Fixed Fee....ooops - The Book-keepers Forum (UK)

Amanda · Expert

Fixed Fee....ooops

Don Tax · Expert

kjmcculloch83 wrote:
Make sure you and the client know what you have priced for and what you will and wont do. That way they cannot take the pi$s as Amanda fears.

My agreement to a client when I quote them work is that my fee's will not increase for at least 12 months unless the scope of the work changes. Obviously businesses can go through peaks and troughs and I allow for that, I also allow for a 10% increase in the work before I would even conciser talking about the scope having changed with the client. One this I would never do is go back to a client and say "I made a mistake, I need more money". Once you've agreed a price I think you need to stick to it.

For the second time today, something that really strikes a chord. In other words, 'my word is my bond'.

LATER:

You could go back to him Georgie with "due to unexpected too-ing and fro-ing etc......, I've actually quoted less than I should have but I've given my word and daa-da-da-daaa etc ...... with effect next year."

He may be so pleased that he offers you the difference or be grateful that you've stuck to your price, but either way, you'll know his foibles next year and what he is likely to have forgotten before you get knee-deep in the work.

best regards,

Tim

-- Edited by Don Tax on Tuesday 25th of September 2012 04:19:23 PM

BobHarper · Guru

@Kris - I've come across people who say Value Pricing makes their brain hurt, never heard it cause itching before.

I'd suggest you don't bother reading my posts.

-- Edited by BobHarper on Tuesday 25th of September 2012 09:04:55 PM

Georgie · Guru

Hi everyone,

Just having read the last post about bookkeepers being squeezed I have a dilema and want some advice. I thought I would try the "Fixed Fee" aproach with a new client and it turns out that I have not really charged enough as there is more work than I thought.

Fingers now badly burnt and hey I made a mistake and am going to learn from it. hmm

My question is, do I go back to the client and ask for an increase or just take the hit on this one? For information purposes I have underpriced the job by 23% ...exactly disbelief

Best wishes

Georgie

BobHarper · Guru

Georgie - are you open to be challenged?

Georgie · Guru

What by the client you mean?

BobHarper · Guru

@Gorgie - I wonder if you are open for your thinking to be challenged.

You seem to think the price should be set by your costs. Maybe the price is right and your approach is wrong? On the other hand, maybe you under-priced by more than you think?

HendyPhilhendy · Guru

Fixed fee for bookkeeping is very difficult. Any bookkeeping work we undertake is always on an hourly rate. We are happy to do a monthly standing order but will invoice the hourly amount.

However, for accounts work we always give a fixed fee based on the value of the work. This is dependant on them providing relevant information i.e. reconciled bank account etc. I always state that annual accounting fees are subject to review once work has been undertaken.

Are there any variables that could be used when approaching the client i.e. did they not provide something they should have which would have made the fee less?

The key is to let your client know what any fee increase is for and why it had been underpriced.

Georgie · Guru

Oh god BobHarper... Sitting here waiting for your reply has just wasted 5 minutes of my time and I will never get that time back!

I didn't think my question was that deep!

Georgie · Guru

Thanks Phil,

Yes, there are a few variables, like not getting all the paperwork and then having to chase him for it which eats into my time...and there is more volumne of work than he led me to believe. I think he would pay the increase as he is very happy with what I have done but I don't want to sour our relationship.

Best wishes
Georgie

Spamkebab · Expert

lol Georgie.

Bob, your reply is like something Lewis carroll would of written lol.

BobHarper · Guru

@Georgie - all good things to those that wait, except procrastinators!

Pricing is a deep subject, is it worth exploring this? Well, as you have just found out your approach on pricing will probably determine your profits/lifestyle more than anything else, including your technical skills.

I'm off to pick the kids up from School now so I'll have to leave it.

Georgie · Guru

He likes to get us going does Bob ! Lol

Georgie · Guru

My pricing does not determine my lifestlye, thanks!

Sylvia · Veteran Member

Georgie, I wonder if you could let him know that it is taking you longer and therefore you will be putting the price up in 3 or 6 months. Letting him know that the new price will depend how much you have to chase him for paperwork.

Sylvia

Don Tax · Expert

Georgie wrote:
Thanks Phil,

Yes, there are a few variables, like not getting all the paperwork and then having to chase him for it which eats into my time...and there is more volumne of work than he led me to believe. I think he would pay the increase as he is very happy with what I have done but I don't want to sour our relationship.

Best wishes
Georgie

Hi Georgie,

Jobs tend to take less time each year and client's accept predictable fees more readily. You could warn him it'll be 23% more next year but you could keep your fee the same and end up getting the 23% back many times over, if this looks a long-term appointment.

The main thing is you've won a grateful client. If you change fees be prepared to lose that goodwill.

best wishes,

Tim

Spamkebab · Expert

Hey Georgie, stop chatting on here, pull your finger out, and crack on lol.

Georgie · Guru

biggrin
Thanks guys for your input, (Phil, Spamkebab, Don Tax, Sylvia & Amanda)

Best wishes

Georgie

kjmcculloch83 · Expert

Hi Georgie,

I'm a bit late on this one. Damn this work getting in the way of my forum time.

This is one of the problems with fixed fees. I've spoken to a lot of bookkeepers moving from, or looking to move from hourly rate to fixed fees and the one thing that they don't take into account is how much they need to change the way they work.

I suppose it depends on your view of fixed fee's, some people take an average of their annual work for a client, add up the hours they think they'll do, divide it by 12 multiply by their hourly rate and charge the client that per month. In my view that's not fixed fee pricing, it's spreading the cost.

I offer fixed fee for everything I do, and with the exception of the first job I did on fixed fees (because I worked it out similar to above) I've never lost out financially. The biggest piece of advice I would give to a bookkeeper looking at a fixed fee structure is to make sure your schedule of services is watertight. Make sure you and the client know what you have priced for and what you will and wont do. That way they cannot take the pi$s as Amanda fears.

My agreement to a client when I quote them work is that my fee's will not increase for at least 12 months unless the scope of the work changes. Obviously businesses can go through peaks and troughs and I allow for that, I also allow for a 10% increase in the work before I would even conciser talking about the scope having changed with the client. One this I would never do is go back to a client and say "I made a mistake, I need more money". Once you've agreed a price I think you need to stick to it. If the client has tried to sneak work in by the back door that's different, but that's where the schedule of services comes in. The biggest difference between fixed price and hourly rate is who takes the risks. With hourly rate the risk is very firmly at the feet of the client, but with fixed fee the bookkeeper takes the risks. Having said that, with the risk comes bigger rewards.

In my opinion to make fixed fee work for you, your processes need to be streamlined as much as they can be.

When you say you've underpriced by 23% is this based on your hourly rate?

Kris

Georgie · Guru

Hi Kris,

Yes, 23% is based on my hourly rate... It's all the emails, have you got this, have you got that etc....I think my best option
is to sit tight for a bit longer...Maybe he will get better at giving me the paperwork.

Georgie

kjmcculloch83 · Expert

Georgie,

Do you have a checklist you give your clients showing everything you need? If not, it's maybe worth getting one. One of the other thinks I've seen done, though not had any need to do it myself yet is to ask the client once for information and each subsequent time you ask make a charge.

I think if you are losing 23% on your hourly rate something may be far far wrong with your pricing. Given that you have taken all the risk you should be getting more than your hourly rate by a fair bit. I would suggest you're a lot further out than you think.

Tim, It's less my word is my bond, and more in God I trust, everyone else signs a letter of engagement.

Kris

Don Tax · Expert

LOL Kris

HendyPhilhendy · Guru

Kris has provided some excellent advice here. For any bookkeeping work we undertake we have a client tailored checklist of information required. This includes deadlines for when items should be received and when we provide any reporting.

BobHarper · Guru

Some thoughts:

1. The price someone is willing to pay for something is never driven by the cost/time.

2. Maybe the work is taking longer because you are not managing the client effectively.

3. Always provide multiple price options with different levels of client responsibility. The more they take on the less the price so you can hold them accountable.

4. Maybe the system you are using is not effective. Do you know there is software that connects to the bank and saves 40% to 60%?

5. Fixed fees need a definition which includes the client's responsibilities. Changes can be picked up with change/variation orders

6. Pricing drives profit more than anything else. Profit drives personal income and family lifestyle so it makes sense to optimise it.

kjmcculloch83 · Expert

Sorry Bob, thats just lots of words and very little substance as usual. Get down to the nitty gritty and help Georgie with the nuts and bolts like the rest of us do, instead of talking in code.

BobHarper · Guru

@Kris - you seem to be getting frustrated again.

My approach to pricing is not based on time/cost plus so I cannot give a simplistic answer. Instead I offer my comments to get Georgie (and anyone else who wants to) to think about pricing from different perspectives.

Georgie thinks she has undercharged by 23% but it could be much more (or less). Perhaps the price she agreed is the maximum anyone could have got from the client and the problem is not in the pricing but how the work is approached.

kjmcculloch83 · Expert

I'm not frustrated.

To quote Hilary Devey, Bob, You make my foot itch mate.

Georgie · Guru

Lol Kris

Don Tax · Expert

Not heard that one before. Still prefer "you set my teeth on edge".

Note to self: must watch more TV

Amanda · Expert

Love it Kris!!!!

I love Dragons Den, Hilary Devey is one of my favourite dragons along with Peter Jones. Changing the subject (sorry Georgie), has anyone heard Greg James (DJ radio 1) do an impression of Hilary Devey, its just brilliant. He had her on one of his afternoon shows once, and she thought his impression was brilliant!

Shamus · Forum Moderator & Expert

BobHarper wrote:
I've come across people who say Value Pricing makes their brain hurt, never heard it cause itching before.

makes my sides hurt.

just joshin.

Of the list point 1 actually made me think a little and I can see truth in it as client are driven by desire for an outcome. The time and cost whilst important are of secondary consideration to the desire and come into play from the perspective of finding the right supplier to fulfil the requirements.

Point 5 emphasises clients responsibilities which of course is covered in a properly worded engagement letter.

Point 6 was an unnecessary addition to the list which considering the audience I think that everyone is aware that we need to make a profit in order to spend it, However, I am sure that Bob simply fogot the audience on the back of possibly trying explaining that many times previously to clients and which of us hadn't had one or two of those who confuses turnover and profit!

Point 2 was a statement of fact rather than offering a sollution as I feel that is probably the one that has caused Kris's response.

Point 3 standard decision package. base product with costings and additional costings for additional complimentary decisions plus the cost to the client of not adopting the option. Standard management accounting. No new thinking there but appreciate that there may be some readers of the site who have not done their management accounting papers yet so useful idea but if anyone wants further reading on that just look up decision packages which will be part of your budgeting studies under zero based budgets.

Point 4. Wonder what software we could be talking about, lol. That one's just a straight sales line thrown in there.

All in all I liked point 1 the best. Some of the rest was padding but not to my mind a contentious post as some others have been recently.

Don't misconstru this minor defence as an olive branch as the whole sheep / alternate accountants thing is a seperate issue for other threads and I think that you know where my trenches are dug there.

Shaun.

EagleEducation · Senior Member

As a training provider that as no choice but to charge fixed fees for distance learning courses some of Bobs points are very relevant and business savvy. We have to work out how to manage customers and provide a professional and efficient service for a price that our customers are willing to pay and deliver it to all customers. Some you win some you lose. But it's our job to make sure we win more than we lose on. Does that make sense? :)

It would be bliss to be able to charge a time rate but simply wouldn't work!

Sonya :)

Spamkebab · Expert

I loved Debra Stephenson's impressions of Hilary Devey.

"I can knock an 'orse out with wun punch"

Shamus · Forum Moderator & Expert

Being an accountant is very important if you are telling accountants what they know and what they do not know.

Your three examples of working as an accountant seem to be :

(a) legal representation
(b) Franchising
(c) Marketing

Impressions can only be made by the way that people portray themselves so as so many seem to be misunderstanding you Bob maybe the problem is not mine.

No, I have not read Ron Baker. Have you read the works of any of the management accounting theorists that I mentioned previously? (Porter, Mintzberg, Handy, Drucker, JSW?).

I will agree on one point in that it is wrong for me to comment negatively on Baker if I have not read him in a similar way to someone quoting baker if you have not read all of the classic theorists so that they are able to view ideas in context rather than isolation.

p.s. amended only to remove a repeated word (quoting quoting)

-- Edited by Shamus on Wednesday 26th of September 2012 02:21:16 PM

BobHarper · Guru

@Shaun - interesting that clients wanting an outcome made you think "a little" - I think about that all the time. Don't you think the bookkeeping and accounting profession should be more focussed on what the client wants?

Client management is so much more than a letter of engagement and once again what someone will pay for something has nothing to do with management accounting or costing.

Working on cost based pricing is sub-optimal which means the business owners lifestyle is compromised. On the other hand, Value Pricing maximises pricing (along with value) so both parties maximise their profit from the relationship and enjoy a better life.

Shamus · Forum Moderator & Expert

Yes, client mamagement is a lot more than the letter of engagement but the letter of engagement is where one formally defines client relationships and respective responsibilities.

On the "think a little" comment, just to emphasise so that there is no confussion I was referring to the following line :

The price someone is willing to pay for something is never driven by the cost/time.

Your comments made me think "a little" as in general your comments only make me think to the extent of identifying the underlying management accounting concept / theory that is being put accross as something new.

That's not unique to yourself. Johnson, scholes and Whitington make a good living standing upon the shoulders of better men such as Porter, Mintzberg, Drucker, Handy, etc.

As for being more focused upon what the client wants. I don't feel that we are the ones who have a problem with identifying that Bob.

which brings us back to :

Always provide multiple price options with different levels of client responsibility.

Let me reiterate again the concept of the decision package that Crunchers call offering alternatives (we'll keep that as our little secret. Best not mention it to the guys at Texas Instruments who thought that they had formalised that idea back in the 1960's).

Everything has a cost, whether that is the cost of implementing something, or conversely the cost to the business of not implementing it. That cost may be straight financial gain or the ability to perform more economically, efficiently and / or effectively. Every path has a price. Whatever the option the cost to return ratios need to be prepared for all options and yes, clients are guided onto the right path which if you are a good accountant will not always be the one bringing the most return for themselves but rather the best return for the client whose best interests we represent.

Cost drives everything whether that is the cost to implement change or desire for cost reduction. Everything has a price tag. Everything comes down to the numbers.

As a general point I do feel that many of your replies do tend to seriously underestimate the knowledge base and professionalism of many of the members of this site Bob.

Shaun.

BobHarper · Guru

@Shaun - knowing the cost of everything doesn't mean you appreciate the value.

Perhaps the reason you are not thinking much is because my comments are not based on an underlying management accounting concept/theory. They are based on Ron Baker's work on Value Pricing. And, I disagree, at the end of the day everything comes down to feelings because we are human beings not computers. That's why we spend more on things than we need to.

As regards your accusation of me underestimating the knowledge or professionalism of members,you'll have to be specific so I can think and respond.

Or, do you mean you because on this thread I asked Georgie for permission to challenge her (she didn't say no) because I felt she would benefit from looking at pricing from a different perspective.

I get the impression from most of the people who respond here that they are not interested in new ideas.

kjmcculloch83 · Expert

I need to come in here, I wasn't going to but your last line made me.

I beleive that you are right (woh! can't believe I said that) people do need their perceptions and views challenged once in a while. They also can gain from new ideas. Having said that, in my opinion, and this is just my opinion others may disagree, you don't challenge people. You waffle on and say little of substance. There are many posts from you where I think "I understand that...." but you never seem to develop the idea, or put any meat on the bones.

To begin with I thought it was just me, but the more I speak to people the more I realise others feel the same way. So ignore you, others question you, but the result is the same. Nothing. I'm no longer sure if all you have is the idea and are not able to develop it any further, or whether you think you really are one of life philosophers who make people stop and think with your alternative views.

I personally find it a real pity that you are unwilling or unable to bulk out your ideas because I'm sure others may take them on board if they understood the real world uses, but until you do they are, for most, just meaningless abstract ideas which don't mean terribly much.

Kris

BobHarper · Guru

@Kris - let's stick to pricing for the purpose of this discussion and in particular this thread.

Value Pricing is not a simple concept that allows me to be specific. It is not "Cost + Desired Profit" = Price. It requires both parties to have a discussion and without knowing everything I cannot put meat on the bones or get into the nitty gritty. The value in my posts are the questions, not the answers.

if you or anyone else is not prepared to think then don't.

kjmcculloch83 · Expert

You say value pricing isn't a simple concept that you can be specific about, but in all the threads you bring it up you've never once fully explained it. Once you got close but then it all fell to bits at the end.

I'm happy to think if someone gives me something to think about. If the value of your posts are in the questions that really say's everything I need to know.

gbm · Guru

Hi Georgie,

In answer to your question, I wouldn't go back and ask for more. I would be honest. I would stand the cost for the current year, and say that the work involved was more than you were expecting and that next year's would be higher.

Otherwise, you will continue underpricing.

As someone noted, fixed pricing moves the risk from your client to you.

Shamus · Forum Moderator & Expert

BobHarper wrote:
Perhaps the reason you are not thinking much is because my comments are not based on an underlying management accounting concept/theory.

No,

I think an awful lot.

I also listen.

I take on board other peoples views and am open to genuine new ideas provided that such idea is to my mind an improvement and not simply a change for the sake of it or someone trying to put over an old idea as a new one.

The issue is that Crunchers thinking IS based on underlying management accounting concepts / theory but as pointed out previously they don't seem to realise it because my impression is (based purely upon posts on here and accountingweb) that you may work with accountants, you may have worked for accountants, but you are not yourselves accountants yet you are telling accountants what they do and do not know!

Seems a little cheeeky to me.

As for Ron Baker. The value pricing / "What-we-can-get-away-with" approach is not an ethically appropriate model for accountants.

Georgie · Guru

@Nick, yes I was coming to that conclusion too...Will hang fire for a bit and see how it goes.....Thing is we live and learn don't we...... And I won't make that mistake again.

Kindest regards
Georgie

Spamkebab · Expert

If we didn't make mistakes Georgie, we would have nowt to learn from.

Worst possible scenario is that you will have to wait 6 or 12 months to revise your fees. Good luck with the work and congrats on securing the client though.

Neil.

BobHarper · Guru

@Shaun - your comment on Ron Baker/Value Pricing is both predictable (classic technicians knee jerk reaction) and shows and complete lack of understanding of the concept.

Have you read Ron Books, specifically where he explains why time based billing is unethical?

Your impression of me is also wrong (like most people who don't work/know me) and whether I do accounting work or not is not important. The value in Crunchers is helping franchisees be successful. There is actually a good argument that I should not do any client work because this takes me away from franchisees.

As it happens, I am doing some client work (see below) but my main focus in the franchise and we are doing well with our first Crunchers Accountant franchisee. A case study is being produced.

The work we are doing right now includes a) assisting one client seek a claim for professional negligence (we are working on 25% of the claim) b) helping another client develop and implement a new Positioning strategy (which has generated 200 leads in two weeks) and c) encouraging another client shift some old stock with a new online promotion (which proved successful).

BobHarper · Guru

@Shaun - I am not telling accountants how to do accounts and tax, my input is on practice strategy, marketing, selling and pricing.

We are not talking about management accounts but pricing. But, why have you not read Ron Baker's work when he is so important in our profession?

My examples of work are what is important to the client. It is not traditional accounting work, that's why we call ourselves Alternative Accountants.

kjmcculloch83 · Expert

Are you a qualified accountant Bob?

EagleEducation · Senior Member

As a relatively new visitor it does look like you gang up on poor bob! Shouldn't people be encouraged to share ideas and contribute? Or am I missing something?

Be kind to me :))))).

Spamkebab · Expert

There's no ganging up Sonya, it's a case of Bob coming at things from a different angle and not having anyone, as yet, travelling along the same path. (on the forum)

I'm neutral in any of these "debates" and find both parties comments rather interesting, educational and often amusing.

Healthy debate between grown boys.

Maybe the site needs a mother figure lol.

EagleEducation · Senior Member

:D lol