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Are accountants happy with no fee increases?

20th Mar 2015
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The spring 2015 edition of the Bankstream Accountants Confidence Index revealed a puzzling contradiction.  Accountants were, on the whole, satisfied with their recent performance (81%) and confident about the months (85%) ahead, yet nearly half of these same accountants had seen no increase in fee income compared with the same time a year ago – in fact 5% had seen their fee income go down. How can this be?

Why no increase in fee revenue?
Some accountants might be genuinely happy to just maintain current levels of fee income – they may have reduced costs to derive more profit from existing revenue, or they may be at a stage of their career where they are seeking to reduce their time or input.

However this probably only accounts for a relatively small proportion. It is likely that most of those who say they are satisfied with maintaining fee income may actually be more resigned to the fact that increasing it is not possible.

An inability to raise practice income may be due to a number of factors – touching both the demand and supply sides of the equation.

No lack of demand
The most obvious reason why practices might not be able to raise fee income is a lack of demand for their services. Yet evidence from the spring 2015 Bankstream Accountants Confidence Index showed that demand (or at least potential demand) does exist within accountants’ client base, with poor-record keeping and information a commonly cited challenge for small businesses (38%).

Add to that the associated challenges of poor decision making and business practices (26%) and it seems that small businesses face problems their accountants should be able to help them with.

Unwillingness to pay
Clients needing additional services from their accountants is one thing, but being willing to pay for it is another.  Anecdotal evidence shows that many small businesses do not talk to their accountants about their needs for fear that any additional services will mean additional fees – this suggests a problem with real or perceived value.

Clients not seeing value
The apparent failure by small businesses to see value in the services provided by their accountants is a recurring issue. Many see accounting as a ‘necessary overhead’, a process that has to be done but adds little benefit beyond meeting compliance requirements.

This is often exacerbated when clients using ‘do-it-yourself’ accounting software believe that they are ‘doing all the work’ – ignorant of the fact that the accountant may spend hours fixing the mistakes the client has made.

Adding value without adding cost
In situations where clients do not see good value in the current service they receive from their accountant, a deadlock can occur with fee growth. In this situation the accountant has to take some leadership as it is unlikely that the client will ever raise the topic of other things the accountant might be able to help them with. Accountants need to be able to lead this conversation with a generous offer – additional services at no additional charge.

This may sound ridiculous (it may be if changes are not made on the supply side of the equation) but the first step towards increasing fees is to increase services without charging more, thus dissolving the client’s perception that greater engagement means only greater cost, not greater value. Practices should consider it a short-term investment in future revenue growth.

Fixing the supply side
Accountants may be unable to provide the services their clients need because they do not have the resources to do so, or they have the resources but are unable to apply them profitably.

Whether the problem is one of capacity or cost, the solution lies in increasing efficiency – doing more work without using more resources.

It is this need for improved efficiency which may be driving practices to investigate ‘add-on’ technologies that enable their existing infrastructure to operate more efficiently. For example, the spring 2015 Bankstream Accountants Confidence Index showed that the technology trend accountants felt will make the biggest impact on their practice over the coming year was the digitisation of paper records (scanning statements, invoices, receipts etc) 43%. Such incremental changes were rated well ahead of major changes, such as replacing current practice accounting software (13%).

Adding to subtract
Add on technologies and services, such as the digitisation of paper records, can significantly reduce the time it takes accountants to do their work, thus addressing both capacity and cost constraints. With the time and cost saved, accountants are well positioned to offer the additional services so many of their clients appear to need but are afraid to ask for.

By demonstrating to their clients that a greater engagement will bring greater value, accountants will be able to simultaneously grow their fees while providing a more valuable service to their clients – a real win/win.  With evidence that this process is already underway, it is likely that future research will show a genuinely happy and confident accounting profession.

Click here to see the results of the Bankstream Accountants Confidence Index.

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