Pay vs. billing

jamesm96
jamesm96 Experienced MentorRegistered Posts: 523
Hi all,

This is kind of a practice managerial type question I guess.

Those of you who run your own practices, or work within one: how much would you usually target for a fee-earner to bill in a year in proportion to his / her salary?

Thanks all!

Comments

  • Monsoon
    Monsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Don't know. I've not actually looked at it like that. I just code relevant wages to cost of sales labour and make sure I'm happy with the GP%.

    Yet another layer to add to my practice admin!
  • Newbie
    Newbie Well-Known Registered Posts: 229
    When I first started in practice I was told I needed to bill 3x salary, in reality this approach results in a drop in standards, after all its not a factory were supposed to be professionals, that said I believe larger firms use time costing systems to record time and monitor idle time etc
  • jamesm96
    jamesm96 Experienced Mentor Registered Posts: 523
    Newbie wrote: »
    When I first started in practice I was told I needed to bill 3x salary, in reality this approach results in a drop in standards, after all its not a factory were supposed to be professionals, that said I believe larger firms use time costing systems to record time and monitor idle time etc

    That's exactly what I was told when I started ten years ago. And, as I understand it, the purpose of this was to cover a. your salary, b. your training costs and c. contribution to profit.
  • Monsoon
    Monsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I've heard using a multiplier of 3 to get a charge our-rate from an hourly rate. It kinda works.

    We just have standard hourly rates that we use for work that isn't covered by a fixed fee and bill that charge out no matter who did the work - it all evens out. Like I have one bookkeeper and one accountant but their work areas cross over, so sometimes I need to bill out the accountant at a bookkeeper's rate or vice versa.

    Mostly, I just do fixed fees and keep an eye on the profit :)
  • Rozzi Rainbow
    Rozzi Rainbow Trusted Regular Registered Posts: 465
    We also started by trying to use the 3x method - one to cover wages, one for overheads and one for profit. But after reviewing things a few months ago, this only worked when most of the hours are chargeable. To reflect the amount of non-chargeable hours we work, we have had to increase rates a bit. Looks like it is about right for now. But even this is flexible when it results in too high a charge to the client.
  • PGM
    PGM Font Of All Knowledge Registered Posts: 1,954
    I'm envious of 3x salary! We'd kill for that at the moment, we do building services. There's so many companies going in at cost or very low rates just to keep themselves and their plant operational that profit margins are dire.

    It does mean we have to carefully work out direct and overhead costs, try and apportion to workers. And cover our costs, and make some money if possible :(
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