Got a Ltd co client who is on SAGE and accounts are prepared well by a bookkeeper with the exception of factoring which last year wasnt posted correctly. (their first year)
They turned over £200k last year and probably charged them on the low side at £720 (as was one of my first clients). Fee should probably have been about £1200.
I do fixed fees based on turnover. They have another month to go and already their year to date turnover is £490k so probably be about £550k at the year end. Based on that my fee should be £2100.
I have said that the fees will be increasing due to the increase in turnover.
But they have said why is that the case and as their records are well maintained there shouldnt be any more additional work this year.
They are probably right in that will just take me the same amount of time providing there is no cock up in the factoring. But still not right someone turning over £200k should pay the same as someone turning over £500k.
Just interested for others thoughts how they would approach this.
I could just say I suppose the fee is the fee and take it or leave it. Expect they would probably have to pay £2000-£3000 if they went somewhere else. Was going to quote a price of £1200 which I think is reasonable for the work involved given the quality of the records.
I think that in many cases the higher the turnover the more work that we have to do so our fee's are justified. However, in a situation where we are doing little or no more work for the additional turnover it does come accross more as a tax on the clients profit rather than a straight fee for work done.
There is of course the arguement that the higher the clients turnover the greater the financial risk to ourselves in the event of a mistake or more probably a failure to advise on the best course of action.
I don't know about others here but where a client has been paying one fee level and we have both been happy with that I personally have a bit of a problem with increasing that dramatically unless there is some justification such as identifiable additional work.
Like yourself I think that an increase to £1200 would be very reasonable using the additional risk arguement but the move from £720 to £2100 to my mind may see the forming of a rift between yourself and the client which could lose them even if they end up paying more elsewhere.
I would however be looking to see what additional work I could pick up from the client to squeeze up the fee's.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Be straight with them. Business people will know a bargain when they see it and starting out is a common enough reason to undercharge. At a guess, £2000-£3000 elsewhere is very likely and they won't want to pay double your new fee.
I personally couldn't justify charging based on turnover -what if it was a relatively small business with high cost products -I for instance have a guy that sells machines at £50k + but only has a small amount of transactions per year. I agree there is more risk financially but couldn't imagine charging that sort of money for the amount of work involved in that instance and especially if the bookkeeper keeps the books in order and you are not doing them from scratch.
Flexibility is the key here, surely? They know what they should be paying you ('cos you told them) and they understand, no doubt, what they would have to pay elsewhere. Remind them your fees are based on turnover to reflect the quality of work, the level of risk and the degree of commitment you must make to provide the service.
On the other hand, you clearly recognise that not all of that applies in this particular case. So look for something in the middle, where both sides feel satisfied.
