You spend an incredible amount of time and energy on client work. So why can’t you bill it all? What happens between the timesheet and the invoice?
Solving this problem means a serious boost in the bottom line. I have some thoughts….
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Hey everybody, Drew McLellan here from Agency Management Institute. Two weeks ago, I did a video talking about the opportunity gap when you look at how many potential hours we have that we can bill and the money we could make if we can bill all those hours, which, of course, is unrealistic, and where we are at today, how many of the hours that we have, how much of the inventory that we have, people's time, do we actually get paid for? And for many of you, that opportunity gap is rather large. Now, again, I'm not saying or suggesting that you're going to get to the Nirvana of perfection. That's not even our business model, really. But I do believe that we can close the gap. So in last week's video, we talked about how many hours your team is spending on billable tasks and how to improve upon those percentages so that you have a greater set of activities that you can potentially bill the client for. Okay, so this week, what I want to talk about is the flip of that, right? So we had billability, meaning how many hours a day did I spend doing billable tasks, regardless if the client ever got billed for them? Now, in this week's video, we're going to take the 'regardless' out. So, in this week's video, what I want to talk about is utilization. Utilization is when we look at the number of hours that someone has on their timesheet and how many of those hours actually got paid for by the client. Because in a lot of cases, you're doing a lot of work for clients, and so it's viable, billable work. And on people's timesheets, they're coding it as billable work, but for a variety of reasons, you're not actually able to bill the client for it. So what are those reasons look like? Number 1, most common is your estimates are bad. So I've done other videos on how to fix your estimates. I'm not going to go into it now, but number 1 is your estimates are bad. Number 2, your input documents are lousy or non-existent. Number 2, your input documents are lousy or non-existent. And when somebody doesn't have, when a creative team or a digital team doesn't have the data they need around the client, then what happens is they make it up. When they get it wrong, they have to go back on the agency's dime and fix it. So the better input document you can put together, the quicker and easier you're going to start to see a rise in these numbers. Another reason why you might be down in terms of utilization is because you have too many people on your team. So, one of the things you need to be looking at is, "Am I overstaffed?" Because people will fill time. That's not a problem. Everyone's going to look busy. Everyone's going to be busy. But is it busy in the right ways? Or if you pluck somebody out of that, would everybody be much more focused on the work that you want them to be focused on? And not being able to trying to figure out how to stretch their hours? So those are three reasons why you may be able to have a bunch of billable time on the timesheets and on your books, but not be able to actually bill your clients for them. And if you can solve that problem, you can make a lot more money without doing any more work. So that seems to be a worthy challenge for you to explore and try and sort out. All right? I'll be back next week.