Timesheets Are A Problem At Mediocre Agencies. But Are They Fraud?

“Fraud” is a very strong accusation, and that’s why this column in the Agency Post, written by Deborah Fisher of Response Mine Interactive got my attention.

Fisher provides the all-too-common view of timesheets in the agency world:

Driven by the need to bill clients in a timely manner, the accounting department nips at the heels of the corporate flock to convert its man-hours into billable client time for invoicing, only to walk away each month that much more disenfranchised by their co-workers. No wonder no one wants to work in accounting.

I’ve never had much of a problem doing my timesheets, even daily if it was asked for, but the real problem is that billable hours don’t provide much guidance into how completely, or how creatively, any job in an agency gets done. We’re basically working in a factory where no two products made are ever alike.

And timesheets have been the bane of contention at many agencies I’ve worked at. The mediocre agencies, especially. Because agencies need to make money, and if jobs take too many billable hours to complete, the agency loses money. But it’s very difficult to predict how long complex jobs will take — particularly ones where multiple concepts are needed and the creative bar is high. So if a copywriter or art director decide they need more time, or the CD demands that the work needs more time, it’s a problem. At a certain point, it’s “pencils up, you’re out of time.” Whether the ads are any good or not. The creative desire to make the work great (when it involves nights, weekends, or more time in general) comes at a price in a timesheet-dependent agency.

It’s also a no-win situation for creatives: Bill less hours than needed to be profitable, and management complains. Bill more time than allotted, and management also complains. I’ve witnessed this numerous times.

What Fisher doesn’t speak to is exactly how her agency now charges its clients. All she says is that the agency is now on a “fixed billing” system, without defining how it works. Might be a fine idea, given that most of an agency’s staff is a fixed cost. Agencies need to make money, clients need great work and should be willing to pay a fair amount for it. Timesheets clearly get in the way of that at many agencies.

Is the timesheet system “fraud” though? As I said, it’s a strong term. Timesheets are not 100% spot-on accurate, that’s for sure. But only the agency management knows whether it’s truly overcharging clients. Either way, it’s always the rank-and-file agency employees that are at fault when the timesheet system fails. Although it’s more of a sign of mediocre leadership and processes.

Does your agency use other methods than timesheets? What’s a better solution?

About Dan Goldgeier

Blogging on AdPulp since 2005, Dan Goldgeier is a Seattle-based freelance copywriter with experience at advertising agencies across the U.S. He is a graduate of the Creative Circus ad school, and currently teaches at Seattle's School of Visual Concepts. In addition, he is a regular columnist for TalentZoo.com. Dan published the best of his TalentZoo.com columns in a book entitled View From The Cheap Seats: A Broader Look at Advertising, Marketing, Branding, Global Politics, Office Politics, Sexual Politics, and Getting Drunk During a Job Interview. Look for it on Amazon in paperback and e-book editions.

  • steveschildwachter

    I really liked Deborah’s article, especially lines like “what is actually sold to clients is ‘time’” (i.e., not ideas) and “price your services on their value”. Amen. We should charge clients for what we really deliver — ideas — not the time required to develop them.

    Throw out timesheets. though? No way. They may be a terrible tool for pricing, but they are an excellent tool for costing out the agency’s resources.

    Fraud? Not in the criminal sense. The definition of “fraud” seems to be that labor-based fees permit agencies to keep charging whether or not they deliver great ideas.

    • Deborah Fisher

      Thanks Steve,

      You may want to have a look at the comment posted above to Dan. I deliver the rest of the recipe there.

      Deborah

  • Deborah Fisher

    Hello Dan,

    I’m so glad that the article was 1. read and 2. commented on by others. The idea of course was to be provoking. I purposely left out the “boring accounting part” that I got from my VP of Finance, because as Marketers, I was interested in readership and discussion. Here’s the part that was left out:

    “The catalyst for change must stem within the structure of client contracts, but
    that’s not hard either; particularly when you are pricing your value, not your
    products. Time and material billing must evolve into retainer or
    project-based agreements. This fixed system of billing creates a solid
    framework to measure direct labor costs against and assists in deciding if
    there are any incremental hires that may be required. Fixed billing also
    helps with budgeting on the client side, as well as financial forecasting
    within the organization.

    In most medium-sized and larger agencies, employees generally work on a specific
    client(s). By identifying each employee’s client base and challenging
    accounting to develop a system of booking total direct payroll costs (payroll,
    health insurance, taxes, etc.) directly to the client level, ambiguity is eliminated
    from the process. This system not only results in direct payroll costs
    being more accurately reflected at the client level, but it also removes a
    layer of policing from the organization. Employees can focus on their job
    of producing results instead getting distracted and demoralized by the
    repetitive administrative task of completing a time sheet.

    The responsibility for allocation of an employee’s time must be moved to the
    management level of the organization. In the long run, this actually makes
    management’s jobs easier as well. The justification of a new hire can easily be
    measured with a quick glance at the client income statements. Active
    employees’ time allocation can be reviewed at regular intervals by the
    management level to ensure effective resource distribution. This
    eliminates the “am I billable enough” quandary.

    An added benefit results in the management levels of the organization paying
    closer attention to the production of their teams. Client profit and loss
    statements are reviewed with a greater degree of scrutiny. Morale is no longer
    dragged down by an organization-wide hassle, and everyone will hate your
    accounting team a little less. In short, productive capacity is
    increased, while the accuracy of client level financial feedback is
    increased. Finally a Win Win that actually means it.

    I hope this brings more clarity to the article, and I thank you kindly for reading it!
    Deborah