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Just lost a client, when I asked why they said they had been quoted £80 annual fee for self employed tax return

Just lost a client, when I asked why they said...

I was stunned.  I charged £175+VAT last year for a simple job but still, £80, how can they do that and make money?

Of course, I said Good Luck to you, Bye and offered to correspond with the new accountant as per normal.  More because I want to see who on earth it is charging £80 with presumably no VAT. 

Now it is a quick and simple job to be fair, but surely that is desperation to charge £80 annual fee?  Or maybe a bookkeeper who thinks it's a 'pricy' job?

Anyone else lost clients to such a tiny fee?

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By Monsoon
04th Jul 2011 12:20

There's always some!

Good luck to them. Hopefully they won't get stung and realise they get what they paid for!

There will always be people doing it cheaper, and always customers shopping on price alone. There are plenty of customers willing to pay more for added value or quality or qualifications or whatever it is we offer at a sensible price ;)

You have 2 choices, either just let them go, or explain why a higher fee is better and what extra they are getting for their money.

£80 to me sounds like a bookkeeper charging a flat £15-£20 per hour for books, accounts and basic tax.

I've not lost to anything this low (as far as I know!). I know I've lost on price before, but I don't let it worry me.

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By Monsoon
04th Jul 2011 12:28

Oh, and

maybe they think they can make money charging such a low hourly rate (presumably because in a previous job they got £6-7ph and are now on more than double that). I think it's new people in business who don't understand pricing and who will rapidly realise they aren't making money by charging that low - the hourly rate you charge is not what you earn! I don't think some people understand the difference between hourly rates and charge out rates. Either that or they are so desperate they will undercut everyone to get at least some money in. Which is sad.

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04th Jul 2011 13:00

OR

The new advisor is merely doing it for a bit of extra cash.  I've come across many semi-retired accountants (me in maybe 2-3 years!) who don't need the money and just do it to keep their hand in and for some extra income to suppliment their pension.

As Monsoon says, there will always be a lower proice out there and all you do is decide a bottom figure, below which you won't go.

Also don't forget that there's more to clients than just an hourly rate (the reason I don't use them).  I charge several clients rock bottom fees because they are good sources of recommendation or the work involves niche areas where I don't have much exposure and need to keep my hand in or there is a great deal of potential to expand my work with them in future years.

Finally however, if a client's prime deciding factor is price, then they should not be a client.

 

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04th Jul 2011 13:01

We have experienced something similar

My most memorable was when I first started, and I had a potential ask for a quote. My quote was double that of his current accountant, so I said I couldn't compete on price and asked why he wanted to change. He said his current accountant was difficult to contact, and everything was always late.

I told him he had to choose between a decent fee for decent service, or stay with his current accountant. He stayed with his current accountant!

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04th Jul 2011 13:23

It depends

If what you're talking about is someone UK resident, providing you with complete 3-line figures or a P60, a smattering of interest and 2 ex-privatisation share divs, then £80 is not unreasonable.  You could do such a Return in 5 minutes and if the circs didn't merit anything beyond that, why should they pay more for superfluous partner/manager review time or guidance on inheritance tax that they really don't need?  I'd charge £100 for such a project

If all I want on my car is to check and fill the oil, I don;t have to take it to a main dealer.   

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04th Jul 2011 13:35

I've lost a handful of clients recently for small fees

 I had a spate of a small number of clients leaving for smaller fees £100 for book keeping and completing a SA that I couldn't hope to match. One of mine left to someone who was working in a finance dept in industry and was doing book keeping and tax work in his spare time to "earn some extra cash because hs company wasn't paying bonuses this year"  This individual didn't seem to have any overheads when he rang me with some queries on the handover he used his employers phone! I wasn't worried because the client he took was a pain always moaned about having to pay tax and never listened to advice.      

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04th Jul 2011 21:04

Expect more of this as we live longer and pensions fall. 

Accoprding to 2020 their are 50 plus Websites in the USA which will do tax returns for free. They are run by insurance companies so they can sell insurance.

Bob Harper

Portfolio Marketing for Accountants

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By Gilly
05th Jul 2011 12:58

Depends on your definition of simple.

£80 for a SATR is reasonable, under certain circumstances - eg. if the entries are 1 P45, 1 P60, 1 dividend voucher. Minimum calculation, no accounts, no fiddly bits, no extras, no advice, and all done within 30 minutes.  SATR's for self-employed people aren't usually as simple as that, though.  £175 seems like a good price.

Some people just want their return filed and aren't interested in anything else.

 

 

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By Luke
05th Jul 2011 13:46

Thanks for replies

It just seemed a very low price to me, and I found myself middle of the road veering towards the cheaper end of those in the sole practitioner survey not so long ago.

It is a client I saw once a year, did the job and didn't see them again until next year.  And not one who was likely to gain me lots of work, although I did get one referral from them it was a not so great client who I still have.

The amount of money I am losing doesn't bother me, although obviously I'd rather have it.

By the way I do do a couple of SATR for £75+VAT but they are employees with savings interest and that is it.

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05th Jul 2011 16:26

Should've Asked Dom...

I recently lost a client of five years' standing whose fees each year varied between £5k and £10k, largely on matters relating to his business. He'd previously spent the same with another accountant, although I was conscious that we'd made a better job of being available and lowered his tax bill somewhat (mainly because the previous accountant hadn't encouraged dividends in place of salary).

He found a local (qualified) bod to take on the whole shoot for a fixed price £1,800 per annum, on an unlimited service basis. Delighted with the miniscule fee quote, our hero "interviewed" his new accountant to finalise the deal; whereupon the new boy cracked, dropping his price to £1,200.

All of which goes some way towards demonstrating just what poor negotiators many accountants are.

I used to think that our industry was undergoing the same price changes as optometrists went through, when a handful of no-frills discount firms such as Specsavers cornered the market for what had previously been an overpriced service. But in reality our industry's price falls have little to do with scale economies, efficiencies brought about by systemisation, standardisation of products, market share, or any other micro-economics reason you might care to think of; rather we're just an overcrowded industry with extemely low entry barriers, which naturally attracts a huge influx of new entrants (many of whom seem only too happy to work at minimum wage levels).

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By DMGbus
05th Jul 2011 17:31

Quality

On another thread recently on AWeb the story was told that £240 was billed to a sole trader and this was achieved by using a subcontractor who was paid £80 for "an hours work" to prepare the accounts and tax return for a sole trader client.

We were not told what sort of records the sole trader kept, nor size and complexity of business.

I rather think that quality control might be lacking here in this quoted example if a set of accounts and tax return really can be produced in one hour.

There many clients out there who just want a cheap fee and don't really have the knowledge to differentiate between shoddy cheap work (one hour to produce accounts and tax return) and something better but costing more.

PS. I do have one sole trader who I charge about £75 a year, there's about two hours work involved all told and this low fee and low time cost is because this is a long-established client (over 20 years) who has fallen on hard times and he undertook to add up all his records and provide me with "accurate" summary totals for review and conversion into accounts for his SA103.   This is an exception, as most of my other sole traders are over £200 annual fee.   

 

 

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