The false economy of professional services
Among the hype of digital disruption are claims the traditional ‘bill-by-the-hour’ model is under threat. While alternatives like fixed-fee work are cited as examples of impending change, it remains the dominant model.
There are limitations to the hourly billing approach and the alternatives have been developed in response to real market needs and wants. Customers are less and less tolerant of ‘Professional’ rates for ordinary tasks. They don’t want to pay for a Lawyer with 10+ years’ experience, to do an administrative task that a less qualified (cheaper) resource could have done.
Larger professional services firms, like the accounting big 4 have the capacity to ‘offshore’ some of these of activities, allowing them to offer competitive pricing and specialise in the onshore aspects of their service that will truly differentiate them. This is where knowledge and innovation come into play and why talent acquisition is so important to these businesses.
Of course there are also some tasks that are high risk, or high security that can’t be offshored. And in some cases, businesses are just in the habit of doing things a particular way – we are all so busy executing, that stepping back to review the efficiency and effectiveness of a process can feel like a luxury.
So why should your firm focus on productivity when billing more hours, is well, billing more?
We’ve been talking to our customers and here are 3 reasons why billing more, can sometimes mean generating less for your firm.
1. Unbillable hours are not just lost – they cost
Imagine this scenario, a lawyer spends 7 hours reviewing PPSR data to ensure they haven’t missed anything and they are providing the best advice. When it comes to the bill, 4 of the 7 hours are written off to make it more palatable. Not only have you lost the revenue for those 4 hours, the opportunity to spend that time on something that will generate value for your firm is also lost – whether it’s more billable hours or developing new business.
2. Customers will walk
“I’m happy with the rates my lawyer charges” said no client, ever. Clients resent paying high fees. Even if they can rationally appreciate what goes into preparing an advice, at the end of the day, every bill that they perceive to be high, leaves a sour taste that is eroding customer satisfaction and loyalty. Furthermore, they see how technology is changing their own business and expect to see the same efficiency improvements from their services providers.
3. Poor process = poor outcomes
Spending time on tedious tasks, inconsistent error prone processes and manually aggregating disparate information is a sure bet way to clock up more hours against a job, but it’s unlikely to lead to better outcomes for your clients. Billing a few extra hours may be a short term revenue generator, but ultimately standardisation, automation, accuracy and professionalism will improve outcomes and deliver greater returns.
Technology solutions like Encompass offer enormous productivity gains that professional services cannot afford to overlook. Increasing the efficiency and effectiveness of your firms processes will allow you to recover more time and write off less and conduct more valuable work. Your team want to contribute their highest possible value and if there is a technology that minimises the potential for error, automatically delivers their work in a more professional format and ultimately enables them to generate more value for your firm and your clients – everyone is winning.
What might you be overlooking that could help you to recover more, bill less and ultimately create more value for your firm and your clients?
Tanya Gleeson is Encompass Corporation’s national solutions manager
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