Why technology is killing time-based pay

Why technology is killing time-based pay

Technological advancements require accountancy firms to review not only their internal processes relating to workflow and business management, but also their working environment, including employee reward and engagement practices

The rise of technology has transformed the accounting industry and the way in which accountants work in recent years, with cloud tools automating processes which previously took up valuable staff time, increasing efficiency in practices throughout the UK.

Yet, technological advancements require accountancy firms to review not only their internal processes relating to workflow and business management, but to also examine their working environment, including employee reward and engagement practices.

Cloud-based technology automates the collection and processing of financial transactions, helping to build better accountant-client relationships. It can capture, read, and store receipts and invoices automatically, removing the need to store paper, type in data, or chase clients. It also vastly decreases the likelihood of error.

These benefits mean that technology provides significant time savings, with firms needing to adapt to the new business climate as a result, eliminating time-based pay and incentivising productivity to foster happier employees, and therefore happier clients. Ultimately, time is freed up for accountants and bookkeepers to focus on more important activities, and provide their customers with a quick, hassle-free service.

Why do pay structures need to change?

In the past, time-based pay structures were sufficient as employees often engaged in manual tasks and were paid for their time worked. But, in today’s environment – where technology takes care of time-consuming tasks – such structures reward clocking in and out rather than recognising specific employee achievements.

Instead of fostering a productive workforce, time-based pay limits productivity and fails to act as a motivator for workplace performance. It also fails to provide incentives for productivity or performance, meaning that individuals are less likely to put in maximum effort, therefore having an impact on the success of the business.

Furthermore, it does little for attracting and retaining the best talent – critical in the current environment as individuals tend to move between jobs frequently rather than staying in one role for a long period of time.

With staff wanting to feel challenged in their role and recognised for the performance they give, firms need to find an effective way of boosting productivity and rewarding employee performance.

Performance-based pay is the future

Value-based pricing uses the buyer’s perception of value as opposed to the seller’s cost to set the price of a product or service. The buyer gets out of the product what they pay for it.

Similarly, accountancy firms should adopt value-based pay to reward their employees based on the value they bring to the business.

Incentivised pay ensures that the amount an individual earns is relative to his or her results, profit, or performance. Short-term schemes, like bonuses and commission, motivate employees to hit or exceed targets while longer schemes, such as profit sharing, help to generate in the employee an interest in the success of the company.

Measuring productivity

Automated bookkeeping removes the variation in quality and the turnaround times associated with previous accounting practices. Businesses that have already adopted automation have more up-to-date information which takes less effort to obtain.

Firms that have adopted this more efficient way of working can begin to meet their productivity potential by implementing new ways to track, review, and analyse productivity by introducing the following:

1. Switch to customer service focused SLAs – set clearly outlined SLAs which can be tracked and reviewed, making your processes transparent and setting expectations for both parties.

2. Track the implementation of the new system – agree on a systems implementation process and track that each step has been completed before you press “go” with the client.

3. After implementation, track KPIs – measure how well you are performing against your pre-agreed SLAs and turnaround times.

4. Make data quality a key concern – with automation, the error level drops and the quality of the data rises.

5. Track how well employees use the technology – Receipt Bank, for example, offers Practice Platform and Practice View, which allow you to monitor the effectiveness of your firm’s processes at a wider scale.

6. Push bookkeeping performance – with metrics and KPIs, companies can actively push the performance of their employees.

Incentivising productivity

The following are three ways in which firms can boost the productivity of its staff:

1. Determine monthly revenue targets for each employee

Firms can incentivise employees by multiplying the employee’s regular hours by the charge-out rate. Anything which the employee makes above this figure will then be split 50/50 with the firm. (It is important to adjust for seasonality in each month.)

2. Use a Net Promoter Score (NPS) system

Based on NPS survey results, the employee with the best score will receive a bonus. As a result, individuals will not only be motivated to offer a more efficient service, but a better one.

3. Monitor the bookkeeper to client ratio

Track the bookkeeper to client ratio for each employee, and set a bonus for the bookkeeper who is able to increase their client numbers by the highest proportion. Employees will be incentivised to increased productivity by managing more clients.

Next steps for firms

Switching to cloud-based solutions is the first step to creating a productive workforce. Once businesses have achieved this, they can turn their attention to motivating employees, driving increased productivity, and producing more impressive business results.

Cloud tools offered by companies such as Receipt Bank allow firms to record and access the data needed to improve productivity and create a motivated workforce. By implementing a paperless solution, which removes the need to spend time chasing people and entering data, employees will then be free to focus on building and maintaining relationships with customers, and driving businesses to growth.

Firms that fail to get on board with these productivity practices will likely find themselves unable to compete with the more tech-savvy businesses, and risk losing their best employees to competitors offering more recognition for individual performance.

Find out how Receipt Bank can help you implement a value-based structure and improve your firm’s efficiency.

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