building activities, you risk not building future capacity for your firm’s growth.
    • Developing budgets for nonchargeable hours that include time for meeting with clients outside of an engagement, business development, people development, community service, and more can help you with this, but not if your chargeable goals and other nonbillable administrative responsibilities are too time-consuming or onerous.
  • You’ll erode the respect of up-and-coming team members. This potential risk keeps me up at night, because I hear this from young people in our profession. Your up-and-comers know that it is not good business to pad timesheets, hoard hours, slow down work, or take time away from important practice development and growth initiatives. And yet they see firm leaders actively encouraging these behaviors by overemphasizing and/or over-rewarding utilization and chargeability. This frustrates and discourages team members who worry that their leaders “don’t get it” because the leaders are accidentally encouraging the wrong behaviors and are also focusing discussions on time and hours, which up-and-comers feel are “old school” notions.
    • To address this concern, shift your emphasis from an hours focus to a production and results focus.

To illustrate, consider these four alternative ways of measuring and rewarding your people:

  • Develop individual goals around realized revenue, which is a factor of an individual’s chargeable hours, their rate per hour, and their realization percentage.
  • As individuals move up in the firm, focus them on revenue managed, which would include their own realizable production, and also the realized revenue for the engagements, people, service lines, and industry niches they manage.
  • As your people develop business, measure and reward their revenue sourced or sold, so that they have an incentive to bring in profitable new business and funnel it to the team or individual in your firm most qualified to deliver the services.
  • For those people who are more people-development or internal initiative focused, develop specific, results-based performance measures, such as “Act as the career adviser for Susan, Jim, and Robert, guiding them each to their next promotion by [date one year from now].”

Stop overfocusing on utilization and chargeability. Avoid the inefficiency, selfishness, and disengagement it can cause. Instead, focus your people on revenue-producing behaviors and desired results. When you do, you’ll experience the firm growth and team respect you most desire.

Jennifer Wilson is a partner and co-founder of ConvergenceCoaching LLC, a leadership and marketing consulting and coaching firm that helps leaders achieve success. Learn more about the company and its services at convergencecoaching.com.

Advertisement
Advertisement

latest news

September 4, 2025

Treasury posts preliminary list of jobs eligible for no tax on tips

September 4, 2025

California issues draft guidance for climate risk disclosure

September 4, 2025

Business outlook brightens somewhat despite trade, inflation concerns

September 3, 2025

New: Digital assets practice aid addresses auditing of lending, borrowing

August 29, 2025

Guidance on research or experimental expenditures under H.R. 1 issued

Advertisement

Most Read

The No. 1 risk to retirement – and one way to guard against it
Tax provisions in the One Big Beautiful Bill Act
Billy Long out as IRS commissioner after less than two months
Calculating AI’s impact on CPAs: New study quantifies time savings
AICPA unveils new QM resources to help firms meet Dec. 15 deadline
Advertisement

Podcast

September 4, 2025

Summing up economic sentiment and concerns about inflation and tariffs

August 29, 2025

Take a bold leap instead of a tentative step

August 28, 2025

Mark Koziel Q&A: Talent, sense of community, profession opportunities

Features

Calming nervous clients nearing retirement
Calming nervous clients nearing retirement

Calming nervous clients nearing retirement

7 retirement tips for small firm CPAs
7 retirement tips for small firm CPAs

7 retirement tips for small firm CPAs

Building a better CPA firm: Stepping up service offerings
Multi-colored plus signs

Building a better CPA firm: Stepping up service offerings

2025 tax software survey
Smiley, frowney, and neutral faces for Tax Software Survey.

2025 tax software survey

SPONSORED REPORT

Smart Strategies in Data Security and Risk Management

In an increasingly digital profession, data security has become one of the most critical challenges facing finance and accounting professionals today. Stay up to date with practical guidance to help you mitigate these risks and strengthen your security posture.

From The Tax Adviser

August 30, 2025

2025 tax software survey

August 30, 2025

Are you doing all you can to keep the cash method for your clients?

July 31, 2025

Current developments in S corporations

July 31, 2025

Paid student-athletes: Tax implications for universities and donors

MAGAZINE

September 2025

September 2025

September 2025
August 2025

August 2025

August 2025
July 2025

July 2025

July 2025
June 2025

June 2025

June 2025
May 2025

May 2025

May 2025
April 2025

April 2025

April 2025
March 2025

March 2025

March 2025
February 2025

February 2025

February 2025
January 2025

January 2025

January 2025
December 2024

December 2024

December 2024
November 2024

November 2024

November 2024
October 2024

October 2024

October 2024
view all

View All

http://JofA_Default_Mag_cover_small_official_blue

PUSH NOTIFICATIONS

Coming soon: Learn about important news

CPA LETTER DAILY EMAIL

CPA Letter Logo

Subscribe to the daily CPA Letter

Stay on top of the biggest news affecting the profession every business day. Follow this link to your marketing preferences on aicpa-cima.com to subscribe. If you don't already have an aicpa-cima.com account, create one for free and then navigate to your marketing preferences.

Connect

  • X Logo JofA on X
  • facebook JofA on Facebook

HOME

  • News
  • Monthly issues
  • Podcast
  • A&A Focus
  • PFP Digest
  • Academic Update
  • Topics
  • RSS feed rss feed
  • Site map

ABOUT

  • Contact us
  • Advertise
  • Submit an article
  • Editorial calendar
  • Privacy policy
  • Terms & conditions

SUBSCRIBE

  • Academic Update
  • CPE Express

AICPA & CIMA SITES

  • AICPA-CIMA.com
  • Global Engagement Center
  • Financial Management (FM)
  • The Tax Adviser
  • AICPA Insights
  • Global Career Hub
AICPA & CIMA

© 2025 Association of International Certified Professional Accountants. All rights reserved.

Reliable. Resourceful. Respected.