The dangers of scope creep

Actions to reduce scope creep – a term accountants know and dread!

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As accountants, it is not uncommon for the amount of work we do for our clients to vary. After all, no one can predict with certainty how long something will take and the very nature of finance means that there will be times when more work is needed – just think about year end and tax return season.

However, in some cases this is not a one-off event. Over the months the level of work completed has slowly increased and the situation has arisen where the accountancy firm is delivering more than was originally agreed and, as a result, the costs far exceed the original budget. This is scope creep – a term accountants know and dread!

There is also a risk with scope creep as it can mean that the project is going off plan and this runs the risks of it going over time and over budget too. This is a bad outcome for all concerned and a situation we all want to avoid.

Why the rise in scope creep?

In many cases this work is not agreed up front and is never billed. It is not monitored and is delivered as part of the original project. It can start off as small additional tasks but over time these can creep up and you get to the stage where you are delivering a significant amount of work for free.

There are a lot of reasons why scope creep arises including:

  • poor scoping of the original engagement
  • change in the client’s business and/or team so extra support is needed
  • gradual growth in transactions which goes undetected over time
  • poor communication in the team
  • missing documentation outlining the scope of the work
  • lack of regular reviews of job profitability.

Another reason is the rise of new technology. The rise in use of online meetings and of cloud accounting means that we can easily set up meetings and see clients without the need to travel. It is therefore easy to have extra meetings which a few years ago we would not have done. Cloud accounting software like Xero makes it very easy to log in to update the bookkeeping from wherever you are located so doing a ‘little bit extra’ is a lot more straightforward compared to when you had to use desktop products.

What about fees?

In many cases, scope creep is not monitored. Many firms are not recording time spent on clients and have moved away from timesheets so there is no evidence of the work done. As a result, no additional fees are raised. The only way this will be detected is if the team provide regular feedback and it is flagged as an issue. Also, a fee and transaction volume review would detect these issues.

With more firms invoicing on a fixed fee per month basis, there is a move away from costing based on a number of hours per month, so it is very hard to judge when you are doing more than planned. This is true for the accountant and the client and, unless a specific new assignment and project is added to the workload, it will often go undetected.

It is also easy to do more work on project-based assignments. It is not uncommon for additional tasks to be needed which were not known when the scope was written. Also, many projects don’t have set milestones and end points so they can drag on for longer with extra work being completed but the fees remain unchanged.

Can we avoid scope creep?

Scope creep can be a costly situation to get into and so is one to be avoided. So how can we avoid scope creep in the first place? Possible solutions include:

  • Clearly scope the work

Ensure you have a clear and documented project plan that is agreed by all parties in advance. Set the key milestones and deliverables and agree when things will be billed and how much will be invoiced. Ensure the scope of the work is tightly defined so there is no question over what is included.

  • Maintain records and track progress

Ensure that you keep well documents records of the work done throughout the process. It is not uncommon to start a large assignment and for plans to change so note any deviations from plans and state the reasons why. If there are any major changes then highlight these early and, where needed, revise the plans to accommodate these changes.

Also make sure you track the progress of the project and check to see if it is going to plan. This ensures that you detect issues and deviations early and it means action can be taken. This could be agreeing a new scope with the client or changing track and going back to the original plan of action.

  • Good communication

It is essential to have regular communication with the client and to keep them updated on the progress of the work. No one likes to be left in the dark and it is often assumed that ‘no news is good news’. Regular meetings and updates are essential, and these should be held in person too so that any questions can be addressed and replies noted.

  • Build in some slack

Having a contingency built into your plan of work means that you can accommodate some deviations. It would be lovely to get the scope perfect on day one, but this is unrealistic and it is rarely the case. Having this contingency ensures that we have that slack and that scope for things to go a little off plan without the whole project being impacted.

  • Transparency

Ensure you are upfront and honest about the fees and costs you are incurring and do this early. Being transparent with the fees that are being incurred throughout the project will allow you to quickly see when costs are on the rise and additional work is being completed.

Through completion of accurate records throughout the project, you can easily identify where and when you have scope creep, and you can address it early.

●     Payment in advance

Historically we often do all the work and bill for it at the end. This has a huge impact on cashflow and, when projects over run due to scope creep, it means that the invoice dates are even later and we are out of pocket for a longer period of time.

Asking for a percentage up front overcomes this issue and reduces the impact on cashflow. We can also consider payments at intervals across the project and so reduce the amount due at the end. This all will mean we don’t have to wait for the project to complete before we get paid and so, if scope creep does arise, it will not mean we are out of pocket for longer.

Scope creep is not a new phenomenon – and we will still be talking about in the future too. However, although we cannot eliminate the risk of this happening completely, we can take action to reduce the impact that it could potentially have on the firm and project recoverability.

Caroline Harridence – Counting Clouds