Fixing Prices - The Book-keepers Forum (UK)

betty121 · Senior Member

Fixing Prices

Lyndsey · Senior Member

Hello all

I've been considering my pricing structure recently, and I'm interested in offering fixed prices for some services, but need some guidance as to go about it.

My 1st thought was a fixed price for SA returns. I've jusy passed the ICB diploma and yet to offer it as a service, but hoping I may get some last minute ones Nov/Dec when people start to panic. I have only ever done my own return (additional property income) and my other halfs small self employed business & rental income. Mine takes me under an hour (12 income invoices and about 10 expense. I have looked online at how much people charge for landlord returns £90-125 (1 property +VAT), I wasnt thinking anywhere near that figure (prob around £50 no VAT) or am I being naive? I don't want to overcharge and lose potential work, but then I dont want to undercharge and find that I'm not earning enough.

My other halfs return takes a bit longer, however, I do his books montly and just have to do year end adjustments & calc capital allowances

How have people gone about fixing their fees (I am really looking at the extra services ie SA, Payroll and not really monthly bookkeeping)

On another point, when you do tax returns would you do bank recs? or would you just take their invoices and reciepts on trust that they are all valid?

Shamus · Forum Moderator & Expert

You may be missing the way that we cost SA returns.

think of them as a set of building blocks.

Basic employment self assessment return. Say £60.

Add a rental property £60

Add self employment : Say £60 (but also on the back of seperate accounts preparation plus any bookkeeping work).

Then look at the whole and consider discounts for multiple parts of the return (i.e. knocking the fee down to £260 for 5 rental properties (£40 each plus £60 base return)).

If you sell it that way rather than selling self assessment as though it is a single service clients understand the additional fee's rather than baulking when hit with a bill for several hundred pounds.

You will however find most clients quite straight forwards. In a case of someone with one rental property and employment income I would as your investigation suggests be coming in at £120 plus VAT.

On the accepting invoices and receipts on trust.... Never.... Clients hire us to keep them out of trouble and they would not be too happy about huge penalties (plus interest) on the back of errors that we should have spotted.

If you are trying to compete on price there is always someone willing to do the work cheaper and all you will do is find that you keep lowering your price to win new clients.

There are actually two distinct cost models, Cost and Differentiation.

Always persue differentiation of your service if you want to survive otherwise you end up in the fools paradise of lots of work and no profit.

I differentiate by being traditional, Bob harper differentiates by being at the cutting edge. Whilst we are at opposit ends of the spectrum the commonality is that we both seek to differentiate our services from the competition.

You have costs (software licences, professional memberships, PII, Travel, office space, a salary for yourself of at least minimum wage (thats not a legal requirement for the self employed but its what you should base your computations on)).

£50 per client regardless of their needs is going to take an awful lot of clients to return a profit.

hope that helps get you started in thinking of your pricing structure,

kind regards,

Shaun.

Lyndsey · Senior Member

Hi

Thanks for the advice - its always good from Shaun!

I understand that self employment returns i.e. from source docs will take a lot longer depending on the size of the business. I was looking at a price from £125+ but you cant really set a single price as some business may take a couple of hours some 10+ hrs & would definitely want to do bank recs for business.

Out of interest if you did the tax returns after you have done the monthly bookkeeping throughout the year, what additional would you charge?

The £50 price was intended for just property income return (plus the basic employment).

I've been trying to single out markets which I know need to do returns which I could target (just to point out I'm doing this part time around looking after my daughter, so small is fine for me), ie "unintentional landlords" people who couldn't sell their homes but had to move so have to rent out (I know from personal experience).

My thoughts were that the majority of these people would never had done a return before & do not really know anything about it, and with 1 property the source docs will be minimal. From my perspective I wouldn't have paid someone £120+ to do my return for me (but I am a bit tight when it comes to spending money!).

Many people I know that rent out property they do not have a separate bank accounts for income/expenditure relating to the rental. How would you go about reconciling their receipts/invoices.

MarkS · Expert

It all comes down to how long you think the accounts and tax return will take to do. Until you do you will win with some lose with others.

I price a basic tax return (with self employment income, maybe some bank interest and dividends) at £50. Would add on £100 if they have a property. If they need accounts doing then it is a case of taking an educated case as to how long it will take based on level of turnover, standard of books, number of invoices etc.

Did a sole trader today, set of accounts and only self employment income on tax return. Price agreed at £360 and all done and drafts sent to client. Has taken me just under 4 hours to date and that I after the client saying that I asked a lot more questions than normal. His previous accountant charged £450. He doesnt operate a business bank account and didnt have receipts for all expenditure. I am different from Shaun as being at the opposite end of the spectrum in that I dont need to cross every t and dot every i. At the end of the day it is self assessment and will come back to the client to prove the information. I have confirmed with the client that they will be able to supply documentation if anything gets investigated. They said that is fine and I have documented that on my file.

I have a one client that rents out a property, has P60 employment income and pays as private pension. He doesnt run a separate bank account so only was to do income and expenditure is just to list the rental income received and all the expenditure. Not possible to do bank rec. Price agreed at £250 and took about 2 hours to do in total.

For all new clients I am giving fixed prices and asking that they pay monthly by standing order so they have fully paid their fee by the end of the relevant period. eg if a client comes to me with a February 2013 ltd company year end and we agree a price of say £1200 then the £1200 would be payable by Febuary next year. So would split as £400 for Dec, Jan and Feb and then reduce to £100 per month thereafter. Everyone that I have signed up to date has been fine with it. Trying to get all other clients to move to monthly after agreeing yearly one off fees and proving not easy to get them all to move.

I try and now price jobs so can be divided easily by 12 so gives the client a round amount to pay each month.

Seen a potentially large client the other night. Got two businesses one with turnover of about £800k and 20 employees, one with turnover of about £50k and his wife got business with turnover of £60k. Going to be quite difficult to price as he wants bookkeeping, quarterly mang accounts, payroll, VAT and year end accounts etc for large company and just year end accounts for the others. Thinking price of about £600-£700 per month for everything. So will see how it goes.

Regards

Mark

YLB-HO · Guru

There is a lot of good advice here.

I have recently increased my charges for SA depending on how much extra "specialist" knowledge I provide. There is a fine line between "over/under" charging.

A couple of years ago, a higher rate tax payer asked me how much I would charge to do thier tax return. (P60, P11d & pension contributions). I quoted £250.00. I got the work. They had been with their previous accountant for about 15 years, and had paid them £250 in the first year, and the fees had gone up every year and when I took over they have reached over £2k (!)

I also asked more questions than the previous (Chartered) accountant, and discovered they had never claimed for Gift Aid. So I also made a backdated claim and the tax rebate was more than the fee I charged for all the work I did that year, so the clients also knew my tax work was better than the previous accountant. The tax return, correspondence questions etc., takes me on average each year 1 hour, and I still charge £250.00 This client would not have confidence in someone who only charged £50 to do it correctly for them, even if they could do it, so sometime charging a "reasonable" fixed fee can back fire. Having a number of these higher fee paying clients, means I can spend more time researching and increasing my specialist knowlegde without worrying about making enough money just to pay my bills.

-- Edited by YLB-HO on Sunday 18th of November 2012 12:32:31 PM

Don Tax · Expert

Just a little thing re. £50 or £100 Tax Returns. Purely under PAYE, HMRC would automatically 'code-out' small underpayments I try not to do this except in the simplest of cases or if the client is particularly hard up.

It mixes up tax years.
Either the Revenue or employer get it wrong - too many cooks spoil the broth.
It invokes some uncommon rules such as the maximum 50% of income source and can do crazy things with the SA P.O.A. system.
You're checking paperwork from two years ago.
The same amount of tax is payable (though it is an interest free loan)
It generates calls explaining to clients what is going on.

Much better if you can say XXX is payable by 31 January and draw a line under it. All in all, the time taken can quickly double if choosing to code out.

I am actually doing a relatives self assessment now and will code out, but I know it will be a one-off and I won't need to be flicking through endless code notices EG. relating 09/10 to 11/12 and so on to see what code was actually used in the payroll.

kind regards,
Tim

Lyndsey · Senior Member

Hi all

Thanks for the advice, not got much time to go through properly atm, getting dinner ready!

I understand your comment about the people not trusting a £50 tax return. I was thinking exactly the same earlier on today. Its all about price perception/expectation. If you charge too little people this you are not going to give them the service of people who charge £250. If we all paid the cost + living wage for everything we buy, the world would be a very different place!

However earning £250 per hour does sound a lot! :D Can't wait for that!

I am glad I posted this to get a feel about what others are really charging, as it can set me a ball park to set my prices on.

Will have a proper read later

Thanks again

BobHarper · Guru

@Lyndsey - there are two ways to approach pricing. Option one is to price the job, option two is to price the customer.

I would recommend you explore option two because (although it is not the easiest option) I believe it is the best in terms of value for client and profit for you.

Option two gets you to think about what you do and how you do it.

I would also recommending different options so the client can choose the price they want to pay.

Amanda · Expert

@Bob, can you elaborate a bit more on 'pricing the client'? Not sure exactly what you mean but am interested.

ta

Shamus · Forum Moderator & Expert

No, no Amanda. Don't ask.... Too late... lol

Pricing the client.

Hold client by their ankles from an upstairs window with an assistant accountant standing beneath with a bucket. When either bucket is full or no more money comes from clients pockets the client has been priced.

No, no, bad, bad, naughty Shamus. Stop playing and get back in your box.

Its all to do with the value pricing ideas of Ron Baker Amanda. There are plenty of threads which discuss this, generally with Kris, Bob and Myself as prime debators.

Bless his little cotton socks Bob seems hell bent on giving Kris and Myself an epiphany (or mental breakdown) in relation to value pricing as he is a very strong advocate of the approach.

Anyway, as I say, plenty of old threads around and in amongst the arguments which occasionally get out of hand there is actually some quite good debate.

kind regards,

Shaun.

Amanda · Expert

Oh you are so funny Shaun!!! Like the attitude!

In other words bleed the client dry, like it!

Sorry maybe I shouldn't have asked the question?

kjmcculloch83 · Expert

Actually, for all the discussions I'm really none the wiser. I do remember that you shouldn't leave money on the table, which sounds like these annoying people who ask your budget before giving a price. I had a guy giving me a price for new windows, his first and (by a strange coincidence) his last question was "what's your budget?" Why does it matter? I'll tell you what I want, you give me your best price and I'll compare.

It actually sounds like sage style selling, you know the "what do you mean you have money left? Have you seen this?"

I was close to an epiphany one, but then it went away.

Kris

Figurate · Senior Member

I'm none the wiser either (well not on the BH interpretation of RB's book, anyway) but threads on "Value Pricing" are good for light entertainment, although they never seem very constructive...

BobHarper · Guru

For those interested I have written a post about pricing http://crunchersaccountants.co.uk/bad-pricing/

It explains why I favour Value Pricing...enjoy.

Shamus · Forum Moderator & Expert

I've read it (and the follow up).

I'm not going to get sucked into another fight as I really don't have the time to play at the moment. However I will say that the list is wrong and misleading.

Whether time based billing is right or wrong is a matter of conjecture but if anyone read that list they would read it as fact rather than merely your personal opinion (or the shared opinion of others who are similarly misguided).

Whilst the disclaimer at the end is good it is no defence for yet another rant against accountants.

I may dig this thread out and tear the list appart item by item sometime after Christmas but for now I'm a bit too busy.

However, between now and then think on this one...

Accountants do not attack Crunchers (that would be unprofessional), why do Crunchers feel it neccessary to make themselves seem better by attacking Accountants.

Amanda · Expert

Over to you Kris........................

kjmcculloch83 · Expert

Like Shaun, I'm pretty busy right now. Having said that even if I wasn't I wouldn't really wish to comment further than it's dross.

It's just the typical Crunchers "We're the best everyone else is shit and out to steal your money". It's just one huge ego trip, but if, as a client, that's what you're after who am I to argue?

Kris

Shamus · Forum Moderator & Expert

It won't be an attack on your billing model which as I said before you are free to employ whatever billing model works for you.

My point by point breakdown will be against the misinformation approach taken by Crunchers. You are standing upon the shoulders of a profession and decrying it to those who may already be misinformed for your own benefit.

I've already taken a copy of the 16 points and will publish my response the day after boxing day.

Why can Crunchers not push their wares on their own merits rather than trying to sling mud at others.

By all means tell me that your way is good and give reasons and I am sure that many will join with your way of thinking.... But do not tell me that my way is wrong and that yours is better.

By the way, as of this month AAT is now a member body of IFAC so the IFAC ethical code of practice is now also applicable for AAT people.

How long do you think that it will be before ATT is also brought into the fold?

Once a member of IFAC nothing that one say's or does can be disparaiging against other accountancy practices or the profession and you cannot make unfounded claims about the superiority of your own services.

When that comes to pass a disclaimer will not work as a get out of jail free card.

p.s. amended because I had a mouse problem and hit submit before I intended to.

-- Edited by Shamus on Saturday 24th of November 2012 12:59:49 PM

Spamkebab · Expert

Need some cheese?

Like there isn't enough in this forum already lol.

I didn't know about becoming a member of IFAC (just off to read up on that) although i have been

a little busy of late and a little late being busy. I did know that AAT have made the Ethics module

a mandatory requirement for those who haven't taken the qualification the QCF? way.

Neil.

P.S. am i now an Accountant by default?

Hmmm... International Festival of Athletics Coaching, i hope i have the wrong page, i don't 'do' athletics lol.

-- Edited by Spamkebab on Saturday 24th of November 2012 01:36:19 PM

-- Edited by Spamkebab on Saturday 24th of November 2012 01:37:19 PM

Spamkebab · Expert

I'm already a recipient of PQ. I just have not had time to sit down and look at my mags lately.

I'm always on the AAT website too, but obviously looking at the wrong right things lol.

What will it mean for the AAT?

I'm stuck trying to get a plan together for submission, before i can start this project im

on with.

-- Edited by Spamkebab on Saturday 24th of November 2012 01:57:29 PM

Spamkebab · Expert

Neil. C.

Spiritual and Holistic Business and Accountancy Services.

Using tea leaves and mother nature to predict your

financial position since god was a lad.

Actually, i could try and get Sheila on board with that one.

kjmcculloch83 · Expert

I have had one or two clients in the past who thought this was a particularly good system Neil.

Kris

BobHarper · Guru

@Kris - you are free to disagree and argue. I am interested in here the basis of your argument.

@Shamus - I look forward to hearing your views and I am attacking the billing model because I feel it is harmful.

kjmcculloch83 · Expert

BobHarper wrote:
@Kris - you are free to disagree and argue. I am interested in here the basis of your argument.

@Shamus - I look forward to hearing your views and I am attacking the billing model because I feel it is harmful.

You suggest that those using fixed price will not actively look for ways to cut down the time spent on a task. I'll quote for ease of others reading this.

"Others use software to work out a fixed price. But, fundamentally they still charge based on how long the work takes.

This means the more time they spend on your affairs the more they charge you. Although they may not intentionally spend longer than they need to, they are not:

1. Committed to cutting the time"

To me this is a fundamentally flawed arguement. Charging a fixed fee may be loosely based on time for many, but surely then if time can be saved profits will rise. Anyone with half a brain will be busy looking for efficiencies to aid this.

"Reason 1 Incorrect billing
Traditional accountants only get rewarded if they spend more time on your affairs. This can lead to recording time against your name which was not spent. This is called dumping.

It could be that over the year eight two minute telephone calls are recorded as eight 15-minutes units (because accountants record time in unit blocks). This would result in two hours of billing which would be a 750% overcharge."

I can't see how this would happen with fixed fee pricing. Surely the point is that unless the scope changes the price will be constant so this can not really be seen as a reason to go for value pricing over fixed fees. I would suggest that if such a practice happened it would be false representation intended to deceive to the extent of gaining an advantage or benefit for the accountant. This is the definition not of dumping, but fraud. Surely crunchers are not suggesting that other accountants are committing fraud, and if this is the case perhaps it is your civic duty to report this?

"Reason 2 Hoarding
Traditional accountants have different levels of employees with different rates. The more work done by the most expensive people the more the accountant charges. This often leads to hoarding of work, rather than delegating it to less expensive staff."

Again, if a fixed fee is charged then the more work which can be delagated to lower cost staff would mean a greater profit, so why would this not be done? It seems crazy to me.

"Reason 3 Culture of inefficiency
Most traditional accountancy firms are inefficient, they do not actively pursue the quickest way to produce accounts because their fees would do down."

And yet again this would not happen with fixed fees. The more efficient the more profit as previously stated.

"Reason 4 Clients are kept in the dark
Many business owners can significantly reduce the cost of red-tape around bookkeeping, accounts and tax by working smarter.

But, to do this they need help from their accountant by showing them the latest and best software and training clients how to use it properly."

Many accountants and bookkeepers offer training on software packages to help clients who want to do their own bookkeeping. I have myself done it. Lets put it this way, if a client is determined that they want to do their own bookkeeping but need some help to get started or some training why not offer this? Surely it's better to get some cash for setup, support and training than nothing. Again, this has nothing to do with value pricing, just good business sense.

"Reason 5 Clients subsidising internal training and other clients
The first time a firm is asked to do some work it will take longer than the second time. This is because they need to build their knowledge. So, under time based billing the first clients will always be charged higher than the subsequent clients.

Reason 6 Effectiveness
There is no financial incentive to innovate new more effective ways of working because fees will reduce.

Reason 7 Innovation
Accountants are not focussed on client challenges so do not innovate new solutions.

Reason 8 No incentive to invest in technology
There is no financial incentive to invest in new technology because the fees will reduce if the investment is successful.

Reason 9 No incentive to acquire new knowledge
There is no financial incentive to develop anything but minimum knowledge or to share knowledge which can help all clients. This is crucial because knowledge is the chief creator of wealth in the world.

Reason 10 No incentive to improve service standards
There is no incentive to enhance the service experience with increase speed of turnaround time and service levels.

Reason 11 Lack of understanding of clients needs
By charging time on jobs accountancy is dehumanised. Consequently traditional accountants have a lack of understanding and little intimacy with their clients.

Reason 12 Unexpected charges
With time based billing clients risk paying more than quoted because if the job takes longer than expected the accountant will charge more.

Reason 13 Focussing on the wrong things

There is a tendency for accountants to spend too much time on work and focus on the wrong work because it takes time.

Reason 14 Talent
Time based billing encourages accountants to working long hours on time consuming work rather than seek out valuable exciting projects. This does not encourage top talent into the accounting profession which means clients suffer.

Reason 15 Poor management
Time based billing creates a negative culture in management with an obsession of volume of chargeable time and how much clients pay for.

Reason 16 Economy

Because Accountants are internally focussed (on time and costs) they are not thinking about how they could better support their clients. This means UK businesses do not get the advice they could to maximise their performance. This impacts the wider economy in terms of fewer jobs created by businesses and less tax paid to fund health, education, . security and support for those that need help."

Just lumping these all together because they could all be valid reasons tocharge fixed fees, not only value pricing. Just an extra point on dehumanising I don't believe this has anything to do with how we charge. I meet every client I have regularly. I know exactly the issues they are facing and have an good level of intimacy with them all.

So all in all, a very good case for fixed pricing, with a small amount of mud slinging built in.

Kris

-- Edited by kjmcculloch83 on Saturday 24th of November 2012 08:55:51 PM

Figurate · Senior Member

Well, having read the list, I've come to the conclusion that I must be "cutting edge", lol biggrin , as I don't do any of the things on that list, as must the majority of the accountants I've come across...
OR Bob has been very unfortunate in the type of accountants he meets wink

On a more serious note, even if someone was billing on a time basis, it doesn't automatically follow that any/all of the16 points or "reasons" on Bob's list would apply. That seems to me to be faulty logic.
Some accountants billing on a time-basis may do some or all of those 16 things, but that does not infer that time-billing leads to these 16 things. I think that's what is logically referred to as inductive fallacy and/or a hasty generalisation.

Similarly, if one was adopting "value pricing" it does not necessarily follow that all 16 points would disappear, that again would be an inductive fallacy.
(It's a bit like the politician's speech: I was elected in 2000; the economy improved in 2001. Therefore my policies caused this improvement)

(Also, aren't point 3 and 6 on the list pretty much the same thing)

edit: crossed with Shaun's & Kris's posts, as I went off to do something else in the middle...

-- Edited by Figurate on Saturday 24th of November 2012 09:47:23 PM

Shamus · Forum Moderator & Expert

Spamkebab wrote:
I didn't know about becoming a member of IFAC (just off to read up on that) although i have been

Hi Neil,

I got the info out of this months PQ magazine.

See here for the article :

http://www.pqaccountant.com/pmag-FFFF00500180010502171957.html

its a really big deal for the AAT.

Shaun.

p.s. Isn't it time you signed up for PQ? It is free and well worth a read to see what the various bodies are up to.

p.s.2 see here for all the latest news : http://www.pqaccountant.com/news.html

Shamus · Forum Moderator & Expert

Well, for starters it means that accountants won't be able disregard you so easily as you don't have an ethical code.

If you act unethically so breaking the ethical code it means that you can get dragged over the coals, fined heavily and potentially banned from membership.

Saying anything against other accountants or the profession is just one element of it. There is also things such as acting at all times with integrity both within a work and non work capacity (minor trafic offences and student pranks seem to be ok but anything beyond that can get you fined, suspended or banned)

You cannot allow conflicts of interest to cloud your judgement. An example of that would be if you had close ties with a software company and plied their wares to clients which may not actually be the best software for the client that could get you in trouble.

Also confidentiality. Section 140 makes it clear that you cannot allow client information be be divulged... Sound easy... try having a husband and wife both as clients and not being able to talk about one's affairs (no pun intended there!) to the other.

The basic five are :

S110. Integrity
S120. Objectivity
S130. Professional competence and due care
S140. Confidentiality
S150. Professional Behaviour

Note that S130 and S150 above really are catch all's. Acting with professional conpetence implies only performing work that you are qualified to perform and due care means that you don't rush the work of a low paying client over that of a high fee yielding client.

Marketing professional services which the discussions with Bob tend to rotate around come under one's professional bodies adaptation of comes under S240 of the code.

My take is that IFAC is going to be protectionism by the back door.

I believe that it will get to a stage that only accountants bound by an ethical code will be allowed to work in this industry (similar to having to have MLR).

To my mind if AAT people are bound by the IFAC ethical code then I have no quibbles about them being called accountants. It may however take others a little longer to catch up with that way of thinking as old prejudices die hard.

BobHarper · Guru

@Shamus - attacking the competition is a key part of Positioning; you find a weakness and highlight it to the market and give a reason to change.

No need to answer 16 points, just focus on this....how can time based billing be right when it results in charging £1,500 (say 10 hours at £150 an hour) to do some tax planning and the next day £750 (charging 5 hours) for the same advice because you've done it before?

For the record, with Value Pricing both could pay £1,125 (much fairer) or the first pay £500 and the second £1,750 because they saved 350% more tax!

By the way, who first taught/told you to price on time?

Shamus · Forum Moderator & Expert

Time based pricing in my case came originally from working in industry where you are expected to claim by the hour worked. Banks, Insurance companies, Pension Companies and the finance departments of Utility and Pharmaceutical companies all expect you to charge on that basis... Of course they also don't expect you to claim extra hours so 8 times standard hours is pretty much a fixed rate for anything up to 24 hours (and is costed accordingly).

How much is your day worth? £400? £600? £800? whatever the acceptable going rate is for the expertise that you bring to the table then just divide that by 8 but don't ever expect to only do 8 hours.

If attacking the competition is a key part of positioning then it is doomed to failure as you work in an industry where that is against the ethical standards as set out by IFAC and one's professional bodies.

You will never see an accountancy practice advertising that they are better than x or the best in the area as that is not allowed.

On the charging different rates front, the general approach is that the person running the practice sets the time a task should take and the fact that trainee's take longer is factored into their training.

When we are talking about accountancy practices clients do not suffer for the lack of knowledge of one member of a practice. Thats one of the points I intend to expand upon when I reply to your helpsheet.

When you are talking about the one man band then we give clients hours where we are picking something new up and it takes that bit longer. They do not suffer for our training. (and that's another point that I will be expanding on).

I really didn't want to get into this yet as I'm too busy for a long drawn out debate which this will turn into.

I do however look forwards to a Christmas week debate.

BobHarper · Guru

@Shamus - I assume you mean one man bands don't charge all the time the first time.

If so, how much time does the owner know not charge the first time (when they are learning) when they don't know how long the second time will take? Let along the third, fourth or fifth?

Shamus · Forum Moderator & Expert

When you are attempting something and you get stuck you know how long it takes you to resolve the issue. That is time that will not need to be spent on the task on subsequent times.

When you are quoting in the first place you tell the client that the work will be done by a particular time / date, not how long it will take.

You quote based on experience of similar tasks.

For example, preparing prospective information for a bank presentation uses the same techniques as producing management reports but then adds to that added levels of what if scenario's and additional analysis.

You have an idea for how long the task should take right from the get go and the more that you do it the more it becomes a by the numbers excercise in coming up with a quote.

Any additional time in the first pass above what you envisaged the task should take is training time.

If you made a mistake in your estimating which means a client paid less than they would have had all the facts been known up front then so be it. You learnt by your mistake and the quote is corrected to take the unforseen factors into account for the next client that comes along wanting the same or similar service.

The real key is that there are generally similarities between tasks (such as the projection and management information) that gives us a starting point for coming up with an estimate based on the number of hours that the task should take a professional accountant or bookkeeper to complete.

All really boils down to experience rather than any flowchart approach to quoting.

HTH,

Shaun.

Shamus · Forum Moderator & Expert

Clients have to get their finance from somewhere. Producing projections in a manner that the bank cannot easily punch holes in the numbers is an important part of the work. Same with compliance work.

I do work with clients on their business strategies and pricing models. Its all part and parcel of the job (and a part that I really enjoy). Sure that Kris does the same as we genuinely care about the businesses of our clients.

Now getting clients to listen... Thats a whole other story.

Think leading a horse to water and making it drink analogy.

One of these days I'm going to crack and say "Told you so" when they don't listen to me and go off and do their own thing when I've told them exactly what is going to go wrong.

Maybe this is my punishment for never listening to my parents before I go off and get married agian, lol.

p.s. sorry Kris, not ignoring you. Keep slipping on and off the site between other tasks. Loving the staff analogy there.

-- Edited by Shamus on Sunday 25th of November 2012 07:23:07 PM

BobHarper · Guru

@Kris - your post is all about fixed fees so can I assume you agree with my comments on time billing?

kjmcculloch83 · Expert

Nup, you can't. You clearly at the outset lump fixed fees with time billing so one can only assume you see them as the same thing and as such you must consider your list to apply as equally to fixed fees as to hourly billing.

I am more interested though in your response to my point in relation to reason 1. Do you think the vast majority of accountants who bill fixed fee or by the hour ar committing fraud, and what steps have you taken to have these people brought to justice? Surely if this is the case you haven't ignored it?

Kris

BobHarper · Guru

@Kris - with fixed fees it depends on the approach. If you get to the fee from value then it's Value Pricing. However, if you get to the fee from cost plus desired profit then it is just the same as time billing.

So, let me ask you again. Do you agree that time billing is fundamentally flawed?

As regards fraud, I think there needs to be intention so my answer is "no".

kjmcculloch83 · Expert

If there is no intention to overcharge and thereby complete the crime of fraud are you suggesting that all these accountants you say are overcharging, or dumping, are doing it by accident?

I have long been an advocate of fixed fees, I don't think that will come as any surprise to most on this site. I do think that there are some issues with charging by the hour. I would never do it and equally when I employ service providers I never pay by the hour. Having said that there are many clients who expact this and like it, and many bookkeepers and accountants who find it simple so who am I to say they are wrong? Just because I don't beleive in it doesn't mean it is wrong for everyone. I'd be very conceited to think that there was only one correct way to charge and that was mine.

I have shared my pricing model previously, and it is based loosely around time in the first instance, but I don't think I suffer from any of the points you raised.

Kris

kjmcculloch83 · Expert

If there is no intention to overcharge and thereby complete the crime of fraud are you suggesting that all these accountants you say are overcharging, or dumping, are doing it by accident? I have long been an advocate of fixed fees, I don't think that will come as any surprise to most on this site. I do think that there are some issues with charging by the hour. I would never do it and equally when I employ service providers I never pay by the hour. Having said that there are many clients who expact this and like it, and many bookkeepers and accountants who find it simple so who am I to say they are wrong? Just because I don't beleive in it doesn't mean it is wrong for everyone. I'd be very conceited to think that there was only one correct way to charge and that was mine. I have shared my pricing model previously, and it is based loosely around time in the first instance, but I don't think I suffer from any of the points you raised. Kris

Shamus · Forum Moderator & Expert

BobHarper wrote:
As regards fraud, I think there needs to be intention so my answer is "no".

A wise decision.

If the accountancy bodies noticed things such as the list and the sheep video they might spend a little less time chasing slightly errant accountants (latest one seems to be chasing accountants in practice in a partnership who believe that one partner in the practice having a practicing licence means that the doesn't need one) and a little more of our subscriptions on getting such dangerous misinformation removed from the web.

As for Time billing.

Clients pay for our time, its the natural start point to calculate a price.

The same as your value pricing will start with you calculating how much time it will take you to do the task and using the number of hours to work out a cost before you start thinking about settting a fee for the client.

Value pricing and time billing are not totally divorced ideas as the time variable still needs to feed into the value pricing equation.

All that value pricing does is hide its time basis behind smoke and mirrors.

BobHarper · Guru

@Shaun - you are so wrong; Value Pricing and time billing are mutually exclusive.

@Kris - in your case I would get you to think about number 13. My guess is that you could deliver far more value to clients that you do using bookkeeping/accounting/tax.

Shamus · Forum Moderator & Expert

So Value pricing takes no account of the amount of time that a job takes.

How then do you know whether taking on the task will be a cost effective use of your time?

How do you know the ROCE of the task?

Of course value pricing is linked to the time a task takes.

As for point 13. Accountants are often focused on compliance work.

Yes other work can at times be more fun but thats the icing on the cake. You still have to have the cake to put it on.... Actually, thats not a bad analogy and the ratios are about right as well between compliance rooted work and additional work.

BobHarper · Guru

@Shaun - working up the price has nothing to do with time when you price using Value Pricing because you talk with the client about what they value.

If the clients tells you that bookkeeping is worth £100 a month but helping them develop their pricing model would make them £1m over the next five years then helping them achieve that will probably be a more effective activity to focus on. But, it may not need a lot of time because that is based on knowledge.

BobHarper · Guru

@Shaun - tying up the two posts, maybe you should be working with clients on the business strategy and pricing so they make more profit rather than wasting their time presenting to the bank.

kjmcculloch83 · Expert

So are you conceding then, Bob, that you were wrong in the first instance to lump fixed fee in with time based billing as the vast majority (if not all) of your points are pretty much irrelevant to this model?

I'm still not grasping the value pricing model. What if a client told you that their bookkeeping was worth £100 to them, but you know that because of the time is would physically take you (or your staff) that there would be no profit in it, would you still take it? I assume that most of the staff in crunchers are paid on a time basis? or do you value their work on a monthly basis?

Kris

BobHarper · Guru

@Kris - no, I've explained before that there are two ways to get to a fixed price; from time/costs or from value. My problem is the time approach.

Employees have a different relationship to employers than clients but Value pricing does change how employees are managed.

@Shaun - if you didn't have a business model based on charging time, don't you think you'd be more focussed on figuring out how to get clients to listen? That is the point of my post; time billing does not encourage accountants to figure things out. By the way, too many accountants tell their clients too much too quickly....persuasion and influence is a science and an art which has been decoded.

kjmcculloch83 · Expert

And in that case, that's where your argument is fundamentally flawed. I have told you that the majority (if not all of your reasons) for value pricing could apply equally to my fixed fee model loosely based on time. And yet you still somehow disagree. So explain to me, and all the good people out there, why your value pricing is better than my fixed fees.

Kris

Shamus · Forum Moderator & Expert

Nope, getting clients to listen has been the day job for the last twenty two years (and to a lesser extent another eleven before that).

Strangely I can get senior management at a bank to listen to what I have to say as we seem to speak the same language but someone just starting out in business is a whole different matter as they seemingly always know better than you do.

I have however found that they do listen the second time as that's invariably when they've now found out that what you said the first time around was correct.

Persuasion is for clients who do not respect that what you are saying is a fact. It basically means that the client has not yet learnt to appreciate the service that they are paying for.

I do not try to persuad clients. I tell the what is, what has been and what will come to be given various sets of parameters.

If the client chooses not to take that on board then they have paid for a service that they have not used properly.

I will agree that I probably give the client too much too quickly. However, I also follow up meeting by sending a client written notes on the meeting and am quite happy to go over again points made (for short discussions at no charge). I give the emailed notes to a meeting as a value added service and do not specifically charge for that but rather it is bundled within the cost of the meeting itself.

I find this particularly useful as having the write up as a part of the service prompts me to keep a note on the clients permanent file of things that we have discussed. The version sent to the client is however a much cut down version of the notes that I keep myself (to which a client has no right of access).

If I didn't send the follow up like as not I would get waylaid on other things and it would probably never get done.

BobHarper · Guru

@Kris - because your prices are based on YOUR time means you are focussed on your outcome rather than your clients.

semsley · Guru

Spamkebab wrote:
Neil. C.

Spiritual and Holistic Business and Accountancy Services.

Using tea leaves and mother nature to predict your

financial position since god was a lad.

Actually, i could try and get Sheila on board with that one.

Neil, even with my psychic powers I still tend to go with the per hour model, however, the hourly rate is client specific.

Sheila

Shamus · Forum Moderator & Expert

BobHarper wrote:
@Kris - because your prices are based on YOUR time means you are focussed on your outcome rather than your clients.

Thats not true at all and pretty bad to suggest.

We are all focused upon our clients but we understand costing approaches and the value of our time based on the hours invested for the work that we do.