Achieving a high billable rate and maintaining it is the holy grail of most architecture firms, technology solution providers, and many other businesses. And it should be because increasing billable utilization is the best opportunity to increase company profitability by influencing employee behavior to make good use of allocated time.
According to the U.S. Department of Labor, architects get paid an average of $ 38.16 per hour and given that the projects they deal with may take months or years to complete, this amount is substantial and calls for proper billable utilization management. Here are some tips that can help you manage your billable utilization.
Give Your Employees a Conducive Working Environment
The belief that failure to achieve a higher billable rate means your employees aren’t working hard enough is just a myth. You may have the best employees in the world but if they aren’t provided with a conducive environment and with the right tools, they can’t achieve the target set.
Once you provide them with such an environment, give them access to billable utilization results so they can gauge themselves or to motivate them to achieve the company target. This will leave them with no excuse and will make it easy for you to hold them accountable in case they fail to achieve the set target rates.
Track How Your Employees Utilize the Non-billable
There are reasons your employees could be missing their targets that do not concern their motivation or effort. This boils down to how your organization defines billable hours. It’s important to know how each of your employees spends all the 40 working hours in a week (both billable and non-billable hours). You can employ labor utilization analytics to determine how time is spent in your organization because this process requires effective documentation of all employee activities and the time taken to complete these activities. Here are common types of non-billable hours.
These are hours spent to earn new business. The pre-sales activities may involve your employees engaging the potential client, explaining and even demonstrating to them the services offered. It is the pre-sales activities that generate billable hours if the client finally agrees to hire your firm. This stage utilizes technical resources but it does not generate any revenue. You should minimize pre-sale hours to increase the time that employees spend during the actual project implementation. So, you need to track time for the purposes of true job costing and resource utilization.
Support Contract Hours
Support contract hours are hours spent during support activities. During these activities, technical resources are usually utilized but the hours spent are not billable. To reduce support contract hours, ensure everything is clear from the beginning.
Undocumented Change Orders
If your project manager or your salesperson decides to throw in some extra services without the formal process of changing orders, they will spend non-billable time but they will utilize technical resources. To avoid this, encourage your employees to always follow the right procedure used in order variation rather than making a decision on their own.
A new project may require that some employees get retrained to handle the project successfully. Technical resources get utilized during retraining. If these resources end up taking longer in the training activity, time will go to waste because this time is not billable. It would be better if you reassign such activities that require employee retraining to employees who are more proficient and comfortable with the activities in question.
As you can see, is it important to track time whether billable or not so you can maximize the billable time but reduce the non-billable time. This will also enable you to allocate the technical resources in a manner that optimizes their use for maximum profitability. All hours count, not only the billable hours, and all 40 hours of the week contribute to the success or failure of your organization.
Provide Proper Resource Forecasting to Avail the Right Resources
You should not wait until a client places an order before you start focusing on billable utilization. Many organizations start managing task efficiency and work schedules once the task or project starts. Relying on your experience, you should be in a position to forecast the manpower and resources a given project may need and the total time it will take to complete it.
When working on multiple projects concurrently, resource forecasting will help you in proper resource allocation to maximize billable hours. Poor resource allocation may lead to the following drawbacks.
- You may have to abruptly move resources from one project to another thus wasting time
- You may have to work overtime which is costly and may also lead to un-billable hours
- You may have to hire new employees in a hurry to ensure you complete the projects in time. These new employees will be inefficient and may require some retraining. This is time-consuming and the hours spent training them will not be billable
Do Not Set Uniform Billable Utilization Targets for All Resources
Resources are not the same, so it’s not advisable to set uniform targets for all services resources and then demanding accountability from your employees to achieve such a target. The aim of a billable utilization target is to ensure each resource gets optimized to achieve the company goals. A uniform target can’t achieve this. Ensure each resource has a reasonable billable utilization target to motivate your employees.
Final Words: Think About the Quality of Services You Offer, Not Just the Billable Utilization RateAccording to the U.S. Department of Labor, architects get paid an average of $ 38.16 per hour and given that the projects they deal with may take months or years to complete, this amount is substantial and calls for proper billable utilization management. Here are some tips that can help you manage your billable utilization.
It is the quality of your services that drives profitability. When the quality of service is high, you will attract a high billable rate. Some clients are usually willing to pay more to get quality services. Doing less work but of high quality and charging more can yield more profit than delivering many low-quality services at lower rates. You also need to implement best practices to optimize billable resources. Using short-cuts or low-quality materials leads to shoddy work which will eventually make your clients run away.
To help you track billable utilization rates quickly and easily you need time tracking software for your billing, payroll, and productivity. With great new features, free support and a 14-day trial, try Time Tracker today and increase your employees billable utilization rate.