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Your thoughts please on a fee quote

Company is very small but is VC backed so is required to produce audited accounts.  No stock, only about 20 transactions per month.

They also need monthly management accounts produced from the books (which they maintain themselves), so will require work throughout the year.

I've costed it all out and am coming to a figure of £4-5k, to include VAT, PAYE, monthlies, annuals and audit.

How does that sound to you?  I'm thrown because it's an unusual one.  My gut feeling is that it's high, but I believe they are paying more than that currently.

Thanks for your thoughts.

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The audit does it for me

I've recently given up my audit registration but got to the stage where anything that needed an audit, no matter how small, started @ 3K. 

This is a personal thing but I have avoided monthly management accounts for years (much as I would never undertake weekly payroll) feeling that quarterly numbers were far more meangingful and capable of being properly prepared.  But if the client insisted and the books were OK I'd quote £4,800 pa for these and the VAT.

I'll stop there but, as you can see, I think you may be short selling yourself.  You don't say what other sort of work/fees you charge, ie would this be a big one?  But it is always worth seeing it from the client's perspective, there is a lot of work involved here, plus the audit responsibility and so, if you are unsure, always go in higher than you feel comfortable with, you can always compromise and lower a quote.  Better that than surprising the client at how cheap you are.

Good Luck

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By Sarah P
25th Apr 2012 19:11

Thanks for your feedback

It's a new practice and this would be the first audit client.

I usually charge around £1,000 for a small company with quarterly management accounts (accounts, VAT and CT600).  I find that once the management accounts template is set up it's a simple process to create them each quarter.  This one only wants monthly accounts because the funder requires it.  I'm planning to automate the process in Excel as much as I can so probably some upfront time invested but then less going forward. 

The costing I have done shows £2,200 for the accounts prep and VAT, £3,200 for the audit.

Interesting that you think I'm selling myself short. So you would have been looking more like £7-8k.

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25th Apr 2012 23:56

I agree with Paul
Without asking lots of extra questions, such as what system they currently use, turnover of the business, of you would include a 2 hour meeting each month to go through the figures with them, and what you perceive the audit risk to be (my feeling is that this is high because of the responsibility you have to the VC) then I would suggest the following :

Monthly managements - £3,000
Meetings regarding the above - £2,400
Audit - £3,600
Others (VAT,PAYE etc) - £1,200

Total - £10,200

Obviously I don't have all the facts, so this is just a suggestion of what I would expect the fee to be. Definitely worth more than £5k - imagine the extra costs you will incur in PI, audit manuals, CPD, practising certificate etc just for this audit.

One thing that crossed my mind when writing this is, of you are preparing the monthly management accounts, are you prejudicing your independence in relation to the audit? Do you have the opportunity to use separate teams?

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26th Apr 2012 08:47

Depends how busy you are?
If you are building a client base the £5k quote, top end of your range, seems OK but I'd not be inclined to go lower than that.

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26th Apr 2012 08:57

No disrespect intended but I am surprised a VC backed company would instruct a new practice. Do you yet have the OK from the VC backers?

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By Sarah P
26th Apr 2012 09:34

You're all asking questions I've been asking myself!
dbowleracca - I've struggled with the question of whether I'm independent enough if I'm preparing management accounts too. My plan was to set them up with VT, they then maintain their own books and my involvement was limited to extracting the info from VT into an Excel spreadsheet which ran the required analysis. I decided that this would distance me sufficiently from the source data. I would prepare the VAT returns based on their source data. They also want payroll but I would outsource that to a bureau. I am concerned about this point though.

bernard michael - I entirely agree! There is VC representation on the board though so I have assumed that they are involved in this process. I have a lot of historical experience in dealing with VC investors so perhaps they're taking comfort from that.

Oh perhaps I should back away. Or quote for the accounts prep work and find someone else to do the audit.

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26th Apr 2012 09:46

Good idea Sarah
I think that the accounts preparation work only would be a good idea - protect your independence and lower your risk.

Do you use VT for statutory accounts too? I'm not sure if it will have all the necessary audit reports etc for a business like this, but maybe I am wrong.

If you do just the accounts work, I suggest you then try to offer some additional support in terms of quasi FD type stuff, and quote them £5k. At least you then get the fee you first thought of, but with less hassle and also less costs.

Please let us know what you decide to do, and if you are able to share the fee you get (assuming you are successful) that would be really interesting.

Best of luck with whichever route you take!

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By Sarah P
26th Apr 2012 09:56

Good idea
They don't have a FD so I could certainly bulk up the proposal with additional support that their existing accountant doesn't provide.

I have to remind myself that one of the main reason I set up this practice was to reduce hassle!! I'm a naturally cautious person so I think the risk would worry me.

Thanks for your guidance, I really appreciate it. Tough when you're on your own and you don't have anyone to bounce ideas off.

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01st May 2012 12:03

What's It Worth To The Client?

What would be the consequences of the client having nobody do any of this work for them?  And the knock on effects of that? etc. etc.?

Getting the client to consider all these thoughts would lead them to an appreciation of the worth of having the work done, which they can then share with you.  If your fee presents the client with a 'bite your hand off' RoI for deriving that value and simultaneously presents you with a 'bite your hand off' RoI for your investment of effort, then everyone is happy.

I would suggest 'bite your hand off' starts at around ten times.  So if the value exceeds £50,000 and you can do the job for less than £500 of costs, all is fine with a £5,000 fee.  If not you'll need to probe for more value and find a way of delivering quality work at a lower cost in order for the price to be both compelling and profitable.

David Winch

Make Sales Without Selling and Get Paid What You're Worth

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By Sarah P
09th May 2012 20:00

I got the work :-)
£4k for the accounts work, sending the audit elsewhere.

Although I have spoken to the Institute and they have explained how I could put measures in place to do the lot.

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09th May 2012 22:08

Well done Sarah!
That doesn't seem unreasonable - and much lower risk so you get the best of both worlds!

Did you go for the quasi FD service too?

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