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System for pricing

I have just finished reading Effective Pricing for Accountants and like the concepts. I would like to try some menu pricing for compliance services and was wondering if anyone else has adopted this type of thing.

The book shows that based on a survey of firms the average firm charged a price of £250 for a self assessment return containing rental income which is fine. But what I don't understand from this data is the quality of the books/records.

For example, I have a number of clients who require an SA tax return with Land & Property pages as well as Employment pages. Some clients provide bank statements, invoices for allowable expenses and mortgage statements. Others provide a complete analysis and totals for rents received, mortgage interest paid and allowable expenses.

Would it be best to provide a range of prices for my menu - for example £250 to £400, depending on whether or not the client provides detailed analysis/totals?

Any suggestions on how to approach other areas of compliance work in terms of menu pricing would be greatly appreciated, especially if anyone has introduced such a system for pricing - e.g. preparing accounts for non-VAT registered sole trader business, preparing accounts for VAT registered partnership with turnover of c£250k etc.

Also, I feel that some of my fees for this type of work (i.e. rental accounts and SA tax return) are too low and introducing menu pricing will raise some fees threefold. Has anyone experienced this before and how did you fair in terms of explaining the increases to the client?

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Attend an AVN proactivity day

@sparkey999

I would recommend attending an AVN proactivity day which would help answer a lot of the questions you have, especially how to explain increases in fees.

In terms of menu pricing, if thats the way you're going then you should have a sliding scale depending on the quality of the records the client mantains.

No doubt a few posters will come along soon and start talking about value pricing which as a concept can easily justify/explain big hikes in fees.

By the way I'm not an AVN member (yet) but I have attended a proactivity day which I found very worthwhile and it gave me some great ideas.

 

 

 

 

 

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Menu Pricing

I have just started up a very long spreadsheet indeed with a list of all the things you might have to do for a sole trader, then to help them incorporate, then after they've done that. I have an estimated amount of time which would be very variable depending on whether I'm dealing with Mr Messy or Mrs Precise, and of course that whole area of judgement is very difficult. Pricing my time at £75 an hour for the pure tax work and £50 an hour for the book-keeping work I got to about £5,000 a year if a small company needed all these services. Included would be a certain amount of time a month if they needed that in addition.

Of course there aren't going to be hundreds of clients who can pay those fees, but they are not entirely unrealistic for the right client. I think my book-keeping rate needs to be tweaked down a bit and possibly also the rate for tax. What I want most is to get paid for all the time I spend at a reasonable level. A lot of clients won't need as much as my "menu" allows for, but at least I won't be quoting peanuts if I am firm about what I will and won't do for a set fee.

I entirely agree with others on separate postings in the last week or so that if you have a feeling that the client values something more than your menu price, then that's what you charge them.

I have a long way to go before I get it even half way right.

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I think it's the only way to price compliance work effectively
@moonbeam

I think you are looking at the way you price from the wrong angle. You are trying to base the price on how long it takes multiplied by an hourly rate, which rewards you for being inefficient and costs you money if you do something amazing within that time like save them £10,000 in tax through some innovative idea you have had.

When using menu pricing, it's better to try a value based approach that rewards clients who have better records and charges a premium if the business is larger or mire complex, and also prices a a premium if the service is a valuable one such as consulting on tax or strategy.

We are members of AVN and use times up to price most of our work. The results have been really good with clients happy to pay more for the services they used to receive plus a few added value bits that cost us very little but increase the perceived value of our work enormously.

As an example, the times up software bases the accounts fee on type of business (LTD,ST,LLP or p'ship), turnover and quality of records, including whether they are using a manual or computerised system. if they want extras, such as preparation of VAT returns, these are on a fixed price per return. Book-keeping to help with the VAT return would be extra, and this is the only element which is based on hourly rates and we charge £30 an hour for this until we can establish a fixed price based in our experience.

The question I suspect you will ask is "how do you calculate the figures that make up the calculation for accounts?". That's the tricky part! We tested several prices with prospects and by running examples of other clients through the system t see how thus compared to the existing fee which was based on time spent, and adjusted accordingly s the fixed price was about 10-20% higher than this.

Happy to help more if I can, PM me if you want me to critique your menu.

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Reward for inefficiency?

[quote=dbowleracca]@moonbeam I think you are looking at the way you price from the wrong angle. You are trying to base the price on how long it takes multiplied by an hourly rate, which rewards you for being inefficient quote]

There is no reward for inefficiency if you price yourself out of the market. However, if you don't start with a reward 'goal' and the number of hours you want to invest to reach that goal  - ie. an internal hourly rate - how are you going to have control feedback to help you achieve it?

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The person

I use a version of 'menu' pricing, and avoid 'value' pricing. I think a lot depends on the type of person you are and how good you are at selling yourself and striking a deal.

I avoid bargaining of any type, and if I personally used value pricing I would quickly be priced out of business. I would also struggle to explain why Joe pays £1,200 for the same service that his mate Tom gets for £200. Surely this would end up with the profitable Joe's moving on to someone with menu pricing, leaving me with the unprofitable Tom's?

I find menu pricing gets me much better fees than I had before. I used to price up a job and think it seemed a lot of money, but if my menu says that is what the work is worth then it gives me the confidence to stick with it and I refuse to lower it unless the clients requirements are lowered, too. Menu pricing prevents me from charging too little and therefore I am assured of a reasonable profit, even if it doesn't get me the massive profits of value pricing.

My clients like it too. I have lost count of the comments I have received like 'I am sure my last accountant just stuck his finger in the air and thought of a number', and similar. My clients do seem to appreciate clarity over pricing. Some decide to reduce their requirements, and some increase their requirements, until they get to the fee they are happy to pay.

As said above, it depends on the individual accountant. This method works best for me, but may not be the best method for anyone else.

 

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AVN & Squosh

https://www.squosh.co.uk/products

 

http://www.avn.co.uk/Tools/TimesUp.aspx

 

Have a look at both of those tools

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I attended an AVN Proactivity day recently and saw a demonstration of their pricing software.

To replicate this I would use some sort of grid, with quality of books and records across the top (ranging from incomplete bag of crumpled receipts to fully reconciled accounting system) and the actual services down the side.

Down the side the services could include the same item multiple times for different size business or level of complexity.  Something like 'Prepation of statutory accounts turnover <£50k', turnover £50k - £100k, etc.

I was doing something similar before the proactivity day.  I've not had chance to pitch to a client since unfortunately, but prospects liked having clear pricing options.  Invariably having shown them examples of management accounts, budgets, forecasts, etc they all wanted them.  Once they got priced up they invariably decided it was too expensive, but rather than haggle down the fee to include everything they simply dropped certain services.  Clearly I'd rather they took everything, but if that's unaffordable I'd rather do less for a lower fee than do the lot for a lower fee!!

And then you give yourself the opportunity to upsell additional services at a later date to increase the fee........

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Time's Up for us

We are AVN members and since we started using Time's Up we haven't looked back - it made us realise how little we were charging before.

It's a system that you can use with the client and almost lets them choose the price as it were - it's a much better system than the 'finger in the air' as described above.

By the way, we also do use value pricing which, for Tax Credits in particular, has been brilliant for us - and without any client resistance.

I do also see Andy's point about having some sort of goal for the hours taken for a job, which I do think you need to have from YOUR point of view, but of course it's totally unfair to bill the client based on hours spent.

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Fixed price or price guide?

This thread has been excellent, I spent a little time earlier in the week producing a concise one page price guide (not list) which I've laminated and now take with me to all client meetings. Previous this list was in my head (or was it finger in the air time?).

Feedback I've had already has been very positive. 

It is however a guide, two businesses identical in terms of turnover, number of employees etc can (as others have mentioned) require differing levels of work depending upon the complexities of the actual business.

I've got a very good idea of how long jobs take (and should take) and this has been used to produce the price guide. My practice is very young and as I start to prepare client accounts, tax returns for the second/third year I will see productivity, efficiency and therefore job profit increase.

So straight away now I'll refer to the guide when it comes to time to talk price, with the types of service detailed it gives a great opportunity to add on extra services, some of which I used to add in for free (duh!).

Overall it means my prices will be slightly higher (10-15%), for existing clients I'll gradually move them towards this pricing structure.

Oh and there is an hourly price for those clients who say, 'can you pop along to the office as I need to have a chat about something... '.

 

 

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I Agree with Everyone!

I also attended the AVN seminar recently but concluded (after deep discussions with a previous user) that the cost of their software was far too high for me. I suspect it has lots of bugs in it, and at the end of six months they would want to be paid even more for it.

The tax side of my business is extremely young compared with that of almost everyone else posting on this thread and I can't justify such costs whilst I'm still trying to find new business.

If TimesUp were a lot cheaper, I'd be the first to get it on board, but I'm well aware that with such a small pool of users, AVN are having to charge a premium to make it pay for itself.

I agree that my idea of making sure I cover at least my time at a reasonable rate (whilst also making sure I don't go sky-high and rule myself out of the equation) is old fashioned. It's the only method that suits me at present to ensure I don't underquote for new clients.

Lots of you have made comments that will help me improve these sheets. Thank you.

 

 

 

 

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A fixed price approach that looks cheap

Here's one firm's approach to pricing...

http://www.cheaperaccountant.co.uk/

...don't know how it works in practice in terms of support / dealing with poor or incomplete bookkeeping.

 

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@DMGBus

I don't see how it can include a decent amount of support or additional work to bring bookkeeping up to scratch and I assume they will charge extra, which may well be more than the annual fees. 

To be fair, this is what we do where poor bookkeeping is concerned, and all accountants should be charging extra to redo or correct the bookkeeping, although some accountants prefer to delay the increase until year 2.

This type of cheap accountant could be beneficial to clients with simple affairs who understand what we need, and in turn need little help or advice, but I haven't met many clients like that myself.

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@ShirleyM:Maybe they've read ISBN 978-1-444-10065-5, "Understand

ShirleyM wrote:

This type of cheap accountant could be beneficial to clients with simple affairs who understand what we need, and in turn need little help or advice, but I haven't met many clients like that myself.

Hi ShirleyM: Maybe they [i.e. the potential "clients with simple affairs"] have read - or should read - ISBN 978-1-444-10065-5, "Understand Tax for Small Businesses" by Sarah Deeks, 2010; new edition due out 26 Oct'12 ?

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Pay peanuts...

...get cheap accounts, its got a ring to it;o).

I'm always wary of websites where there is no phone number and no company/business name or address displayed anywhere on the website.

Strange that the firm behind the website doesn't want to associate themselves with it (looks like its a firm from Derby).

 

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Our business address details can be found by clicking on the following link: http://www.cheaperaccountant.co.uk/contact-us.php

Feel free to ask any questions.

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Thanks 4 providing up-to-date postal details on your website!

esimps wrote:

Our business address details can be found by clicking on the following link: http://www.cheaperaccountant.co.uk/contact-us.php

Feel free to ask any questions.

Thanks for providing up-to-date postal - but not yet telephone or fax - contact details on your website.     All I did before - in an earlier AWEB post now removed - was to copy and paste the details that you gave on your website, for others to read, in response to the "Derby" comment!    Thanks again - dstickl.

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We are currently considering employing a secretary to handle phone calls and to manage the cold calling from other service providers. Currently the best way to contact us is by sending an email to [email protected] and we are always happy to speak to clients over the telephone to help them with their accounting needs.

We don't anticipate using a fax machine at any point and prefer to receive all communication by electronic methods such as email.

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Great thread and something I have actually been looking at over the past few weeks when I have had a spare half hour or so.

I remember reading a while ago a thread about fee structures where a very generous member on here collated the data people emailed in.  Can anyone remember the thread as I would like to have a read through it again?

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@MissA... : Here's a link to some PGC info ...

MissAccounting wrote:

... I remember reading a while ago a thread about fee structures where a very generous member on here collated the data people emailed in.  Can anyone remember the thread as I would like to have a read through it again?

Sorry, I can't remember "the thread" either (& I'd like a link to it!) but in the meantime the following link to PGC StartUp membership might be of interest to you:- 

http://www.pcg.org.uk/cms/index.php?option=com_pcg_onestop_selection 

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Steve Holloway

MissAccounting wrote:

I remember reading a while ago a thread about fee structures where a very generous member on here collated the data people emailed in.  Can anyone remember the thread as I would like to have a read through it again?

It was Steve who organised it you should be able to find the thread through him.

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RE: Steve Holloway

Here's a link to Steve's apparent first "Survey" thread [Thu, 27/01/2011 - 13:49]:- 

http://www.accountingweb.co.uk/anyanswers/fees-benchmarking-sole-practit...

 ... but I'm still searching to see if there's a later one ...

here's an earlier one [Sat, 08/01/2011 - 14:58]:- 

http://www.accountingweb.co.uk/anyanswers/personal-tax-return-pricing-di...

And there's also a general summary - including SH's then views - on [way back on Tue, 01/09/2009 - 08:59]:-

http://www.accountingweb.co.uk/topic/practice/how-do-you-charge  

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Why do you need software to price?

I don't understand why you would use software to price jobs.

I would use a simple spreadsheet that could take into account various factors. If the software was reasonably priced I can see how it could be useful but usually this software is sold at a "premium" price - ie. too much!

I don't see why charging based on time is unfair. Spending less time on a job doesn't mean you are efficient - it may just mean you are cutting corners.

I prefer going to a professional who does the job properly and gets fairly rewarded for their work. Being obsessed by price and not considering quality does nobody any favours.

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@petersaxton

petersaxton wrote:

I don't see why charging based on time is unfair.

... sorry but I totally disagree, it's completely unfair, and I would NEVER spring a surprise bill on a client - it's the one thing they hate most of all...

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Really?

jaybee661 wrote:

... sorry but I totally disagree, it's completely unfair, and I would NEVER spring a surprise bill on a client - it's the one thing they hate most of all...

Why is any of that unfair? I'm not saying you don't say what it's likely to be or even what it will be if they do certain things. If they make a mess of the bookkeeping I will have to sort it out or ask them to do it - something they usually have no idea of how to do even when you explain it to them. Most clients still make silly mistakes. What is wrong with giving an indication of what it will be?

I think what clients hate most of all is work being done late and/or work being done badly.

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@petersaxton

petersaxton wrote:

jaybee661 wrote:

... sorry but I totally disagree, it's completely unfair, and I would NEVER spring a surprise bill on a client - it's the one thing they hate most of all...

Why is any of that unfair? I'm not saying you don't say what it's likely to be or even what it will be if they do certain things. If they make a mess of the bookkeeping I will have to sort it out or ask them to do it - something they usually have no idea of how to do even when you explain it to them. Most clients still make silly mistakes. What is wrong with giving an indication of what it will be?

I think what clients hate most of all is work being done late and/or work being done badly.

... if I was a client and I was given two options - you can either pay a fixed fee of £500 or it will be roughly around £500 but we may or may not add a bit more on depending on certain factors I know which one I'd choose!

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And then what?

What if you then decided to not waste time making an effort with the record keeping and it's a total mess?

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@petersaxton

petersaxton wrote:

What if you then decided to not waste time making an effort with the record keeping and it's a total mess?

... the records would have been reviewed BEFORE I gave the client a fixed price.

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I understand now

So, a potential client is considering two accountants.

He comes to you. You say that you'll tell him a price when he gives you the records. He says he hasn't prepared the records yet, either the accounting period has just begun, he's behind with his record keeping or he's a new business.

He goes to another accountant. The other accountant says he'll do the work for £500. The client says "where do I sign?". Everybody's happy. ..... Wait a minute, you're not!

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@petersaxton

petersaxton wrote:

So, a potential client is considering two accountants.

He comes to you. You say that you'll tell him a price when he gives you the records. He says he hasn't prepared the records yet, either the accounting period has just begun, he's behind with his record keeping or he's a new business.

He goes to another accountant. The other accountant says he'll do the work for £500. The client says "where do I sign?". Everybody's happy. ..... Wait a minute, you're not!

... EXACTLY, you've just proved my point... then when the other accountant realises what he's let himself in for I'll be the one who's laughing - brilliant!

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Congratulations

You've lost a client but somehow you know what has gone on between the other accountant and  their client.

On the other hand, the client may have been perfect.

The client may have even gone to me and I'd explained what the likely price would be but it depended on the quality of his records. I'd explain I didn't want to give a quote because if I did I would want to ensure that I didn't lose out and I would quote at the higher end. This way there's an incentive for him to provide me with accurate data. The client may have liked that approach and signed up with me.

This other accountant or me may have got a good client so we may have been happy.

You didn't get a client but you may have been laughing so: Congratulations!

You could have joined a circus and got even more laughs though if that was your goal.

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@petersaxton

... so he hasn't prepared the records yet but he may me a perfect client... hmm, sounds like a bit of a fairytale.

...in any event, this seems to have diverted from the original question about whether hours should be used as a billing basis... and, if you think that's a fair way to treat a client, good luck to you.

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You must have not read what I said

I said: "either the accounting period has just begun, ... or he's a new business.

But I appreciate you needed to toss in a red herring and escape when you realised you'd got confused!

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@petersaxton
... what a very rude person you are.

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How am I rude?

Why did you say "so he hasn't prepared the records" when I made it clear that was one possibility but there were two other possibilities that you pretended I'd never said.

So you say I am rude because I point out your deceptive behaviour.

Remember clients tend to choose accountants they like. They won't choose an accountant who cheats.

Your opinion means nothing to me because you can't be trusted.

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@petersaxton
... you're certainly a class act!

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It's called honesty

You should try it sometime.

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@petersaxton

petersaxton wrote:

You should try it sometime.

... no it's called inciting, childish, troll-like behaviour - and this is my last response to it...

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Getting back to the topic

I'm seeing a new client today. He wants to set up a company. He hasn't got any accounting records. I have pointed out in this thread that this can lead to difficulties in pricing. Some people may get round this by giving estimates or quotes based on what can be agreed to be provided. I think this is sensible. Some accountants will say they can only give a price sometime in the future when the client has had time to prepare records which isn't very useful to the new business person because they will feel unrepresented and may need some advice at an early stage.

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