What would you charge cont'd...

What would you charge cont'd...

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Basically we are a small practice which my Father has grown over 30 years. I have been apartner now for around 5 years and have found that our billing system leave a lot to be desired.

Some clients are billed realistic fixed fees (especially the new ones) while some of the older clients are not.

How do you change this. Surely a letter to the older ones to say "thanks but your fees are going to double next year" will not go down well.

I wondered how other firms have coped with introducing a new fee structure.

Thanks in advance.
Nicholas Robinson

Replies (4)

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Teignmouth
By Paul Scholes
29th Jun 2005 00:41

Go for it
He doesn’t mention whether he warned his clients but if not I think John Savage may need to keep his hat on. You should always explain why you need to make any change to a client relationship; wouldn’t you want it explained if you were buying?

There’s nothing wrong with saying that charges have become uneconomic and have dropped below market levels, you are in business and if you think clients value your work they should expect to pay market rates or more. If clients get the hump and leave afterwards then you have either not been providing value for money or they are unreasonable and you’re better off working for the ones that do value your time.

I and many other accountants have gone through this process and wish they’d done it sooner; the drop out rate will be manageable.

May I suggest that if you are going to approach them over rates then it may be worth looking at the whole billing procedure, terms & conditions etc, get it over with in one go.

Whilst I agree that time records are a good control of chargeable & non-chargeable time, I am a complete convert to the principle that clients do not buy hours they buy a service.

They have no way of judging whether 5 hours or 10 hours is a reasonable time to do the accounts so why bring it into the equation. Also if they were happy with £1,000 and next year because you invest in new IT or better trained staff and the job takes you 5 hours less to do, who should take the credit (and cash) for that? It's your effort & effeciancy, so you should.

The difficult truth for us is that we are like other businesses (yes plumbers), we have trained & learned the ropes and now want to charge for what we’ve learned. Although many clients still see what we do as a mystery and are therefore still prepared to pay £500 for their tax return they are a dying breed, the mystery is going and we have to judge the value of work for each client. Client A will be delighted to pay £300 for his return whereas client B would rather do it herself than pay £200 for an identical return (both taking 3 hours to prepare).

Good luck & go for it.

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By AnonymousUser
24th Jun 2005 21:07

The First Mistake
IMHO the lack of confidence that affects many accountants' abilties to negotiate profitable fees can be traced back to day one, when they first set foot in an accountancy bureau. There they were informed by a professional hustler exactly what their salary range would be, what hours, holidays, training and benefits they would be offered, and how lucky they might consider themselves to be IF their CV were to be put forward. Oh, and there are some stronger candidates by the way. Cue begging position.

So the Bureau's jobs are non-negotiable? Not quite, because those that make it through the initial interviews can look forward to a final round in which their salary expectations are reduced to the lower end of the advertised range. There follows a cat and mouse negotiation in which less steady / weaker / desperate candidates blindly undercut each other by tendering lower salary expectations. Such shenanigans help the Bureau land the strongest candidate at the weakest candidate's salary.

Any of this sound familiar? Anyone else see a similar situation when we scramble for clients' business?

Nick, if you have the awareness to charge your clients more then good for you. A hairdresser client taught me a useful lesson. She squeezed her prices up one segment at a time: pensioners; then children; then perms, and so on. That way she was able to monitor the reaction without risking her whole client base. And still they came!

Kay

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By AnonymousUser
23rd Jun 2005 14:13

Common Problem
The problems faced by Nicholas and John are common among small practitioners. It is very easy to continue to charge fees just a bit higher than last year without giving due consideration to the amount of work put in to the job.
I did this for many years and found my profit remaining static whilst I ran around at an ever increasing speed. At the time I was not maintaining a full record of all time spent on jobs.
I wrote to all those clients I considered were being under-charged and explained to them that due to the increasing burden of overheads together with regulation and legislation, I would have to increase my fees to cover costs. I did this in conjunction with using my time recording system properly. I had few problems with any clients other than a handful I was happy to lose anyway.
I now charge based on time spent and try to explain any excess over previous years to my clients. Occassionally I still have to write off time when I consider I have not been as efficient as I could be.
Just a thought that those who do not have a time recording system in place will probably need one under UITF 40, if they are not to fall foul of the Revenue.
As for increased time to do jobs, I think that most small practitioners are in the same boat. Increases in tax compliance, changes to ethical guidlines, a more aggressive Inland Revenue, money laundering etc have all made our lives more difficult.
The unfortunate outcome of all of this is that fees will have to rise to meet costs, because there are only so many hours in a day that one can work. There will always be those who will keep their fees low, but I would prefer to lose 20% of my clients with the rest paying 25% more and have an easier life where I can provide the level of service I consider my clients are due.

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By John Savage
23rd Jun 2005 10:24

Interesting question
I would also be interested in finding out how others tackle this one. Been in practice now for nearly 20 years, and some of my long standing clients are being charged far too little. So last Last November, feeling that my fees were too low, I reluctantly increased them by 35%. Putting on my tin hat, I waited for the flak. Only two of my clients have bellyached about it, and I note that one other client, a long standing one, never mentioned anything but now takes ages to pay.

The rest of the clients seem to have just shrugged their shoulders and stuck with me. However, am also feeling that as everything has now become, and continues to get, far more complex, I am taking far longer to get jobs done to billing stage. Are others also finding this, or is it just me getting too old for this caper and losing my enthusiasm?!

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