Simon Witkiss, Head of Product & Marketing
From the moment Luca Pacioli described double-entry bookkeeping and codified business advisory, change has been ever present in the Trust & Corporate Services industry. But a constant that Pacioli also contributed to was an industry whose foundations are rooted in knowledge and selling services based on that knowledge. From this foundation comes the need to record time spent on activities for billing purposes and therefore the timesheet.
A move to value pricing
Timesheets are often derided as archaic and uninnovative - unfairly so in my opinion. What is fair criticism though, is the deriving of billings solely from timesheets. As an industry we’re rapidly moving away from billing by hour to alternatives like menu pricing or fixed fee per project and, more generally, towards value pricing.
What value pricing means is that you have the option to deliver the same service to two different clients, but because they value that service differently, you have an opportunity to price differently. Think of peak/off-peak pricing on public transport - a commuter values the early morning journey higher than a tourist travelling at midday – and you’ll see our industry is no different.
A big driver of value pricing is the internet and how it facilitates business outside traditional social and business circles. The internet increases the choice clients have available for the service they need, which also drives transparency and openness in service approach and pricing. The internet is moving the industry from business by friend recommendation to business by 'TripAdvisor review'. Clients can now access low wage countries to achieve the same service. All this drives a trend towards transparent pricing for certainty and comparison - no more the uncertainty of being billed by the hour.
What also changes with value pricing is the incentive for better and more efficient client service, something that timesheet billing can never achieve. With the removal of the perverse incentive of greater efficiency equaling lower billings, we're free to innovate in the knowledge that billings remain the same and that spare time can now be focused on new clients and new billings.
Timesheets for a different purpose
But we can never fall into the trap of thinking that moving away from timesheet-based billing means moving away from timesheets. Because while billings may no longer be directly tied to hours spent on a task, we are still inherently a knowledge business where staffing is our biggest cost. Therefore, it is critical we understand how staff time is spent and how profitable our services are.
With this knowledge, we can then begin to understand where the 'time sinks' are. What elements of a service take too long in proportion to their value? Which clients cost us too much in relation to the fee we can charge? All this is information that requires timesheets in order to understand the efficiency levers we can control.
An exception to this might be the large, high-volume, low-fee providers in the market. But that is only an exception on the surface. This model is so highly process driven that in effect the daily timesheet is always known. Even these businesses must once-in-a-while consider the question of what their workforce is spending its time doing and recording that answer.
The rise of the machine
The focus on knowledge also allows us to unpick the excitement over AI, blockchain or any of the myriad of 'next big things' in our industry. They are not a revolution in the industry, but they do continue the evolutionary trend of automating time spent on least valuable work. And while they might be a bigger evolution than some changes before them, they can still be thought about in those terms. So, in the same way we can understand how computerisation changed our industry, it’s the same for the next big thing - understand what part of a service they can eliminate or speed up, then think about how your service adapts to that.
Long live the king
Our industry will continue to evolve just like it has always done. We shouldn’t obsess on eliminating timesheets in the name of progress, similarly, eliminating the human element and replacing with AI/blockchain/machine learning* (delete as appropriate). Instead, we should have confidence in the fact that our industry is inherently and fundamentally a knowledge business, where clients derive value through leveraging our knowledge. Making our deployment of that knowledge more efficient is a continuous drive and one that will never stop but knowing when and how we deploy that knowledge will never stop either. So long live the timesheet – it still deserves a place!
Microgen is a leading vendor of Trust, Corporate Services and Fund Administration software to the wealth management industry. If your processes are too manual and your timesheets full of work your clients don’t value, then get in touch to see if Microgen can help you out.
Simon Witkiss is Head of Product & Marketing at Microgen Financial Systems.
While Simon will defend timesheets until the end of his days, he's very glad to have not needed to complete one for the last 15 years!