Financial reports help businesses see how they're doing and make better decisions. In this series, each article will explain a specific report, covering what it is, why a CPA needs it, how the numbers are calculated, and a simple example to show how it works. Whether it's about tracking income, managing costs, or checking how well your team is working, these articles will give you the basics to make sense of these important reports.
Utilization by Team Member (Billing)
What’s in this Report?
Does include:
Archived, inactive, and deleted clients
Archived Invoices
Does not include:
Deleted Invoices
Archived and deleted Time Entries
Report type | Column description | Permissions requirements |
Utilization by Team Member: displays billable hours, adjustments, and utilization by team member | Team Member: employee tracked
Total Hours: total hours tracked by team member
Billable Hours: sum of total billable hours tracked by team members for the selected date range
Billable Amount: calculated by multiplying the rate by the duration of the time entries
Adjusted Hours: calculated by taking the billed hours less the billable hours
Adjusted Amount: calculated by taking the billed amount less the billable amount
Discounts: calculation of any discounts that can be attributed to a team member
Total Adjustments: calculated by adding ‘Adjusted amount’ and ‘Discounts’
Billed Amount: the amount that has been billed to the customer (For the most accurate reporting, ensure that time entries are linked to invoices.)
Effective Rate: calculated by taking the amount in ‘Billed Amount’ and dividing it by the ‘Billable hours’
Percent Invoiced: calculated by taking the ‘Billed Amount’ and dividing by the ‘Billable Amount’ | Billing Reports, Access To All Clients |
📊 What is a Utilization by Team Member Report?
A Utilization by Team Member Report is a performance metric report that tracks how effectively each team member is using their available work hours. It measures the percentage of time that employees spend on billable or productive work compared to their total available working hours. This report is commonly used in service-based industries where tracking time is crucial, such as consulting, law, or engineering.
👨🏻💼 Why Would a CPA Need It?
A CPA would need this report for several important reasons:
Efficiency Evaluation: The report helps the CPA assess how efficiently team members are using their time. High utilization rates indicate that employees are spending a significant portion of their time on productive, billable work.
Revenue Optimization: By analyzing utilization rates, a CPA can identify opportunities to increase billable hours, thereby boosting revenue. Low utilization may indicate inefficiencies that need to be addressed.
Resource Management: The report assists in understanding if team members are overworked or underutilized. This information is valuable for balancing workloads and improving overall team performance.
Cost Control: High utilization rates generally lead to better cost control since employees are spending more time on revenue-generating activities, rather than non-billable tasks.
Profitability Analysis: Utilization rates are directly linked to profitability in service-based businesses. A CPA can use this report to correlate utilization with revenue and profitability metrics.
Performance Reviews: The report provides objective data that can be used in performance reviews, helping management set goals and incentives for individual team members based on their utilization rates.
🔢 How is the Math Calculated for This Report?
The math behind a Utilization by Team Member Report involves the following steps:
Identifying Billable Hours:
Billable hours are the hours that a team member spends on tasks or projects that can be billed to a client. These are usually tracked through time sheets or project management software.
Calculating Total Available Hours:
The total available hours represent the total time a team member is expected to work over a given period, typically calculated as the number of working days multiplied by daily working hours.
For example, if a team member is expected to work 8 hours a day for 20 days in a month, their total available hours would be 160 hours.
Calculating Utilization Rate:
The utilization rate is calculated by dividing the total billable hours by the total available hours and multiplying by 100 to get a percentage.
Utilization Rate (%) = (Billable Hours / Total Available Hours) * 100
For example, if a team member works 120 billable hours out of 160 total available hours, their utilization rate would be (120 / 160) * 100 = 75%.
✏️ Example Calculation:
Let’s assume a company has the following data for a team member:
Total Available Hours: 160 hours (8 hours/day for 20 days)
Billable Hours:
Week 1: 30 hours
Week 2: 35 hours
Week 3: 25 hours
Week 4: 30 hours
Calculations:
Total Billable Hours:
Total Billable Hours = 30 + 35 + 25 + 30 = 120 hours
Utilization Rate:
Utilization Rate = (120 / 160) * 100 = 75%
The report would show that this team member has a 75% utilization rate, meaning they spent 75% of their available time on billable work. This data helps the CPA and management understand how effectively the team member is using their time and whether there’s room for improving productivity.