Making a loss on fixed fee

Making a loss on fixed fee

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I have recently quoted a fixed fee for a client for accounts and self-assessment on the basis that their book-keeping was going to be sufficient to simply extract balances. However, I had to do quite a bit more work than I expected to identify exactly what their expenditure was and this pushed me over my budgeted hours. What do other practitioners do - would you increase the charge this year and/or next year and would you go into a lot of detail with the client as to why the fee is going up? The main reasons for the overspend were that their cash book did not analyse out every expense so you had to go to the purchase ledger for the detail and then reconcile the two. Also their records of credit card expenditure did not match their year end credit card balance.
Andrew

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By rhangus.
29th May 2009 14:26

Tom
You will probably find your plumber will not be able to pay for a cash rec as the guy he knows down the pub can do his books for £200 when you may need say £200 to sort his books and give some decent advice for next year and say another £150 for accounts and say another £150 for a SATR. Total of say £500 + to do an adequate job for him. Will he appreciate a better job done than his mate down the pub. Probably if his refund is sufficient.

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By AnonymousUser
29th May 2009 10:56

Bob
There are things that I find offensive, but I do not regard them as an excuse to go round being rude to people. I also see people make mistakes, but I do not use this as an excuse to be rude to them on the spurious grounds that the effect of their mistake harms someone else.

You can always find an excuse to behave the way you want. In this case, you have obviously managed to do that.

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By skylarking
28th May 2009 17:47

St Bob
Bob is offended on behalf of 3rd parties while calling anyone who doesn't agree with him ignorant. Now I know he has a hidden agenda. Martyrdom!

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By User deleted
28th May 2009 17:06

unsubscribe?
Is is possible, having contributed to a thread, to unsubscribe so that I no longer get notified of the new postings?

This thread has become tedious.
I have had enough
I do not want any MORE

PS Beware there is another newer but similar one happening now!.
I will not be commenting on that one!

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By AnonymousUser
28th May 2009 16:58

Being rude
Arnold – I’m offended by people who are in a position of trust and through their ignorance waste their client’s money.

Tom – start with a cash reconciliation so you don’t have to report him for ML

Bob

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By AnonymousUser
28th May 2009 10:58

Bob: "the only saving grace is that I’m consciously rude, it’s j
Conscious rudeness is even worse; you cannot even claim it was unintentional

I did not take it personally (in any case it is not your place to tell someone how to feel about your manners), but rudeness is offensive and you have no moral right to decide whom you should offend and whom you shouldn't.

If you offend people you cause unhappiness, and the more unhappiness you cause the more (no pun intended) you detract from society. One should hope to be a net contributor to society.

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By thomas34
28th May 2009 09:21

Some Advice Please Robert
Robert

I've just taken on a sole trader plumber as a client. Turnover around £55K (about 45% of which is materials), not VAT registered.

I need a second opinion on what books and records he should maintain. Please advise as to what reconciliations he should carry out.

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By Jason Dormer
27th May 2009 18:49

Bob
There was an interesting article on here around six months ago on the subject of the prof bodies take on the subject - i'll have a search see if I can dig out the link.

From hazy memory it may have been by Steve Pipe.

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By AnonymousUser
27th May 2009 17:45

The dangers of poor books
Jason – not reconciling books means clients are unlikely to have good quality information and more likely to miss mistakes.

A few little dangers include clients making poor financial decisions like how to finance the business which can lead to cash problems, having bank facilities removed, losing supplier discounts and missing tax planning opportunities. There is also the chance of clients experiencing more hassle from tax investigations under the new rules. Are all your clients really aware of these risks?

At the end of the day, providing accountants are upfront and tell clients what their options are, offer support and get them to sign disclaimers they can’t do anymore.

But, the vast majority of the time that’s not happening. The fact is that very little is said and I wonder how long it will be before clients start to understand that they have effectively been overcharged and start looking for refunds?

Imagine if a new firm of accountants launched with a guarantee of lower fees and offered to handle claims of effective “over charges” on a no-win no-fee basis!
Maybe I’ll do some research as see if there could be a potential claim and see what position the professional bodies take.

Bob
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By Jason Dormer
27th May 2009 15:10

Bob
Spot on. I am a good guy :)

I disagree with your analogy with the mechanic. There is generally no placing of danger by clients not keeping reconciled records throughout the year (subject to exceptions). I do agree that the benefits of doing so, the potential problems which can be eradicated and the options of how to do so should be explained and from there go on the clients choices. In an ideal world they all agree and everyones happy but If not interested then so be it - you can lead a horse to water etc. As I said earlier, different horses for different courses. Why do I keep mentioning horses?

I don't consider that most clients would rather pay extra at year end but there is no denying that some do. And these are not 'bad' clients that should be turned away, they are busy people trying to make a decent living in troubled times. How many have I asked? Every client that walks through the door. Give the client what they want not what you think they want, or even what you know they should want.

If we forced systems and reconciliations on clients (much as I would love to) without any regard for their personal circumstances they would beat a path away from our door to the firm down the road. And whilst i'd be happy to not to be engaged those who don't take their responsibilities seriously, i'd not be happy to lose those that do but want outside help in doing so.

Hope life is good for you and the gang.

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By AnonymousUser
27th May 2009 08:37

It's as easy as ABC
Jason – having met you a few times I know you are a good guy and have strong values. This is why I believe accountants are “unconsciously” unethical about how they use their client’s money.

This is not so much about your local garage charging you extra for a servicing your car because you haven’t looked after it. Fair enough, charge for new oil but what about the mechanic who knows there is something fundamentally wrong with your car (which puts you and your family in danger during the year) and chooses to charge you extra to fix it every year rather than sort it out properly? Don’t you think they should explain the problems and give you an option?

It’s interesting that you feel clients would rather pay extra at the year end rather than get it right themselves, that’s not my experience. How many have you asked?

By the way, it’s not really about charging clients extra or less; most clients will pay the same, good books just makes them feel better during the year and allows the accountant to be more effective whilst eliminating write-off time which is what this post is about.

Mick – I assume you’re worshiping the billable hour rather than being open minded to new beliefs?

Arnold – the only saving grace is that I’m consciously rude, it’s just for effect so don’t take it personally.

Swiss Toni – good point, most fixed fees are based on time charges so they just lock in the problems.

David – it’s easy to hold your ground when you know your right. Unfortunately, it’s easier (and safer) to bury your head in the sand rather than change.

One the fence – I’m sure some will think you’re on the payroll and Alex did mention you to me. Good luck and thanks for the donation, Jim will appreciate that. It’s a shame not everyone has such high values.

Bob
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By User deleted
25th May 2009 20:16

On the fence
I am in a tricky place here.

I started on my own last year after many years in another firm, and was contacted by one of Bob's team, whom I spent a few hours on the phone with discussing the pro's and cons of adopting Bob's way of thinking.

Although I was not keen to move from a traditional accounting set up to their approach, I embraced some of their ideas and tooks them on board. And I am very glad I did.

Some of the things said are a bit "different" or "outlandish" to us traditional accountants but I firmly believe that by listening and taking on board some of what was said to me I am a better person (maybe not from a technical tax/accountancy point of view) but from a business point of view). Those of us traditionalists who will happily close their ears to what Bob and Co have to say should do what I did and just lsten and take it all in like a sponge and realise that there is good and bad in what is said.

Now I am not on Bob's side here I am merely stating that there are benefits in listening to his views.

Bob - for the record you do not know who I am but I spent a while on the phone with Alex and benefitted from his approach and as a result of the "free marketing and business advice" I got made a donation to a charity of Jim's choice as a gesture of thanks and goodwill. btw I have met Jim since and he was someone who was really complementing of you when you were his accountant.

To other readers - yes we all disagree with Bob's approach sometimes and may be narked by his direct marketing tactics but, and this is a very large Jabba the Hut sized [***] (!) Just listen to what he has to say and take it in the spirit to which it is meant - we can all learn something.

I apologise to all of those I have offended in this post but have been reading this thread for a while now and have finally succumbed to the urge to intervene.

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By rhangus.
25th May 2009 14:42

How many times - there are no blooming Fixed Fees
Mr Peavely, u gave Batch his promotion yet?

....and what's this, you say you are good at something. Who are you kidding Peavely?


Anyway, back to the point, the act of communication is something most accountants fail to do to the right degree.
Give an estimate based on the norm but if books are sub standard or more work is required or if more work asked for by client then a higher fee will be required. Is that ok Mr Client? Of course the reply comes back.

Fixed Fees are for mug accountants only, who will give their client in many cases a sub standard service normally to the extent of not finding all the business exp and thus a higher tax bill than legally needed. accountants need to stop being lazy, ask the pertinent question, go beyond their budgets and get the job done and show what they have done to a grateful client who will pay up.

Have we all got that now????????????????

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By The Minion
24th May 2009 08:44

Bob
i have to commend you holding your ground in such a forthright way and maintaining that you are right in the face of such adverse comments.

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By Jason Dormer
22nd May 2009 20:38

Horses for courses
Not a question of ethics.

It is no more unethical to rework, correct and complete than it is for my local garage to charge me more for servicing my car than if I looked after it throughout the year with more regular maintanence. The simple fact is, I would rather pay the extra annually than lose valuable time doing something I don't want to do.

Same goes for bookkeeping. We all know that most small businesses have not the resources, time, expertise or desire to keep meticulosusly reconciled books throughout the year and would rather do the basics then pay someone to provide the year end review and correction as part of the accounts preperation.

Should the client want to improve their bookkeeping with systems and training then that's a different matter.

Each client has different drivers and discovering them should form an essential part of the client inception process. Lumping clients all together and saying that we should be doing this for them or we should be doing that for them, unless protecting them from breaches of responsibilities, shows a lack of empathy with the market. Lose empathy and you lose business.

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By Swiss Toni
22nd May 2009 14:50

Why Dont You


Hi Yes Hello.

Do what 99% of you would do, rip your client off and charge him a massive fixed fee for the following years work? Win Win situation.

Chow For Now

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By AnonymousUser
22nd May 2009 14:03

I've got a good reason [to be rude]
Bob - There is never a good reason to be rude.

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By AnonymousUser
22nd May 2009 13:53

Interesting
Paul – I’ve made a decision to be aggressive and risk antagonising some people while others get the point. The only accountants I can be upset are caught with an outdated mindset. I genuinely think it’s unethical to burn the client’s money every year completing and correcting their mistakes.

Fair play to you for having the energy to offer support to your clients and you’re right, if they don’t want to do it then do it for them. It’s clear that bookkeeping is a growing service requirement. And, it can be highly profitable if your price and organise it well.
All I would ask is what “system” did you use to support your clients? Maybe it was the software that stopped the process?

Most accountants don’t understand key pricing concepts otherwise they wouldn’t use timesheets but you’re right. It is much easy for accountants to record time and bill clients for their effort rather than focus of the result. It doesn’t mean they’re right and it doesn’t mean they are ethical because time based billing rewards ineffectiveness.

Tom – you’ve got greater experience than me because you’ve been doing it longer and I haven't worked with hundreds of firms, right?

Let’s be honest, you’ve probably been doing the same thing over and over so you’ve probably got five years experience repeated five times.

Having said that, at least you’re not charging clients for bank reconciliations, you’re just letting them not do anything!

Andy – did you really survey your clients? Did you explain that they can save money off their accounts fee and offer free software and training? Did you point out that they would protect themselves from the taxman, have better information and avoid traps like section 419?

Did you explain that you’ll also be able to provide more pro-active tax advice and save them money in their areas of tax credits?

In my experience, the only clients that respond negatively to this are doing their own tax planning!

Bob

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By Paul Scholes
21st May 2009 19:40

Live & learn
Andrew nothing much to add to some excellent contributions here, this is a great one to learn from. The art of quoting a fee, whether for a piece of work or the entire year is “knowing your client” identifying the key issues that you & the client need to agree upon and assessing the relationship or any piece of work presented to you in full before doing anything.

As others have said, if you wish to charge £X for some work then forget hours X £s, it’s the value of the work to the client that is key, ie if the client is 90% competent to do it him/herself then you will only be able to charge a fraction of what you could charge another client who is only capable of doing 10% of the same piece of work.

Bob (can I call you Bob), I and many others have had reason to criticise you in the past for the way in which you attempt to get your message across. It is difficult to judge your motives, ie if your postings are a marketing exercise &/or you truly believe in your message and are attempting to make the world a better place then why on earth antagonise people? The best you can expect is to be ignored and you will certainly get no thanks, praise or business from us when, in a few years time, you are proved to be right.

The alternative, I suppose, is that you just have so little regard or respect for all those thousands of accountants you speak to that this is a great forum to vent your spleen.

Having said all that (and I hope I don’t live to regret this) I think you make some valid points. In particular, in a perfect world, I would love every client to be able to keep a perfect set of records, leaving me little if anything to do at the year end. This is not doing me out of a job, it’s enabling me to do work that matches my competences.

I have striven for this for years, I have coached and encouraged them but they are human and, no matter what the theory or CD says if they don’t want to do it and are prepared to pay a good fee then sod it, I’ll get my hands dirty and we’ll both be OK.

Life & relationships don’t fit grids or flow-diagrams. You talk about Ron Baker’s thoughts (and then hack me off by generalising that accountants have no concept of their message). “Trashing the Timesheet” has been under my pillow since the ACCA sent it to me, it’s great, and I trashed my timesheets but no matter how much you scream at us, it will not suit everyone.

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By thomas34
21st May 2009 18:33

Robert
I've been suckered into a response and know that you'll pounce with your views which, although they have some hypothetical merit, have little relevance in the real world.

The real world, for your benefit, is where a taxpayer earns his living and at the end of a tiring day (or week, or month) sits down to record what he's earnt and what he's spent. He does this in part because his accountant advises him that (a) he needs by law to keep records (although HMRC seem to have had some difficulty under schedule 37 to specify their exact contents) and (b) the better the records, the lower will be his accountancy bill.

The day you were born I was undertaking my Articles, so I hope you'll give me some credit for having greater experience than you.

All clients are different and my job is to ensure that they maintain a system which enables either them, their spouses or possibly me to prepare a profit and loss account at the end of the year. Of overriding importance, and more important than the record keeping itself, is the supporting documentation which is produced contemporaneously with each transaction and without which an HMRC attack would not be thwarted.

Many of my clients prepare records on a single entry basis, in other words no reconciliations (bank or other) are relevant. I do of course have my own checking systems developed over a long period to ensure accurate results. I can only think of one sole trader or partnership client where I prepare a balance sheet. A balance sheet is only prepared if the value of its preparation exceeds its cost. I've had no negative reaction to this procedure from HMRC during the statistically few enquiries I've handled (which amount to 0.9% of tax returns I've submitted in the past 6 years).

To summarise, a bank reconciliation is irrelevant to most of my small traders.

To the questioner, I'd doubt you've made a loss on a fixed fee job (unless you've paid an employee more than the invoice value). You might have accumulated a negative variance of some sort if you've got a time based system and budgetted for every job. If you have, you're spending an awful lot of time on what may yield little benefit.


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By User deleted
21st May 2009 17:37

Been in that boat
Really you should have explained the records weren't good enough at the beginning if you wanted to get extra money - as from the client's point of view you haven't given them an opportunity to correct it. But that's easy to say and I've been guilty of that too.
I think you need to concentrate on the ability of the client and have a serious talk with them.
If they aren't interested in getting it right - then suggest a bookkeeper or a member of their family who is more "with it" from an accounting viewpoint does it - more than one client of mine has his wife prepare the books even when it's not for tax reasons.
If they are almost there, explain where they are going wrong
If they won't do it right but expect you to fix it for what is effectively "free" then stop acting for them by raising your fee for next time to a more realistic level based on time spent.

And finally - refuse to quote until you've seen what their books are like, not just their opinions on what they are like. It's obviously not something followed by all accountants in my area - though I'm happy for them to have all the unprofitable jobs as a result. We're in business to make money ourselves, not work for below minimum wage which some clients would be more than happy for us to do.

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By skylarking
21st May 2009 17:37

Bob
I think you've got it about right. 90% of accountants won't be interested but 90% of clients won't either.

The clients who are genuinely interested in better bookkeeping are proactive enough to make sure they operate a decent system that suits them and their accountant.

The ones who aren't, never will. They would rather spend their money having their accountant check things over and make corrections where necessary than be taken out of their comfort zone with new systems, routines and coaching which will cost them in time and/or money.

Bowing to their requirements is not an accountant being unethical. It's providing what the market demands.

I did my own marketing and mailed my clients with news of how I wanted to help them keep better records, the benefits of this and how it could be done inexpensively - even for free! I didn't get the expected 2-3% response. I got zero response.

There is undoubtedly a place for your services, Bob, but I think it's a niche market or maybe you are ahead of your time.

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By AnonymousUser
21st May 2009 17:07

Guily
Arnold - I accept that I am a little rude but I'm not sure I need an excuse because I’ve got a good reason.

We’ve spoken with thousands of accountants, leading industry consultants and other "change" suppliers over the last four years. From this I've developed a reasonable take on the market and my comments maybe rube but they are true.

I haven’t made up the fact that most clients don’t do good bookkeeping and most accountants make a living correcting and completing this for their clients rather than offer systems, training and coaching.

What's clear is that over 90% of accountants are ignorant to the change that's happening. For example, most Chartered Accountants are not even aware of the lead given by their own body in the Profitable and Sustainable Practice Report. If they are they not doing anything to implement it.

The ACCA publish work of Ron Baker about Value Pricing and Trashing the Timesheet which accountants have no concept of despire proof this is a better way of working for clients (and accountants).

I accept that many will find my comments rude and may not work with us. It's the other 10% we're interested in who generally feel the same as us and want a better life for clients and accountants.

Bob

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By AnonymousUser
21st May 2009 11:53

Intention to Offend
If your use of a word is intended to offend I think you are doing something wrong. There is never any excuse for rudeness; not even marketing your product.

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By AnonymousUser
20th May 2009 17:10

Wrong end of the stick
Edit – you completely misunderstand my point – it’s great that you offer to do the books for your clients – what I'm critical of is letting clients struggle and charging them for correcting mistakes and completing things like bank reconciliations. There's no need for it and it's where accountants let themselves down.

By the way, it’s “unconsciously unethical” rather than just "unethical" because I know most accountants are not wasting their client’s money on purpose. The use of this word is intend offend and get people to question what they're doing. It's as bad as dumping time to a code to make up your timesheet.

David – we can agree to disagree. Call me old fashioned, I just prefer to be able to review previous months and see bank reconciliations locked and make sure that VAT returns are prepared from locked data file.

Bob
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By The Minion
20th May 2009 15:13

spreadsheets are fine
if that is all the client can cope with and in fact needs.

Bob am i the only one who puts a column in the spreadsheet for the client to mark that the cheque (and indeed banking) has cleared the bank.

That way you can build in a bank rec anyway.

And as for the latin quoters, isnt the line we all operate under Illegitemi non carborundum (dont let the B**t*rds grind you down for those who havent seen the T shirt!

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By User deleted
20th May 2009 11:57

Bob, please put me in with the guilty bunch
Our practice has recently spoken to numerous clients where we talked to the client about what they wanted to do in house and what they wanted to outsource. I can confirm that we picked up several book-keeping jobs, where the client thinks they can better spend their time doing other things, rather than marvel in the joys of book-keeping.

So that makes me guilty according to Bob.

But at least I am not patronising or arrogant to think that one solution fits everyone. As for calling accountants unethical and guilty, that just says volumes in itself.

Bob, your approach completely puts me off what you have to offer. You should consider giving enough credit to clients to be able to make choices themselves, and to accountants to have their clients' best interests in mind, not their own.

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By AnonymousUser
20th May 2009 11:45

What is a loss
Mick – my impression of the last exchange is the same as this one – rather than challenge “what” I’m saying you seem to prefer to jibe about “how” I say it. And, my reading of the last exchange was that I came out on top like this one;)

It’s interesting that you position yourself as a whiteknight for people that need protecting from agitators like me. That’s more arrogant than me!

Patrick – you’re right, many accountants pride themselves on what they do. Some even have their ego caressed and their entire self-worth determined by their practice. It’s just we don’t agree that’s what business is about. Horses for courses - just make sure you’re on the right track.

The issue isn’t about if it makes sense for the client not to do bookkeeping. That’s just about selling them a bookkeeping service.

My point is that too many accountants seem happy to take the easy option and let clients use a spreadsheet. Then at the year-end they spend time (and their clients money) doing a back reconciliation and correcting mistakes to justify their fee.

The really weird thing is that they then complain that they’ve made a “loss”. No, it’s a lower margin caused by a lack of project management.

Andrew – be careful with your language. When you think a client makes you a “loss” you will be less inclined to provide great service and you’re damage your brand.

Bob
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By User deleted
19th May 2009 17:04

Happy clients?
Robert

I am sure that your clients are very happy obeying your orders and doing exactly as you require them to.

Many accountants pride themselves - quite rightly - on providing a personal service that meets the clients needs, which of course can and do vary from client to client.

Sort of Savile Row made to measure rather than Burton's off the peg, if you will

It is complete nonsense to state that a speeadsheet is not the right tool for the job when you have no idea of what the particular needs of the job/client are. There are and always will be clients for whom that is just what they need - who perhaps make better use of their time by making or selling or consulting or whatever they do, rather than entering data on software that "makes checks at the point of data entry" - whatever that means.

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By AnonymousUser
19th May 2009 11:02

Agression
Viv X – I agree, compared to most accountants we are aggressive but that's not the question, wasting client's money and accountant't time is what this thread is really about.

Aggression is a good thing when you’re doing the right thing and it’s a shame more accountants aren’t aggressive with their commitment to improving their client’s bookkeeping.

This forum is about opinions and I’m just expressing mine. I choose my phrases and words carefully but believe that accountants who allow clients to keep crap records are crap. There's alomst a link between the quality fo the bookkeeping and the outcome for the accountant and client.

Now, a spreadsheet is just not the right tool for the job – it’s like repairing a car with a Swiss Army knife. Keep in mind that it’s not the checks the Revenue make that you should be focusing on but the checks the software makes at the point of data entry.

In value pricing that’s part of project management when you have a system designed for the purpose of collecting high quality data rather than doing bookkeeping/accounts.

Bob
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By AnonymousUser
18th May 2009 18:30

Research is good, it's rubbish books that are the problem!
Patrick guilty! How about assessing your clients systems before you quote and providing assistance so they don’t mess up. Include mid-year financial data health checks. How about going one step further and putting a guarantee in place that you won’t let clients keep poor records and refuse to work with clients that fail to keep proper books? Afterall, it’s against the law, isn’t it?

Viv guilty! How can you leave your clients in a position where the Revenue can use their SpACE program to find errors in your spreadsheet? The old saying penny wise, pound foolish springs to mind.

Patrick innocent until proven. We’ve got solid research discovered over the last four years from speaking to firms every day!

I estimate we’ve spoken to over 2,000 firms of all shapes and sizes all over the UK and worked with hundreds. The Sage ABC survey also backs this up.

What we’ve found is that 45% of micro/small business clients are not using a computerised financial system. Of the ones that are 80% are not using the system properly, mainly because they’ve been left on their own.

A lot of work done by accountants at the year-end can be eliminated. Getting clients to use software correctly with training and coaching is a good start. Another good idea is being commercial with the approach to the work.

What most accountants don’t realise is that in reality they are not even being paid for that work. I really believe that many accountants are just satisfying themselves that they’ve done enough work to justify the bill. I’ve even heard accountants say they tell their clients to drop the paperwork in even though they don’t look at it!

It’s harsh but we work with accountants that feel guilty when they make really good money when the work is eliminated so there must be some truth in it!

By the way, how do you know that clients don’t want to be taught to do everything they can to maximise the value they get from their professional service fee - have you surveyed your clients? Or, more to the point, would you dare survey your clients?

Bob
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By User deleted
18th May 2009 17:07

Unsubstantiated rubbish
Robert

Can you please point me to the research that demonstrates that most accountants charge for work that can be eliminated?

Or that all of their work is uneccessary work and that if it was eliminated they would have nothing to do.

I have no problem with the message that your organisation seems to be putting accross, indeed insofar as I have looked at your link I agree with it, but your gross overstatement of the situation does no credit to your organisation.

Not all clients want to be taught to do everything themselves - they want, and do use competent professional people to support them and their businesses and there are many happy clients out there in the big wide world.

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By User deleted
18th May 2009 14:02

a question of timing
When will accountants learn!

If you quote a fixed fee on the basis of a certain level or bookkeeping you need to do two things;

first to make sure that the client understands that there is an onus on him to keep proper records - and I agree that this can be difficult to achieve without putting him off.

second if the books are not up to scratch talk to the client BEFORE you do the extra work; explain the issues and problems; give him the opportunity to fix it, or to agree that you should, for an extra fee, fix it for him. Use this as a positive and show that youwill help him to keep better records........ then if he doesn't want it done or won't pay for it then you can avoid your loss.

If you just go ahead and do the work that is your choice and I suggest that you debit the account called "experience"

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By AnonymousUser
18th May 2009 10:59

Unconsciously Unethical
Andy - the point I’m making is that charging for work that can be eliminated is unethical and most accountants do ti. What makes it worse is having clauses in agreements to catch clients out, especially when you don’t offer support.

Why don't accountants take full responsibility by offering effective support for clients? This includes provide systems, training and coaching. Have a policy of only working with clients that do monthly bank reconciliations and weekly cash controls.

The answer is that accountants wiould have nothing to do! But, what they don’t understand is that this creates a new type of service and when you do this your recovery rates will rise to £125 an hour and client will love you.

Accept this as a loss and turn it into an investment by learning. Choose between just adding a clause and catching clients out or taking responsibility. And, remember, your clients are only as good as you.

Bob
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By User deleted
18th May 2009 09:46

Really appreciate your comments...thanks
Thanks so much for these very helpful and constructive comments, esp Viv X. I think I will point out the main areas in their book-keeping that could be improved and show them how to fix it. Also saying that if they find it too much, I can sort it out for them but there would need to be an additional fee next year, but I have waived the extra for them this year. Another option could be for them to get a little book-keeping package rather than excel and then I might even be able to reduce my fee! Viv X if you are still there - how did you find out that your fees were too low when you started out?

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By listerramjet
18th May 2009 09:12

backs and monkeys!
Very few clients are interested in the bookkeeping. What they really want is the information that results. What you have done is typical - you have made a flawed assumption, accepted the responsibility, and become dependent on the quality of the clients bookkeeping - the monkey is firmly attached to your back.

Bob is quite correct when he says that you have a fixed price billing model, but a time based biling mentality. And of course, you are set for conflict with your client if you challenge. I know that some practices make a virtue of this approach, but it is a flawed model. Not too much of a problem if it is only one or two clients...

For starters I would have thought you should share the problem with the client, and the implications - advise him! From your perspective, you need to re-engage with how you complete this work. If the client is prepared to pay for you to fix his system then fine, but otherwise, why not work out how to complete the work within your fixed fee. Give the client the monkey back!

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By Jason Dormer
17th May 2009 19:39

Fees
I don't see any real problem. You agreed a fee on a set criteria which the client didn't follow. Therefore not honoured his/her side of the bargain.

Two choices really:

1. Increase the fee with the justification of the above and agree to your original fee going forward if (and only if) the criteria is met.

2. Stick to the fee and explain to client, in clear language for them to understand, that you priced it on a basis that didn't transpire, how they can ensure that this doesnt reoccur, and that going forward the fee will be increased for additional time spent.

I'd be tempted to go for the second option as it will show that you are reasonable, the client will feel that they have been treated fairly, and you are protected for future years. Don't make the common mistake of automatically looking at the profit in year one, look at overall profit over (say) 5 years and the marketing potential from positive word of mouth referrals from happy clients.

The more time invested in the client in the first year will result in considerably less time in future years so your decision should rest on how much you want to invest in this relationship.

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By geoffwolf
17th May 2009 19:03

surely
one of the important things for accountants to do is to advise clients on the way in which their bookkeeping can be improved even if this is only achieved instages achieved in stages year by year.

I have always been reluctant to quote a fixed fee in year 1. In my experience it is almost impossible to assess the efficiency of a prospective clients records by simply looking at the books. What may appear a perfect set of books very often turns out not to be so.
It therefore makes sense to sit with the clients records after a month or 2 and begin to suggest changes in record keeping well befor the first year end.

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By skylarking
17th May 2009 14:26

Viv is correct
Your letter of engagement should set out your mutual obligations.
You would be a little green, I think, to give a fixed fee without seeing how your client was undertaking the bookkeeping. If it is your naivety that is the cause of the problem I think you need to take it on the chin.
If the client has reneged on the agreement to supply information in a certain manner then you must point it out and reserve the right to charge more. If you do not, you will have the same problem for the whole life of the client.
Robert is wrong to suggest that you might be acting unethically. However, if the cash book does balance and the supporting records (purchase day book, etc) provide a pretty robust set of books you should ask yourself the question, 'has this seriously entailed more time for me and would it have entailed the same 'more time' for any other accountant'? The client shouldn't be penalised for our shortcomings or for providing (except for credit card purchases) a fine set of books.
Clients should be encouraged to keep better records and it is down to you to facilitate this by a variety of techniques including motivating them with the promise of lower fees.

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By AnonymousUser
17th May 2009 09:13

Change your mind about pricing
The truth is that most accountants are in the same position as you. The problem is that they are offered fixed fees but operating with a time based billing mentality.

There are a few simple things you can do to turn this around to be a massive win. Some firms prefer to catch their clients out with change orders. I get the impression that some think this is cleaver whereas it can be seen as unethical, especially as they offer no support.

Call me on 0800 915 4225 and I’ll send you a report on “Pricing for happy and profitable clients”. And, if you want I’ll pop a copy of a CD about value pricing but understand the answer is in you changing the way you think about billing.


Bob
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