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Why the Billable Hour is Killing Accounting Talent
And What to Measure Instead
Luke Templin
October 22, 2025
Read Time: 2:07 minutes
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The Measurement Problem at the Heart of Every Firm
Accounting firm leaders don’t have a people problem. They have a measurement problem.
The billable hour has turned accountants into tired timekeepers, chasing utilization instead of impact. This system rewards activity, not results, and it is one of the biggest reasons young accountants are leaving the profession.
After over a decade in accounting, I’ve seen how outdated metrics quietly drain a firm’s potential. The good news: there’s a better way to measure performance.
Upcoming Live Events that I will be at:
All Things CAS Roundtable - Have you got a question, challenge, or idea about running and growing your CAS service? Join our live, unrecorded monthly roundtable in The Kick C@$ Community. A space to ask anything and hear what’s working (or not) from fellow CAS leaders in real time on the second Tuesday of every month at 3 PM CST.
Speaking at Intuit Connect on October 27th at 9 AM PST.
Automation Workshop: AI as Your Financial Statement Reviewer
Tactical, hands-on session with automation expert Isaac Perdomo. Build a live workflow that uses QuickBooks Online, Zapier, and an OpenAI assistant to review financial statements. Join us on November 18th at 2:30 PM CST in The Kick C@$ Community.
The Hidden Cost of Billable Hours
Every firm I worked in measured success the same way: billable hours.
Partners tracked utilization, and staff tracked time. We all chased numbers that didn’t tell us if the firm was healthy. Hours became a proxy for productivity, but the result was predictable: stress, burnout, and turnover.
College students hear the horror stories now. They know what “busy season” really means. Many avoid public accounting altogether, leaving firms scrambling to recruit and retain people who no longer see value in the traditional model.
I know because I left public accounting for the same reason.
At one point, I even negotiated not to take a raise in exchange for working fewer hours and no weekends. During one audit, I was assigned the inventory section, halved the budget, and found a material misstatement while taking my weekend fishing.
The result was the same: I delivered better outcomes in less time. The difference was incentive. Once I stopped being rewarded for time, I focused on getting things done. Parkinson’s Law says, “Work expands so as to fill the time available for its completion.” The billable hour and budgets guarantee that expansion.
When a Measure Becomes a Monster
The late economist Charles Goodhart captured the issue perfectly: “When a measure becomes a target, it ceases to be a good measure.”
That’s what happened to billable hours. Once firms made them the central KPI, the number became the goal rather than the guide. Efficiency, creativity, and client outcomes all took a back seat to time tracking.
The same risk applies to any metric, so it’s critical to use performance indicators as insight tools, not as targets to hit. Firms need a measure that connects people’s work to client value and firm profitability, not just logged activity.
That’s where Labor Efficiency Ratios come in.
Enter the Labor Efficiency Ratio (LER)
Labor Efficiency Ratios, or LER, flip the equation. Instead of asking, “How many hours did we bill?” they ask, “How much gross margin did every dollar of labor produce?”
LER measures the return on labor investment, not its cost. For example, if a firm’s LER is $2.00, every dollar spent on payroll generates two dollars in gross margin.
It’s simple math with powerful implications:
LER = Gross Margin ÷ Payroll Costs
The higher the ratio, the more efficient your labor investment.
The concept traces back to Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits. His work emerged from conversations with entrepreneurs who said they’d never rehire their accountants because they lacked forward-looking financial advice. In response, Crabtree developed LER as a practical metric that links labor, profit, and growth, and it has since become a cornerstone for my advisory work.
Why LER Is Better Than the Billable Hour
LER changes what success looks like inside a firm.
Instead of measuring time spent, it measures value created.
Instead of rewarding hours, it rewards efficiency.
Instead of pushing staff toward burnout, it helps leaders identify bottlenecks and improve margins.
And importantly, LER isn’t limited to accounting firms. It’s the same metric you can teach your CAS clients to use in their businesses. That makes it the perfect bridge from compliance to advisory: you practice what you preach.
When firms start tracking LER internally, they gain the experience and context to discuss it with clients. They show business owners how to hire smarter, staff efficiently, and increase profitability without working harder.
The Mindset Shift CAS Firms Need
Moving from billable hours to Labor Efficiency requires more than a new KPI. It requires a mindset shift.
From tracking effort to managing output.
From utilization to profitability.
From individual performance to team efficiency.
When accounting firms make this shift, their culture changes. Staff stop obsessing over whether they “hit their hours” and start thinking about how their work contributes to firm growth. Clients stop seeing accountants as compliance vendors and start viewing them as strategic partners.
LER provides the clarity both sides need to have better, more forward-looking conversations.
The Takeaway
The billable hour is a lagging indicator. It tells you how busy you were, not how effective.
Labor Efficiency Ratios are a leading indicator. They tell you how well you turn time and payroll into margin, growth, and opportunity.
If your accounting firm is serious about building a modern CAS practice, start by changing what you measure.
In Part 2, I’ll show you exactly how to calculate and apply LER inside your firm and with your clients. I'll also discuss the three versions (dLER, mLER, and overall LER) and how to connect them to advisory forecasting.
Let’s Meet at QuickBooks Connect
If you’ll be at QuickBooks Connect this year, I’d love to connect in person.
Just hit reply to this email and let me know you’re going. I’ll be around all week and would love to meet fellow kick C@$ people IRL.
Thanks for reading, Luke Templin!
P.S. There are four ways I can help you grow your CAS offerings when you are ready:
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