Question

In a service industry such as public accounting, employees may at times "eat time" meaning they don't charge for all of the time that they spent working on a specific project. What is the harm to the company if this is done?

Answer 1

Eating time in public accounting harms the company by underestimating project costs, inadequate compensation for employees, skewing future estimates, and mismatching of resources, ultimately affecting the firm's sustainability.

Step-by-step explanation:

When employees in the service industry, such as public accounting, engage in "eating time," they do not record or bill all of the time they have spent working on a project. This practice can harm the company in various ways. First, it leads to an underestimation of actual project costs and profitability, making it difficult for the company to accurately assess the financial health of projects. Secondly, it can result in inadequate compensation for the amount of work performed, affecting employee morale and potentially leading to burnout or turnover. Moreover, continuous 'eating of time' can skew future project estimates, as prior projects seem to require less time than they actually do. In addition, this can lead to the mismatch of resources, where the company may not hire enough staff or charge enough to clients, affecting the firm's long-term sustainability.