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Seven ways to increase your fee income

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26th Feb 2010
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Mark Lee outlines how to get paid for additional work over and above the standard client fee.

Time-based billing used to be very common among accountants and some still do this. However, most clients want some idea of how much the fee is going to be before they engage you.

Many new practicing accountants set fixed fees and later find that they have underestimated the time that it takes to service their clients. They then use the Any Answers facility here on AccountingWEB.co.uk to seek advice on how they can increase their fees.

More experienced practitioners can also find themselves in a similar situation either after quoting fixed fees, or when clients have become used to a certain fee level. How then can practitioners get paid for additional work over and above the fee that the client expects to pay? Here are seven approaches that can work in the right circumstances.

Ensure your fixed fee relates to specific work

If we assume you have quoted a fixed fee, you will want to avoid clients being able to take advantage. Is there a fair use limit on the phone calls or meetings? Or maybe you size up clients before quoting a fixed fee and avoid this if your gut suggests the client is one who would take advantage.

It’s generally best to avoid creating the feeling that the fee clock starts ticking every time clients call you. You want them to keep in touch. You want to know what’s going on and what worries they have, and you don't want them to think that every time they get in touch you’re going to try to sell them additional work and fees, so your fixed fee should probably anticipate an element of this.

If a client does want you do advise on something specific outside the scope of the recurring engagement, can you quote for this before starting? Maybe it will be within a range of £x and £y? Beware of the client focusing on the lower end of the range. Keep the client informed and ensure you bill promptly – as soon as you’ve done the work and at least monthly if the work is protracted. Face your fear and bill it anyway!

Keep track of delegated work

In larger firms it is quite common for a partner to ask someone to do the work. Even if the ‘worker’ thinks to ask the question the partner doesn’t want to hear that it’s not covered by a fixed fee. Or maybe the amount of time taken is not considered until the WIP records are checked after the event.

In smaller practices it is often easier to keep track of delegated work and for the team to determine at the outset whether the client’s query or enquiry will justify an additional fee.

I totally understand why more and more accountants are moving away from simply billing by reference to ‘what’s on the clock’. I still tend to think that retaining timesheets can be a helpful management tool, as they can show you how much time was really spent on the job so that you can price more realistically next year and for other clients.

Approach the client sooner rather than later

There is a tendency to simply send an invoice covering extras and then await the dreaded phone call or letter. A better alternative is to send a note to the client advising them of the higher than expected fee. However there’s a trap. Although a letter/email may be a good way to broach the subject it is critical to follow up proactively with a prompt phone call rather than to just wait for a reaction.

Talk to your client rather than just write to them
If you’ve underestimated a fee and want to increase your prospect of recovering more than the expected amount you must take the initiative. Set out your justification and plan your approach to the client. Don’t just send the bill. Don’t even send the bill if you hear nothing back after sending the client a note of the proposed additional fee. Even if it gets paid you cannot assume the client is happy. They may well have started to look for a new accountant. You will only know what your client thinks if you speak to them – and you trust them to tell you the truth!

Event billing
This is the classic approach of billing by reference to specific pieces of additional work rather than waiting for the end of a quarter – or even the end of the month.  If it’s too much hassle to raise an invoice mid-month there is something wrong with your billing process.

You already issue invoices with accounts and tax returns (don’t you?) - that's the point at which the client should be most appreciative of your work.

Smaller, more frequent bills don't look so bad, unless they are so frequent that the client fears a bill each time they speak to you. In general though each bill highlights the value of a specific extra service. This is much better than expecting the client to remember and appreciate the value of a whole succession of small and large jobs performed over an extended period.

Delegate the billing
The staff who actually did the work are often the best people to draft the bill - after all, they know exactly what they did. If the staff or secretaries are responsible for billing the extras maybe they will be more commercial – after all the more they bill, the more money comes in to pay their salaries.

Swallow it and learn

If you really cannot charge or recover a commercial fee for the extra work you’ve done, you will simply have to swallow it and learn for next time - or say goodbye to the client.

Mark Lee is chairman of the Tax Advice Network and consultant practice editor for AccountingWEB.co.uk

Replies (5)

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By Bob Harper
26th Feb 2010 10:23

Value Pricing

Some useful tips but trying to fix fixed pricing problem really isn't the answer..value pricing is.  This is a which a completely different mentality to charging clients and managing work which is truly ethical and ultimately in the best interest of the client, practice owner and employees.

Pricing is a massively important topic for the profession - Ron Baker (author and founder of Verasage) help a Webinar...anyone who would like a CD copy can register here.

Bob

Marketing for Accountants

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By Mark Lee
26th Feb 2010 11:13

I'm a big fan of value pricing too Bob

For those who have yet to embrace value pricing though I think it's worth sharing practical solutions to the all too common situation whereby additional time and work needs to be billed or written off.

If it's happening too often then I agree it's worth thinking more deeply about value pricing. But it's not a solution to specific cases as are my suggestions above.

Mark

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By Bob Harper
26th Feb 2010 13:08

Symptom of a bigger problem

Fixed pricing is a half way house so you have made recommendations which fall inside Value Pricing methodology like ensuring your fixed fee relates to specific work and talking to clients. 

However, suggesting timesheets help with pricing and management really cuts across what Value Pricing stands for.  Time recording and using time for billing is really the problem…fee disputes are just the symptom.

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By TrevorJSmith
26th Feb 2010 16:20

Always an interesting topic.

Good article Mark, I can certainly relate to all of that, running a small expanding practice. Thank you.

I use timesheets , even on fixed fee work, to keep things real, and review the good and not so good productivity and profitability of each particular job. If the clients records need additional work, I explain this either during the course of preparing the work, or at the end, depending on my relationship with the client.

I charge as and when additional work is carried out beyond the scope of the normal work, but not for emails or phone calls unless I feel it is discussed at the time of contact.

Clients don't want surprises so timely invoicing, as mentioned Mark, i agree is essential, even interim invoicing where the client is dragging his heels and the WIP is stagnant on a job for a month or two.

I confess I have not looked at value pricing, but will be looking into this, thank you Bob.

 

 

 

 

 

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By spinone
03rd Mar 2010 18:05

Demand vs Supply

Good article Mark.

Isn't the value pricing versus timesheets the equivalent of looking at things from the demand and supply positions.

You only want the work if your share of the value created is more than the cost of your supply.

 

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