Your firm isn't a factory. Stop running it like one.

Accounting's billing model was designed for factories.

Not metaphorically. Literally.

In the early 1900s, accounting firms took cost accounting theory — built to manage factories and railroads — and applied it to themselves. Their logic: our people are machines that produce hours, and we sell those hours to clients.

That made sense for a 20th-century factory. It makes zero sense for a knowledge business.

I learned this firsthand when I was a bookkeeper at the start of my accounting career. I automated 80% of my data entry work using cloud tools. If I'd stayed on an hourly billing model, I would have lost 80% of my revenue overnight. So I switched to fixed fees immediately. My clients got more service. I did less work. Better margins for everyone.

That's the trap of hourly billing: the more efficient you get, the more you get punished. The most productive accountants aren't the ones logging the most hours. They're the ones who've decoupled revenue from time.

The big firms haven't cracked this. Their practice management systems are built around timesheets. Even when they attempt fixed fees, it's a hack layered on top of an hourly infrastructure. And their staff have no incentive to innovate, because efficiency just means more clients, not more money.

AI is about to make this worse.

AI can make a good accountant 10x more productive. One person can now do work that used to take a team. How do you reconcile that with billing by the hour? You can't. The entire relationship between hours and revenue will be completely destroyed.

The answer is to think like a SaaS company. Stop tracking utilization rates and realization percentages. Start tracking:

• Annual recurring revenue (ARR)

• Customer lifetime value (LTV)

• Churn rate

• Cost to acquire a customer (CAC)

These metrics tell you whether your firm is actually healthy. The old metrics just tell you how many hours people sat at their desks.

I went deep on all of this with Alex Hoffman on Syft Analytics’ Beyond Insights podcast. We covered the factory mindset, AI agents, how to productize your services, why niching is one of the best moves a firm can make right now, and why I call myself a “lazy CPA.”

Watch the full episode here: https://youtu.be/afNcI70FOPw