RSS feedsBusiness owners face a variety of problems: lack of time, staff issues, cashflow, red tape, profitability and, of course, worry over where the next sale is going to come from.
With new products and services ready-packaged and available, accountants are in a position to help clients with many of these issues. So, why do so many firms continue to keep themselves on their clients’ blacklists by charging for the time it takes to produce something their clients don’t want? Clients don’t want accounts, although they do need them.
One of the developments of recent years is accountancy firms offering fixed prices. This approach solves a major client frustration – surprise bills. Still, this is a long way from the ultimate objective of turning clients’ perception of fees from a cost into an investment. To do this, firms need to change their pricing philosophy, not just how they present the price.
Creep show
At grass roots, accountants are now offering fixed prices for compliance-based services. As a result, many have experienced the danger of ‘scope creep’. This is where the nature of the engagement changes and the work takes longer as a result. An example for the completion of accounts would be the client delivering substandard bookkeeping, perhaps with the bank not reconciled.
One way of dealing with this is to raise an extra work order. This will avoid the potential for financial loss, but is it the most client-centred way to run a professional services firm? It’s the equivalent of an insurance company not paying out because of the small print. Isn’t it better and more in keeping with the role of the number one trusted adviser to work with clients to help them avoid situations such as this?
Start helping clients to improve the quality of their bookkeeping. Linking fees to the quality of the books avoids the dangers of scope creep and providing free bookkeeping software and financial systems training is the way to support clients. This way you can encourage your clients to agree to switch to a value-based, fixed-pricing approach.
Involving clients like this encourages you and your clients to work together to ensure maximum value for every pound of their professional fee budget.
In return for your clients’ involvement and changing their behaviour, you can reward them with higher service levels and a wider range of services. This mutual commitment is the key to a truly successful relationship.
Remote control
Helping your clients to improve their bookkeeping through the use of free financial systems and training ensures they have tighter control and better management of information during the year. It also gives clients some protection from the dangers of tax investigations at a time when HM Revenue & Customs is piloting interventions. Installing higher levels of control, security and peace of mind in clients must be key service objectives for accountants.
Data value
Focusing on financial systems and getting good quality electronic data gives firms the capability to use processing centres such as MIS. As an example of what is possible, processing centres can produce final statutory accounts from clients that use more software for a flat fee of £50.
With the market accepting about £1,500 for a small limited company, you can concentrate on delivering value, perhaps through benchmarking, tax budgeting, business advice and financial services, for the same fees you previously charged for just annual accounts.
As your clients’ books improve and you have more time, you can develop consulting skills and devote time to helping clients develop their businesses. You can also start focusing on your clients’ experience – on customer service.
As a result, your clients will come to rely on you more and loyalty will improve exponentially. Your relationship will improve, trust will deepen and you will have more opportunities to introduce further fee-attracting services and to identify areas for clients to improve their businesses.
As their turnover grows, so do your fees. And, at a stroke, you have moved from compliance accountant to consulting accountant. This is good for your business, your clients and your people.
To help implement this initiative, firms can use pricing software. For example, Times Up from AVN (www.avn.co.uk) is set up for accountants to offer ‘accounts for free’. Another option is FFAP from Squosh software (www.ffap.co.uk). The lesson is that you should adopt value-based fixed pricing before the market price shrinks so much that the opportunity passes you by.
Better class of client
Paul Miller of Cornish Accounting Solutions is a committed advocate of value-based fixed fees. In 2002, Miller 'sacked' 30% of his clients and started moving clients into written fixed-fee agreements.
The results have been spectacular, even though he is still in the process of switching clients to the new arrangements. Miller has reduced his client numbers and increased his turnover. Client referrals are much better quality and he feels he has a front-end filtering system in place that gets rid of clients that are unprofitable. At the moment, 55% don’t get past the initial quote.
Miller’s target is to move all clients to fixed fees, and he has set monthly targets to that end. He feels he now has a proper advisory relationship with his clients; as a result, they are happier and more loyal.
Big benefits include improved cashflow and no more bad debts. His biggest lessons are scope creep and not capturing value. He explains that his clients are actually starting to set their own fees to a large extent.
As Miller puts it, some people want a Mini service, some want a Ferrari service. Clients pick from the services on offer and the fees are set accordingly.
Bob Harper is sales and marketing director of More Software Ltd
