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Utilisation Targets: The Key To Business Efficiency

This might be the most important thing you ever do for your business. And it will probably be the quickest and easiest win you have ever had. You might not want to do it at first, but once you do you will never look back. I’m going to go so far as to say that unless you do this you will never grow well.

The reason you won’t want to do it is because you know – perhaps only subconsciously – that it will shine a spotlight on your businesses’ efficiency.

You need to set a target

That’s it. You need to set an utilisation target of 80% for all billable staff, including yourself, and ensure that all staff fill in their timesheets daily. The 80% must be time billable to a client no exceptions! You’re going to get a lot of blowback and probably some stubborn resistance but unless you do it you might as well stop this process now.

How to go about setting a target

Give the task of implementing this mini-project to your most efficient and persuasive admin person and get them to tell anyone that questions it “we have no choice if we want to be an efficient business”. If necessary, you can get them to publish a “recalcitrant list” every morning for the previous day. If someone refuses, make it a disciplinary action. It probably won’t get to that but you need to show you are serious.

Make sure your senior people support you. What I say to people is “you don’t get to work at BHP without your safety boots, you don’t get to work here unless you do your timesheets every day.” It’s that important to the success of this firm.

Why you’re doing it

Most people are so busy they can’t accurately remember what they did yesterday, let alone last week. People can only hold so many things in their memory, and surely there are more interesting things to fill our heads with than timesheets!

It’s much easier to get into the habit of filling out timesheets as you go and then be free from the stress of trying to work it out later. There will almost always be an underestimation of time spent on projects the longer it is left unaccounted for. If you’re reading this and thinking that’s an obvious observation, then from my experience you are in a small minority of professionals. Most firms have to hound staff to do it.

This is probably one of the most unpleasant things you’ll have to do, even worse than firing someone, because people will become aggravated and think you’re being unreasonable, but hey, you’re the boss!

What’s the right target?

The standard utilisation target for service businesses is 80% of available time. This means that 80% of standard hours need to be recorded against a billable project/job.  So if an employee’s standard hours are 40 hours a week and they are on leave for a day, their available hours are 32 and their target is 80% of that; 25.6 hours.

Expect some resistance

People will argue that they have to bring in business, do marketing, administration; the list will be quite long. Be firm on the 80% for all staff. Obviously associates (contractors) should only bill you for time you can bill clients.

The utilisation target needs to balance time for important non-billable activities such as marketing and management with producing income for the business. Having said that, supervising staff on client work is billable, so write the time down.

It’s important to remember that not all time recorded against a project can always be billed.  Adjustments often need to be made for things like bringing new employees up to speed.

How to manage it

You should be producing and reviewing weekly utilisation reports every Monday. They should show the previous week, month-to-date and year-to-date. They should also show average hourly rate as well as revenue against plan.

Once you start doing this, you’ll notice an immediate jump in billing – probably 20% to 30% – but it will also flush out who’s been coasting a bit, who’s been reducing the time they record for a client because they don’t think they’re worth it (so many professional people are their own worst critics), and you might upset a few clients who are used to you guys selling yourselves short.

So there you have it – if you want to improve your business efficiency, make utilisation targets a priority. This blog is an excerpt from Overcoming the Most Common Obstacles to Business Growth, an eBook by Thomas Taylor. We’d love to know what you think – just leave your comments below!

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Thomas Taylor CPA
Thomas is a CPA qualified accountant, business advisor and on-demand CFO with over 20 years experience running businesses. Having worked in senior finance roles with some of Australia's biggest companies & best business leaders, he has been a part of a lot of success stories - and seen what to avoid. He works with businesses - from start-ups to large companies - to help them grow and make the right decisions.

Thomas Taylor CPA