I would be interested to have members' feedback on how much to charge for Accountant's reference - for confirming turnover, profit for the last 3 years, for confirming that client is capable of meeting financial commitments etc.
I have a estate agent client for whom I have to repeatedly issue references to other agents, landlords etc. It takes about 10-15 minutes per reference from start to finish.
But the value to the client for these is high as they generate business deals.
How do others charge for this? Time based, Value pricing? What value do you attach?
Thanks
Replies (39)
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We don't charge for things like that as we consider it part of building up goodwill with the client. I don't think value pricing would be fair on our clients either!
Numbers game
If you are having to do this numerous times for the same client I can appreciate that the time can mount up but as the same time would you not have a template to save on the time.
If your annual fee does not cover it then you either have to decide if the client will accept an increase to cover at least some of the extra time or if the client goodwill is worth more.
I would not charge for doing the odd reference.
Doing them as frequently as this is a drain on your time. I would be charging for doing these. My price would be £15/20 + vat each if they could be done in 10mins give or take a few minutes.
Same here
I would not charge for doing the odd reference.
Doing them as frequently as this is a drain on your time. I would be charging for doing these. My price would be £15/20 + vat each if they could be done in 10mins give or take a few minutes.
One-offs, no, I wouldn't bother.
Regularly - there comes a point where goodwill is completely amortised.
I think that it depends on whether the report that you are providing increases your professional risk. For simply providing an SA302, which the client could just as easily request himself, you might lose that in admin. But if you are providing something on your letterhead that might come back to bite you (or your PI) if the client defaults on a loan after the loan company had placed reliance on your representations, then that is quite a different matter. The fee would run into 3 figures, even if it took 10 minutes to produce. Sure you could include disclaimers, but ...
With kind regards
Clint Westwood
AUDIT 2/01
Paragraph 9 here: https://www.icaew.com/~/media/corporate/files/technical/technical%20rele...
is of use.
Para 9
Does Para 9 not refer to the idea of charging the lender as opposed to the borrower?
Well
I charge a fixed rate per reference per person, so a joint mortgage application gets charged twice.
If the client is not my client, for example its come through a mortgage broker contact, I charge a bit more.
Most importantly I get them to pay up front as too many times I've had people refuse to pay if their mortgage is not approved even though I have done what I was asked to do.
Non-client references
If the client is not my client, for example its come through a mortgage broker contact, I charge a bit more.
I wouldn't give a reference for someone who's not a client - a dangerous game I feel, and certainly not worth a couple of hundred £s or whatever's charged!
...or have I misunderstood?
You can simply report the facts.
If the client is not my client, for example its come through a mortgage broker contact, I charge a bit more.
I wouldn't give a reference for someone who's not a client - a dangerous game I feel, and certainly not worth a couple of hundred £s or whatever's charged!
Presumably once you've done the MLR checks you can say "The accounts show turnover of £xxx, profit of £xxx etc"
To clarify
If the client is not my client, for example its come through a mortgage broker contact, I charge a bit more.
I wouldn't give a reference for someone who's not a client - a dangerous game I feel, and certainly not worth a couple of hundred £s or whatever's charged!
...or have I misunderstood?
By "reference" I mean the forms that lenders issue and ask to be filled in and signed off by an accountant and then stamped.
I just quote the figures off the tax returns. The forms come with a disclaimer on them and if the lender relies solely on the form, more fool them.
The charge is £60 + VAT for my own clients and £75 + VAT for non-clients.
I would never do a bespoke reference on my letterhead for anyone. ever.
Contingent fees
<snip>
Most importantly I get them to pay up front as too many times I've had people refuse to pay if their mortgage is not approved even though I have done what I was asked to do.
If the work involved is trivial, so that the bulk of the fee is to accommodate professional risk, then I would be quite happy quoting a fee that is contingent on the mortgage being approved. If it is rejected then I am protected from risk. If it is approved then I doubt that the client would object to the fee that would be lost in the numbers involved.
With kind regards
Clint Westwood
Maybe I'm being too strict with myself
..but if I hadn't prepared the figures I'd want to do an awful lot of checking before I would be happy to send them to a third party. I'd also want to see what had been sent to HMRC unless they were projections.
I’m not sure why anyone would want to go to the trouble of setting up a new client, along with the potential consequences, to provide a reference for someone that is not a client. For what you can charge I just don’t see that it is worthwhile.
I don't charge
My charge includes an allowance for an hour or so of sundry items such as filling in student grant forms, taking a call from the client enquiring about tax relief or vat etc. I'd only consider charging if a significant amount of time is taken.
We charge
£175 plus VAT a reference since we are being asked as a professional - a solicitor would too
Wow
What reaction do you get from clients?£175 plus VAT a reference since we are being asked as a professional - a solicitor would too
Same as Paul
£175 plus VAT a reference since we are being asked as a professional - a solicitor would too
Ours is also £175+VAT. We do bundle it in for the higher end clients though
In the house buying process...
The bank charges a set up fee for the mortgage
The Mortgage Adviser charges a fee for finding the mortgage
The solicitor charges a fee for conveyancing
Why are we the only ones who'd work for free?
Including it in the ongoing fee is wrong.
I don't charge the client for services I might not provide, so when I do provide them I make a separate charge for them. If you can afford to do it without charging extra, you over-bill them every year they don't ask for a reference.
drifting
I don't charge the client for services I might not provide, so when I do provide them I make a separate charge for them. If you can afford to do it without charging extra, you over-bill them every year they don't ask for a reference.
This is a separate issue I feel. The principle of fixed-fee charging is predicated on the inevitability that for a particular year for a particular individual the fee will be greater than the associated attributable costs. Customers are prepared to pay a premium for the certainty.
With kind regards
Clint Westwood
Be Careful
We don't charge for this and only ever give very restrictive confirmations i.e. figures per the accounts / tax returns we have produced (with a disclaimer). We never comment on whether a client can meet his / her financial commitments going forward / has means to pay etc. You need to think very carefully whether you are prepared to give such assurances to bank. i wouldn't.
.
We never comment on whether a client can meet his / her financial commitments going forward / has means to pay etc. You need to think very carefully whether you are prepared to give such assurances to bank. i wouldn't.
Me neither. I think you'd have to charge a lot to cover yourself for the risk this would expose you to.
to whom it may concern
WE DON'T CHARGE FOR THESE EITHER BUT IF THE VOLUME IS HIGH ON A PARTICULAR CLIENT THEN A COMMON LETTER ADDRESSED TO "TO WHOM IT MAY CONCERN" MIGHT WORK.
my god there are some greedy 'people' on here
just talk to client and agree an annual fee, once you have a template or 2 its easy peasy , all you have to do is sign them off. Dont waste your time billing everytime you send one
@carnmores
We are not gready but businessman. Whether or not you charge a fee is up to you and it maybe that you collect the amount via a different method perhaps itis included in your annual accounts and tax fee
Don't charge
ICAEW recommend not charging for a reference. See para below from ICAEW:
"Accountants should only provide these where there is no need to perform any work, research or investigation to produce the reference, and no fee should be charge."
During a QAD visit we had they confirmed this.
This is news to me
Is ACCA the same?ICAEW recommend not charging for a reference. See para below from ICAEW:
"Accountants should only provide these where there is no need to perform any work, research or investigation to produce the reference, and no fee should be charge."
During a QAD visit we had they confirmed this.
ICAEW
Sadly I have never produced a reference that did not involve work.
ICAEW seem to live in a different woorld from most of us. How do they/ (it) feel(s) about telling the self-employed etc in the uk that accountants should not provide mortgage references.
@paul
I agree and disagree , i do think that a small charge is OK but £175 is far too much , fees should be proportionate to the level / skill of the work carried out .in my opinion but its your call ! i do pity the poor chap who has to deal with continual requests re the estate agent
/ risk
FYPI agree and disagree , i do think that a small charge is OK but £175 is far too much , fees should be proportionate to the level / skill / risk of the work carried out .in my opinion but its your call ! i do pity the poor chap who has to deal with continual requests re the estate agent
With kind regards
Clint Westwood
My garage
wanted £30 to fit a light bulb, so £175 to complete a reference might seem quite good value!
We do not charge - it would cost almost as much to raise the invoice and process the payment (in theory, at least).
Edit: sorry that did include the bulb!
Disclaimers - 100% effective?
Surely we want to eliminate the risk or can't we disclaim anymore
I think that you can attempt to control risk by use of disclaimers. It certainly adds a level of protection and an obstacle to litigation. In reality I don't think that it is particularly effective in all cases. "Elimination" is an aspiration but unattainable. I don't suggest giving up on disclaimers.
The only reason that a lender is asking for an accountant's reference is so that he can place reliance upon it, and as the accountant you will be aware of that. If you provide a reference combined with a statement that no reliance can be placed upon it, what does that say about the quality of your work?
At the risk of thread drift I know that some accountants have in the past "opted out" of advising on tax credits and considered themselves immune to backlash simply by a statement in the engagement letter to that effect. But if they give advice which is inappropriate to a tax credit claimant who incurs consequential loss then I don't fancy their chances in court, because a reasonably competent accountant should be versed in tax credits not make such an error, disclaimed or otherwise. In practice the PI insurer would probably pay up without a fight.
With kind regards
Clint Westwood
One is free
for every client once a year as per our engagement terms.Any additional references are chargeable at £100. Nothing is free in this world and why on earth we as professionals should not charge for these references unless you offer it as an add-on benefit to your clients under your engagement terms (as we do). Most tenants can not get their properties until they provide an accountant's reference (if self-employed) so a client can well imagine the worth of that piece of document to them. I would not even imagine to offer free service in the hope of building goodwill.
Goodwill
I would not even imagine to offer free service in the hope of building goodwill.
I think that if you're providing a very corporate, streamlined, functional practice, or a low margin high volume practice, then charging for every tiny bit of work is probably the right thing to do, you're unlikely to have enough 'profit margin' in your basic accountancy quote to accommodate that extra work or the clients already know that it's a very formal business relationship. However, I find that if you build up a good relationship with your clients and they know that you're willing to 'do them a favour' as it were without charging them for every minute of your time then you're more likely to be able to maintain that service going forwards and you make them less price sensitive also. My personal view is that for 15 minutes of my time, they (and their wife, family and children) place a lot of appreciation on that work, it's a good opportunity to get to know the client and 'personalise' the business relationship, I agree that because of the very same reasons you're in a position to charge them a hefty fee (you can afterall effectively hold them to ransom in their hour of need), however that's not the kind of client relationship I personally have or would want to have.
Two different business models, both work.
I would probably look at things differently however if I didn't personally like the client and they'd squeezed me down on my fees. But then again, I'd probably be looking to get rid of that client anyway.
Interesting that you don't seem to value goodwill, I wonder if you will when you're looking to retire and valuing the practice for sale?
@sheepy306
Goodwill value per £ of fees is reducing and I am advised that 0.75 to 1 is the norma. Whereas a few years back it was 1 to 1.25.
Sale value of a practice is based on annual fee income so if you charge for a reference the Annual fee will be higher than if you dont!
Depends how many clients you lose in the medium term because you charge them for every single little piece of work and don't have any positive goodwill in the relationship, your GRF may therefore be far lower. 'Recurring' is the key word a buyer would be looking into.
Reducing multiples? I'd agree with you but the practice guru's keep telling me that I could be using a multiple of up to 5x GRF. Surely they're not wrong?