When you go for a new pair of shoes would you expect to pay the person measuring your feet or just for the new pair of shoes that already have the cost of the person who measured your feet built into their price.
If nobody else charges for a service then why would a client pick the one business that charges for it over those that do not.
Add to that that MLR is for you and the Government with no benefit at all to the client. How do you sell them on parting with money for the privelage of checking whether you want to take them on as a client.
Consider MLR differently. Consider it as an opportunity to check out a client before you decide whether or not to allow them into your stable.
I would not attempt to charge for MLR checks.
If I take a client on my standard terms are a business cheque for three months in advance and then monthly by direct debit from the business account. (I use little things like that as excuses to emphasise to clients the importance of keeping their bank accounts seperate).
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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.
A valid point, about new shoes but then I just go buy the size I have always taken.
But then if you go to the opticians you have to pay to have your eyes tested, even though the glasses you are buying already have additional cost built in. And if you don't need glasses you still have to pay to be checked.
I don't know if anyone else charges for this, but an Admin fee could include anything from preparing a contract or letter of engagement to setting up folders and client VT files. If you go to an accountant I'm sure they will charge for this sort of thing and solicitors well they will charge you twice and then some more.
3 months in advance is interesting, I do like the busines account idea mind. But then do you offer credit or is it always an advance payment?
Whats your idea on minimum contract terms? I have been thinking about getting clients to sign up to a 24 month contract with a guarantee that there will be no price incease for at least 18 months.
Again I haven't done this before so not sure if it's something people have done and failed at or not even tested the water with.
I don't charge an admin fee and haven't heard of anyone else charging for this. As Shaun said what benefit is there to the client of charging for setting up things that you need to do in order to work with them?
If you were setting up a VT file for the client to them work on themselves that is something you could charge for.
With regards to contract terms I think you need to be wary of setting fixed terms until you have worked with a client for a while, I know I am wary of getting locked into services I haven't tried and don't know if I will be happy with. Many contracts are rolling with a notice period which gives flexibility on both sides - what happens if you tie yourself into a contract with a client that you want to get out of but it still has 18 months to run?
I very good point on getting tied into a lengthy contract.
Thats why I ask I can see the positive side of getting work for the contract period others with the experience look at the other side as well and see more pitfalls.
I very good point on getting tied into a lengthy contract.
Thats why I ask I can see the positive side of getting work for the contract period others with the experience look at the other side as well and see more pitfalls.
Part of this role is having a commercially sensitive view. Try doing a pros and cons list of all your ideas and asking your mates for starters. Eg of a con on the contract from a clients point of view is your pal who closed down her childminding business - how would the fact you have both entered into the contract work then. You could enforce the payment but that wouldnt do you any favours locally when she starts badmouthing you for having to pay for a service she hasnt had (if she wasnt a pal of course!).
If I asked my clients to sign such none of them would, yet Ive had clients on my books for over 3 years (which is as long as Ive been in business!), with most of my new clients coming from recommendations from my other clients.
I personally would never sign such a contract.
From a clients view point - how do they know that they are going to get a good service from you, if they dont then they will be stuck with you for 2 years.
Plus the fixed fee thing for 18months wouldnt work for me. There are of course lots of debates about fixed versus hourly - I do have both. I have one that I put on hourly and Im so glad as despite my quizzing them about the nature of their business and getting a good grip on, their industry has changed and this has seen the way they work change hugely, with their business exploding - I now earn more than 4x what I was doing at the start. Imagine that in a 2 year contract!
Sorry to say that your analogy of the opticians is flawed. Opticians broadly provide two services - eye test and selling glasses. You can buy one from one opticians and go to another to buy the other service. You are NOT providing two services to a client wanting bookkeeping and needing MLR. MLR is not a service but something you legally have to complete. What costs are involved anyway? Its a admin cost to you, just as much as your eg stationery costs so it should be built in to your margin.
You say ''If you go to an accountant I'm sure they will charge for this sort of thing and solicitors well they will charge you twice and then some more. '' Accountants/solicitors do NOT charge separately for such things. They work on either fixed fees or hourly rates and their original costings are done using the same concepts as any other services/manufacturing based business - Im sure you will have covered this in one of your first training modules. Or are you thinking of the fees solicitors providing certified copies of ID documents to us (eg when we have remote clients) - that obviously is a different issue.
'Offering credit' - please note you CANNOT do this unless you are regulated by the FCA.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
You are not charging interest, simply stating when payment is due.
Payment by credit card or payment received without interest in four or fewer payments does not constitute a credit agreement.
On the seperate question of signing up 24 months in advance, in addition to Alisons point about it not necessarily about trapping the client, such is unlikely to be enforcable in a court of law although you would need to seek legal council to confirm.
As with many companies to have such is simply working to the principle that clients will simply pay without going to the expense of challenging it. However, are you gbig enough to fund an extended legal case where you would not be awarded costs? Probably no more so than your clients so if they walk what exactly would you do about it?
As stated by Jo, Accountants subsume costs such as MLR into general fee's for a client rather than charging seperately for such.
I actually use it as a selling point that provided that their fee's are up to date my clients can walk away any time that they want to.
Do you really want a client that doesn't want to be with you?
We sell our services on the basis of quality of service and if a client wants to move to a cheaper option then do you really want to keep that client? Let them go in the knowledge that they will be back and you will make more money from them in fixing the mess that someone else has made (as if they didn't they wouldn't be back again).
p.s. I did have a consumer credit licence when I first started but I allowed it to lapse as I am not offering credit terms.
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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.
I thought 30 days was standard business terms and generally used and accepted by all.
There are no standard invoice credit terms per se. Depends on the industry. I have one client who has 180day terms with their own clients.
If you want to do 30 then fine - but Im just saying why wait that long for your money? You have to build in the fact that you will have to chase most to get the money from them and can your cashflow cope with such terms when you are new to this?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I thought I would be chasing anyway there are always people/companies that like to hold off paying as long as possible, I know I'm one of them.
If I can get away with the money being in my account an extra day I will.
As for cashflow nope not really but I just assumed that's what everyone else would be offering. I like Shaun's idea of charging first 3 months upfront but I'm not sure people will go with it.
If your an established business then people will part with their cash more easily.
People will only get away with as much as you let them. One of mine tried it on, was late paying, so I downed tools - there was panic stations when it was the staff payday and amazing how quickly he caught up to date with his payment then. Then when I asked him to collect his books he panicked again - agreed to payment up front so I would keep working for him!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
1. If you want to charge for MLR checks and doing engagement letters then charge for them. But as no other accountant charges for this and there is no benefit to the client for you doing this work then why would they pay you £x rather than go to a competitor and pay £nil.
2. Same with setting up VT files or any other system. If it is for the client to work on then fair enough you have saved them time setting it up and will have set it up properly (or at least should have). If it is to set up your own files for working on the client then again why would the client pay for this. There is no benefit to them.
The above are costs that are generally absorbed in the overall fee you charge. Ok you might spend a few hours more the first year doing the accounts because of MLR, engagement letters etc. But such is life. Over the life of the client there will be years where you spend less time than the fixed fee.
Regarding how you charge clients. Again entirely up to yourself. Common terms are; 30 days credit, 14 days credit, 7 days credit and no credit.
Personally I am with the latter. As giving credit costs time chasing clients for fees which is lost time.
Most of my clients are on monthly DD with GoCardless (historic clients are on standing orders but in the process of changing them over to DD).
Benefit of the DD is that know what is coming in each month from a cash flow viewpoint and suits most clients as they can spread the cost over the year.
When a client signs up they are paying in advance for the year. Of course there can be different scenarios;
1. If they have set up say 6 months then give them a couple of options to pay the year over the next 6 month or pay say the first 3 years over the next 24 months.
2. Some small fees will just do an annual fee which is paid on completion of work and before submitting as after you have submitted you have no leverage for the client to pay you. If you only submit once paid then the ball is in your court.
We also give discounts to clients.
1. 10% off their fixed fee if they hand in their records within 3 months of the year end.
2. But reciprocal of this is they hand in in month 7 there is 10% added on, 25% added in month 8 and 33% in month 9.
So basically up to the client what their fee is. Can be as low as 90% of the fixed fee or as high as 133%. Depending on when they hand their records in. All clients know these rules at the start. Most of our Ltd Co clients have a March year end and already most have handed their records in. Which works for us as gives us plenty of time to get the accounts done.
Sole Traders/Partnerships same rules apply but dates slightly different in that 10% discount if hand records in before July, and uplift if handed in Nov, Dec and Jan.
This is what we do but plenty of other accountants give 30 days clients.
But as said at the start it is your business do what works for you and your clients.
I had one potential client recently who I quoted £1800 + VAT to do what they needed. I would normally never do this as a one off fee given the amount. However they definitely werent wanting to set up a DD so was a choice of no client or annual fee. I said was ok with the annual fee but they ended up going somewhere else where they got a lower quote. So fair enough. There was a time I would have proposed a fee of £900 + VAT for the work needed but dont need the work as got plenty so now always quote clients the full fee for that think is justified.
