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December 2020 » How Realization Negatively Impacts...
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Mark Nickerson, CPA, CMA, and Linda Hall, PhD, CPA, CMA, CGMA
In BriefDespite claims to the contrary, the billable hour is still the most common billing method, and realization the most common profitability metric used by CPA firms. Even with the emergence of other billing protocols such as value billing and fixed pricing, most firms have not progressed beyond these traditional methods and metrics. The authors suggest that, when used as a performance indicator, realization may actually decrease profitability and create a negative work culture leading to increased employee turnover. The alternative, gross profit margin method, promises to be a more accurate means of measuring performance that can increase profitability, provide for more accurate fee proposals, and create a more positive workplace culture.
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