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 (Time)
Quick Notes: The Billable Amount column values are calculated the same way as the Unbilled Revenue column on the WIP Report. The adjustments are still calculated as follows:
What’s in this Report?
Does include:
Archived and deleted Clients
Does not include:
Archived and deleted Time Entries
📊 What is a Utilization by Team Member (Time) Report?
A Utilization by Team Member (Time) Report is a document that tracks the percentage of time each team member spends on billable or productive work versus their total available working hours. This report helps measure how effectively team members are utilizing their time, highlighting the proportion of their hours spent on tasks that directly generate revenue or add value to the organization.
👨🏻💼 Why Would a CPA Need It?
A CPA would need this report for several important reasons:
Performance Assessment: The report helps evaluate the efficiency and productivity of each team member. Higher utilization rates generally indicate that team members spend more time on productive work.
Revenue Optimization: By analyzing utilization rates, the CPA can identify opportunities to increase billable hours and optimize revenue. Low utilization may suggest underutilization or inefficiencies.
Resource Allocation: The report provides insights into how resources are being used across the organization. This helps in making decisions about where to allocate additional resources or adjust workloads.
Cost Management: The report helps manage labor costs by ensuring that team members' time is being spent effectively. It can highlight areas where time is not being used efficiently.
Budgeting and Forecasting: Historical data on utilization rates can inform future budgeting and forecasting, helping to predict labor needs and project costs more accurately.
Client Billing: For businesses that bill clients based on hours worked, the report ensures that team members are spending sufficient time on billable work, supporting accurate billing and revenue collection.
🔢 How is the Math Calculated for This Report?
The math behind a Utilization by Team Member (Time) Report involves the following steps:
Tracking Total Hours Worked:
Record the total hours worked by each team member over a specific period, including both billable and non-billable hours.
Tracking Billable Hours:
Record the total billable hours each team member has worked, which are the hours spent on tasks or projects that can be billed to clients.
Calculating Total Available Hours:
Total available hours represent the total number of hours a team member is scheduled to work. This is typically calculated as the number of working days multiplied by the daily working hours.
For example, if a team member is scheduled to work 8 hours a day for 20 days a month, their total available hours would be 160.
Calculating Utilization Rate:
The utilization rate is calculated by dividing the billable hours by the total available hours and multiplying by 100 to get a percentage.
Utilization Rate (%) = (Billable Hours / Total Available Hours) × 100
✏️ Example Calculation:
Let’s assume a company has the following data for three team members:
Team Member A:
Total Available Hours: 160 hours
Billable Hours: 120 hours
Team Member B:
Total Available Hours: 160 hours
Billable Hours: 80 hours
Team Member C:
Total Available Hours: 160 hours
Billable Hours: 100 hours
Calculations:
Team Member A:
Utilization Rate = (120 / 160) × 100 = 75%
Team Member B:
Utilization Rate = (80 / 160) × 100 = 50%
Team Member C:
Utilization Rate = (100 / 160) × 100 = 62.5%
The report would show each team member's utilization rate, indicating how effectively they use their available hours for billable or productive work. This information is valuable for assessing performance, managing resources, and optimizing labor costs.