Use the right charge out rates and team structure

PARRAMATTA, Australia - June 18, 2017 - PRLog -- The end of the 2017 financial year is upon us and with FY2018 just around the corner, we better start changing our charge out rates for our teams after determining the new wages of our staff.
Companies are marking up around 3 to 4 times their staff wages, depending on what they are doing. Bookkeeping is hard to get more than three times but tax planning and strategic work are at a higher multiple compared to "what the market will bear."

To get a bigger picture, here is an example:

52 weeks

minus 4 weeks of annual leave

minus 2 weeks of public holidays

minus 2 weeks of sick leave

= 44 weeks x 37.5 hours/week x 85% productivity

equals 1,402.5 chargeable hours

If package is $70,000 including Super

divided by 1,402.5 hours

= $49.92 per hour x 3.4 mark up

equals $169.73 charge out rate

1,402.5 chargeable hours x $169.73 per hour = $238,043

You can use this to determine your whole team's capacity and the resources you need. You should prepare your capacity spreadsheet before hiring extra staff even when your work load peaks and it is tempting to hire more. Remember that when workload drops because it's cyclical, you will have excess staff that will hit your bottom line.

You have to be responsible in making sure you are achieving a 25% EBIT (earnings before interest and taxes) to ensure shareholders are getting a fair ROI.

You have to achieve a win win balance for everyone through proper management of business and teams. Poor management means some stakeholders losing, staff not being paid decent wages, creditors not being paid, clients paying excessive fees or shareholders not getting their fair return of investment.

As a manager, make sure you are achieving the $185,000 of fees per full time employee. Only if you do will you achieve about 25% EBIT. To achieve this, you have to run your teams "Narrow and Deep" and not "Shallow and Wide."

This means your teams should have a Client Manager with three Accountants. The Narrow and Deep structure is easier because there are more working accountants who are easier to find than managers. This is not only profitable, your Client Managers will also get the opportunity to develop their careers.

You should avoid the Shadow and Wide structure where Client Managers work on their own with no staff doing the work. This means you have to find a superstar who is expensive and hard to find. These people charge their admin and bookkeeping tasks at accounting rates which can be a loss to clients. Alternatively, time is also written off.

I encourage you to use the right charge out rates and the Narrow and Deep structure to run your teams for a more profitable and successful business.

For more information about business in Australia, contact a Specialist ( discuss your particular circumstances.

For more tips and advice from other industry experts,

Disclaimer (
Chan & Naylor PRs
Trending News
Most Viewed
Top Daily News

Like PRLog?
Click to Share