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Accounts Fee Reduction for Covid Affected Company?

Should we contemplate discounts for clients whose businesses have been hit by lockdown?

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Client with two limited companies has paid us £800 +VAT pa per company for many years, for FRS105 Accounts prep & CT600 (everything else, inc payroll, VAT, & SA return is DIY). Both are VAT registered trading / service companies, with fair (but not "good") records; normal t/o circa £90k apiece. Each company paid by monthly s/o, so I never got around to increasing the fees.

Both ceased their monthly instalments a few months ago, at the point when they were all-square with us (each having paid exactly 12 instalments for their most recent accounts). I suspect the director was shopping around. Now he's back in contact, so I've pointed him to our current fee list from which he can see it'll now cost him "from £1,200 + VAT" for each company. 

T/o for both companies is down, not only due to the affects of lockdown but also because the director (of his own volition) has switched chunks of business from both companies to an entirely new company. Which means I'm hearing "winding down" and "practically dormant" in relation to the old companies.    

As you can imagine, we're poles apart on fees. My starting point for each Old Co is £1,200 +VAT; his is £800 + VAT for each minus a whacking discount (let's suppose 50%) because of their low activity; so £400 + VAT!

Are other practitioners contemplating extending such discounts for Accounts prep to Covid-affected clients and their businesses? 

Replies (66)

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By Evolute
09th Jun 2021 10:53

Morning,

I think where a client has clearly been affected due to lockdown a reduced fee of around 15-25% is reasonable as a one off gesture. This may be less than they wanted but it at least shows you value them as a client and want to preserve the relationship, but also to show genuine support and compassion for a client who has probably been through hell and back.

I personally don't see why accountants or solicitors are treated any differently to other suppliers and I come at this from someone who has worked in practice and owned my own business - so have no bias!

Be interested to hear other people's view on this, especially the practitioners.
Regards
James

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Replying to Evolute:
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By eppingaccountant
11th Jun 2021 10:05

But James, if we as accountants reduce a number of clients' fees by up to 25% as a on-off...then this affects our own income as an indirect result of Covid....and none of our suppliers are being that generous to us.

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Replying to eppingaccountant:
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By Leywood
12th Jun 2021 11:01

Agreed Epping.

Plus, James, some of us Accountants have been to hell and back during this time.

Many have given up masses of free time to calculate furlough etc etc, but that will have already been long forgotten, as Ive said. Clients have extremely short memories.

Besides, this client is clearly not playing fair/showing loyalty the other way is he (and I dont just mean the fee reduction request).

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By ireallyshouldknowthisbut
09th Jun 2021 11:10

I explain the base cost is X, but and the 'volume' cost is Y, so the base cost (and for us its £600) is for any company at all no matter how small, and the turnover is Y. So if they are on £800, then only £200 is turnover, so if it halves they are on £700 not £800.

Similarly if the turnover doubles to £180k the most we would be looking at is £900.

Sometimes works.

I think you are peeing in the wind asking for £1200.

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Replying to ireallyshouldknowthisbut:
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By I'msorryIhaven'taclue
09th Jun 2021 12:16

Thanks IRSKTB, I like the sound of that!

Let X = £600; and Y= (£200 minus Evolute's 25% discount).

The "accounts starting from £1,200" was a hike to deter new prospects during lockdown. It certainly has the client peeing himself.

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Replying to ireallyshouldknowthisbut:
Egg
By EGG
09th Jun 2021 12:18

I really like this way of explaining - I always talk about a certain amount of work to do a set of accounts, which doesn't change based on turnover or transactions but in my mind had not linked it to a 'base cost' and 'volume cost' so will use that in future!

Thank you!

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By Duggimon
09th Jun 2021 11:17

I wouldn't go any lower than £600 for any company with any transactions at all, £400 is impossible.

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Replying to Duggimon:
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By I'msorryIhaven'taclue
09th Jun 2021 12:31

Thanks Duggimon, that's reassuring. I'll certainly make £600 my "X" base figure.

Client's contention is the companies are practically dormant. Which might well be the case for turnover, though I just know there will be inter-company FA transfers, stock movements, furlough pay and BBLs.

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Replying to Duggimon:
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By sammerchant
13th Jun 2021 12:31

Unfortunately, some uninformed clients think that because we file a single page of accounts at Companies House, it must be a walk in the park and we are charging much more than warranted.

I send the clients the same copy as the one that HMRC receives electronically, and each year, with each client, I explain that we may file this set at Cos Hse if they wish, or perhaps file a much-edited version to be placed "in the public domain".
That helps them to understand the work required and justifies the fee charged.

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By SXGuy
09th Jun 2021 11:23

From the type of work you say, I wouldn't be charging £1200 anyway. I'd probably be charging around £600 as standard.

So with that in mind, I wouldn't offer £400.

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Replying to SXGuy:
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By I'msorryIhaven'taclue
09th Jun 2021 12:37

Thanks SXGuy, I'll chalk up another vote for X = £600

"From £1,200" even for a small set of accounts was deliberately inflated to put off new clients during the pandemic. (And it worked!)

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By Wanderer
09th Jun 2021 11:31

I popped into Sainsbury's the other day. Told them my income was down due to Covid and asked them if they would discount my food shop by 30%. They looked at me rather strangley and refused. Can't work out why?
They did say however that if I bought 30% less food then they would only charge me for the 70%.
Alternative is to go to Aldi, but I'm not sure I'd get the same quality of food, as I do like the Sainsbury's 'Taste the difference' range.

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Replying to Wanderer:
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By I'msorryIhaven'taclue
09th Jun 2021 12:42

I'm a fan of their Good for You range of gin.

Message received - you'd tell this client to Bog Off, not BOGOF!

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Replying to Wanderer:
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By North East Accountant
11th Jun 2021 11:51

Hit the nail on the head.....

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By David Ex
09th Jun 2021 11:34

I think you have a tricky situation- you want to ensure that the generous gesture on a temporary basis is seen as that. The stupidity of clients reported on here does suggest you run the risk of your generosity backfiring, eg, client assuming or suggesting he/she has been overpaying historically.

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Replying to David Ex:
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By Paul Crowley
09th Jun 2021 11:43

Agree
I have foolishly reduced prices on a couple of occasions and had that issue.

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By Paul Crowley
09th Jun 2021 11:40

Have not yet had any such conversations, other than one self employed where reduced from £300 to £250 where records are just totals on a tiny piece of A5 paper.
We start at £250 for any tax return for new clients ( legacy clients all over the place), then extra according to what goes on the return.

Not looking forward to the discussions.
My company Base line is £1200, with wages charged extra. But quite a lot are well organised and lower than that.
I find I spend more time on the winding down and finishing off on all jobs as there is more faffing about than in normal years.
I realise that I am just chatting and probably not helping, but always prefer to finish off the close down than leave client to find some some clever little oik who is going to ask loads of pointless questions and make suggestions to client that the tax would have been cheaper all those years if only client had moved sooner.

As mentioned above, no other products and services are expected to be cheaper just because it was a bad year.

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Replying to Paul Crowley:
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By Paul Crowley
09th Jun 2021 11:58

I should point out that we have commercial premises huge car park, reception and admin staff and train employees from scratch.
Significant overheads.

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Replying to Paul Crowley:
Maytuna
By DJKL
09th Jun 2021 12:54

No so, plenty of tenants occupying commercial property have sought relief from rent from their landlords because it has been a bad year (remember a lot cannot get evicted for non payment at present), we are certainly well into the tens of thousands re reliefs granted and the big property companies are well into the tens of millions.

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
09th Jun 2021 13:11

No, no, that's a good help Paul. My baseline for this particular client would have been circa £1,000+VAT had I not jacked the set menu up by 20% last year (purely as a premium fee for any new clients arriving during lockdown). The only reason fees remained at £800 for the companies in question is because their director has done a cracking job of turning his pockets out and pleading poverty these past 10 years!

Paul Crowley wrote:

As mentioned above, no other products and services are expected to be cheaper just because it was a bad year.

Ahha, music to my ears! That's my default position, and it's good to know I'm not totally out of step over that.

Office overheads here too, to factor in somewhere along the line; though nowhere near as salubrious as yours - our free car park often has cattle in it!

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By Richard Cliff
09th Jun 2021 11:57

I wouldn't budge from the bare minimum of £800+VAT. I've been doing the VAT/Book-keeping for several years without increasing the fee more than 5%, even though the turnover and transactions have doubled. Thanks to MTD I was able to use if has an excuse to put a larger increase. Unlike many other businesses I have had to work longer and harder through covid because we can't take holidays and have had improvements done to my house, so I would rather lose a client than to work same hours at even a 25% reduction.

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Replying to Richard Cliff:
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By I'msorryIhaven'taclue
09th Jun 2021 13:20

Thanks, and the more I think about this client the more I suspect that the lion's share of his drop in business isn't directly related to Covid, but to his having channelled business away from the two Oldcos and into a (third) Newco. What's the betting there'll be unpaid BBLs in the Oldcos?

Richard Cliff wrote:

Unlike many other businesses I have had to work longer and harder through covid because we can't take holidays

You're not goin' on a Summer Holiday? With no more workin' for a week or two..

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boxfile
By spilly
09th Jun 2021 13:02

Our minimum would be £650 for a company, but we might throw in a director’s tax return for free if it is straightforward.
We have decided not to increase fees this year for any business that has been Covid-affected. The only fee reductions have been where we do the book-keeping too as that’s taken less time due to lower paperwork volume.

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Replying to spilly:
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By I'msorryIhaven'taclue
09th Jun 2021 13:34

Thanks Spilly,

So that's another vote for no discounts for Covid-affected clients. I think I can live with a price-freeze, and let this client back on board at his old £800 rates (even though he's had those old rates for nigh on a decade!)

I expect, like you, I'll end up at around £650 (using X = £600 as my baseline, topped up with Y = £200 x pro-rata turnover reduction).

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By bluebaron
09th Jun 2021 13:26

As a one off I reduced fees by as much as 50% (generally 20%) for a handful of good clients who were really struggling last year, and I still feel like it was the right thing to do. Fortunately I don't have staff or premises. For me, processing furlough felt like the worst thing in terms of fees, last year.

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Replying to bluebaron:
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By I'msorryIhaven'taclue
09th Jun 2021 13:45

50% off? Ouch! I should give him your number :)

Agree about processing furlough BB: thankless task, poor recovery rate, and it might yet come back to bite you in the b*tt!

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Replying to I'msorryIhaven'taclue:
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By bluebaron
09th Jun 2021 14:29

The 50% fee reduction was just for one client only! Otherwise it was around 20%.

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Replying to bluebaron:
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By I'msorryIhaven'taclue
09th Jun 2021 14:58

Too late... he's calling you this afternoon ;-)

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Replying to I'msorryIhaven'taclue:
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By bluebaron
09th Jun 2021 16:09

Arghhh, noooo...!! I'll exchange him for one of my furlough clients!! lol.

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By Hugo Fair
09th Jun 2021 13:33

Unhelpful (but valid) point: not changing fee for 'many years' will always come back to haunt you (because it suggests only faint correlation between work & costs).

Best suggestion so far: IRSKTB's approach to explain difference between fixed and volume components (people are used to this from utility companies et al).

Additional thought: if you ever want to reduce the price (for whatever reason ... covid impact, loyalty, you fancy the client or whatever), then make sure the full price is quoted and the 'discount' is clearly labelled (not necessarily with the actual reason behind it)!
This doesn't reduce the starting-point for subsequent quotes ... and people like feeling that you've considered them specially (and love a discount).

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Replying to Hugo Fair:
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By I'msorryIhaven'taclue
09th Jun 2021 14:02

Agree I've been remiss over fees with this client. And when an increase comes in one big step-cost every five or 10 years rather than gradually then cue mock outrage.

IRSKTB's fixed and variable cost element has much to commend it, and works perfectly for me. X= £600; Y= £200 x % change in activity. Wonder if I could get that Ukranian chap with the VAT calculator to write me an app for that?

And I like your additional thought Hugo - so much so that I'm going to incorporate it into my quote viz:

Menu price £1,200 + VAT
Less: special discount -£400 + VAT
To you: only £800 + VAT
comprising of: base cost £600; and
variable cost £200
less activity discount on variable element -£100
Total cost after deducting all special and other discounts £700 + VAT

Tempted?

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
09th Jun 2021 14:06

I'msorryIhaven'taclue wrote:

Tempted?

Careful, I might start sub-contracting to you ... oh no, that was a different thread.

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A Putey FACA
By Arthur Putey
09th Jun 2021 16:15

I don't discount but I suggest they might do some of the work themselves, or take them off monthly payments on the understanding they are billed for the annual accounts work later when hopefully things have picked up. In your scenario I'd probably have stuck to the £800 unless I'd rather not do the work. There's only so much gold plate you can put on a set of FRS105 accounts and a CT600 especially if the client is doing their own VAT and the books are likely to be in a reasonable state.

On the X=Y suggestion the Y is turnover, which is a bit narrow, more turnover doesn't mean more work or a higher fee per se. Low turnover clients are often more likely to be a PITA than larger ones.

By the way, how much government support has your client received and what are the profits, notwithstanding reduced turnover? I wish I had increased the fee for some clients who seem to have done rather well out of it.

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Replying to Arthur Putey:
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By I'msorryIhaven'taclue
09th Jun 2021 16:43

Good question Arthur - I'm about to find out with a phone call! I'm expecting furlough pay and messy & bodged asset transfers. We'll see.

I know there'll be BBLs in both Oldco accounts, which I'm supposing is the motivating reason behind the client migrating to the clean sheet of a Newco.

Looks like I'll have myself back up to £1,200 if I'm not careful. And this is someone whose starting point is the £150 for dormant accounts he's spotted! Should be a fun call.

I'm very grateful for everyone's ideas: I had no idea whether I'd be pilloried by the panel for not offering a large and sympathetic discount; or laughed at for taking too much off (which has happened already to me this year at Bournemouth Beach!)

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Replying to I'msorryIhaven'taclue:
A Putey FACA
By Arthur Putey
09th Jun 2021 17:02

Well if he's had CJRS and BBLs etc then why shouldn't he pass a bit of that your way. Tell him things have been difficult for you [insert sob story here] or if that fails threaten to show him your Bournemouth photos .... (btw I hope it wasn't Studland and you didn't take it all off!)

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Replying to Arthur Putey:
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By I'msorryIhaven'taclue
09th Jun 2021 17:35

lol Studland's strictly for the birds.

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Replying to I'msorryIhaven'taclue:
A Putey FACA
By Arthur Putey
09th Jun 2021 20:35

There was a conspicuous absence of birds in the broader sense when we blundered onto the beach some years back, although Mrs P did observe a number of what she identified as coc......

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Replying to Arthur Putey:
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By I'msorryIhaven'taclue
09th Jun 2021 22:58

I could listen to you all day :-)

Mrs P is to be congratulated on her observations. Identifying cockneys isn't that easy at Studland , especially when not adorned in their identifying colours.

Rumour has it a pair of cockneys have been spotted nesting on Sandbanks Cliffs these past few years, but I'm not sure I believe that.

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Replying to Arthur Putey:
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By Paul Crowley
10th Jun 2021 11:07

On fee issues I always show clients some simple time reducing functions they can do, but always put it into context.
In the past I have had clients spending days doing what me and staff can do in 2 hours, but wanting £700 off the bill.

Very often send some working paper spreadsheets to clients that just mess them up and ruin the totals and functions.

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Glenn Martin
By Glenn Martin
09th Jun 2021 16:41

In a strange way Covid has cleared up my client list for me, those at the top end already know the benefit of working closely with me so have signed up to extra services.

But we are under a lot of pressure at the bottom end with small jobs that don't really fit and tax only jobs etc we have picked up along the way. These small compliance jobs are not really what I want to do, but not got around to dealing with it, but they all want cheap now and we would not budge on fees so a lot of the small jobs have moved on, which has has given me a lot of time back. All of the difficult clients have now gone for cheap elsewhere.

For your guy I would stand my ground if its going to be easier than normal knock him a little off his fees to get them done.

Have you got the Newco he has setup? if so make sure that goes on new pricing

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Replying to Glennzy:
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By I'msorryIhaven'taclue
09th Jun 2021 22:48

Thanks Glenn, I took your words of wisdom into battle and didn't budge much.

This is indeed bottom end, but capable of kicking up a tremendous amount of dust if the slightest thing goes wrong - Letter from HMRC? Call out the guard! £10 late CT payment interest? Off with their heads! - so I factored that in.

And I'm happy to report agreed fees of £720 + £880 (+VAT). As in "Normal list fee £1,200 less special discount", and go from there. To be perfectly frank I'd have quoted £2k a pop 20 years ago (back in the day, when £2k would keep you in wine, women and song all year long. Come to think of it, I don't recall singing all that much). Which just goes to show what a dwindling industry we're in!

Nevertheless, I'm most grateful for your pearls of wisdom. Oh, and £1,250 + VAT for Newco, so good call :)

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
09th Jun 2021 23:15

Good news.
Now if you study the obverse of my earlier suggestions and hold it close to a hot lightbulb so you can read the invisible ink, you'll see the copyright mark for 'special discount' ... but don't worry, I can let you have it for not £250, not £200, just £100!

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Replying to Hugo Fair:
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By I'msorryIhaven'taclue
10th Jun 2021 00:03

Cushty!

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Replying to I'msorryIhaven'taclue:
Glenn Martin
By Glenn Martin
14th Jun 2021 17:13

Well done, not a bad result for you in the end.

In general I do feel a big chunk of the business community don't really value what do. When I started out we were held in the same regard as Doctors, Dentists and Architects Lawyers etc but now people compare us more to trades people.

I must say it is far easier agreeing fees at the top end of what I do now than at the lower level as you mention, some people seem to think they can get Ltd co accounts for £300/£400

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boxfile
By spilly
09th Jun 2021 17:19

And don’t forget to factor in that almost all the software fees have increased by quite a chunk this year.
We’ve used that to justify a couple of fee rises that clients were a bit disgruntled about. Seems to make them accept it a bit easier somehow.

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Replying to spilly:
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By I'msorryIhaven'taclue
09th Jun 2021 22:57

It's odd, isn't it... software prices rising, second hand car prices going through the roof, house price inflation, market forces creating a supply and demand shortage of hospitality staff.

It defies logic, and all seems rather like Enid Blyton's Topsy-Turvy Land!

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By bernard michael
10th Jun 2021 09:34

Are you instructed on the new company.?? If not he's taking you for a mug by making you reduce your fees because of his chicanery in transferring the business

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Replying to bernard michael:
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By I'msorryIhaven'taclue
10th Jun 2021 10:44

New company £1,250 +VAT. Oldcos @ £800 +VAT apiece (well, £720 & £880 to be exact). One of the Oldcos (the £880 + VAT one) will have to soldier on a few years, as it has a BBL.

But you're right about the attempted mugging, Bernard: client has emailed me blaming both companies' banks for having stopped monthly s/o payments back in the Spring. I can see the way that's headed - he's trying to get back on the carousel he elected to alight, the one that allowed him to pay monthly on the drip; and mostly in arrears! And can we set something up instalment payments for Newco, which needs accounts pronto? (We certainly can: 50% deposit; balance 50% before filing!).

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By Leywood
10th Jun 2021 09:46

Just tell him he is and has been on a reduced fee for a number of years at £800. That you will do it for £800, or maybe £750 if pushed. I would use Wanderers point in my conversations. Sounds like he will be a gonner anyway. Im sure we have all done lots extra for a large chunk of clients and whilst it is appreciated at the time, it is soon forgotten by most of them and Im at the stage now where enough is enough.

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Replying to Leywood:
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By I'msorryIhaven'taclue
10th Jun 2021 11:09

Thanks Leywood, I dug in @ £800 apiece; and did indeed use Wanderer's points, as well as IRSKTB's base & variable cost model (not to mention Hugo Fair's Del-boy's discount whereby the first line of the quote starts at £1,200. Luvvly Jubbly!)

I was conscious of there having been pricing threads similar to this one a year ago, when the topic matter was whether or not to charge full fees (or indeed whether to charge at all) for client support related to furlough claims, BBL applications, and other lockdown-related services. If this straw-poll is anything to go by, it seems accountants' attitudes have hardened since then.

And maybe that's because (I'd say) you're spot on: all such free or discounted work is indeed all too easily forgotten by clients; worse, what's the betting appreciated at the time will morph into expected and taken for granted?

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