What waste it is to discount before billing. Often called write offs or write downs. It’s measured by the value of the time charged to work in progress (WIP) less a discount applied before billing. So if $2.3M was charged to WIP in the year yet only $2M was billed then the write down was 13%.
In some countries they record it in a more positive light by using a bigger number– “we had an 87% realization rate”. What a complete joke. Trying to put a positive spin on a negative number.
Face up to it – you discounted 13% or $300,000 in work last year! That’s an apartment or a house in some locations. You destroyed a small house. You would have had more fun if you burned the house to the ground and watched it burn whilst having a cold beverage.
Most firms have them and most firms justify them with blame and excuses like “we couldn’t charge the amount on the WIP” or “the client would never pay that much”. My question is HOW DO YOU KNOW?
Writing down work is at the heart of the self-esteem issue with partners of accounting firms. Why do it? You made a decision to write down – so make a decision to stop it.
If you price in arrears then your business model says whatever is on the clock you should charge – not a minute more. Writing up after pricing in arrears goes completely against your business model and is considered fraudulent behaviour. It’s ‘ripping people off’.
If you price up front, you have agreement from the client on price and scope of the project, and then you do the project in the most efficient means possible you’ll have an abundance of write ups. Much more of a positive result!
You should be aiming for a positive result with write ups – no negative numbers or numbers less than 100%.
I have written an extensive report on Accounting firm performance. You can download the full report here with all 12 KPI’s in it.
Tell me what you think of video # 5….