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Bid for accountancy services far too high

We quoted to do the accounts for a £1m turnover Ltd and were 4 x the prices of others...

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We were asked to quote a £1m turnover SME for;

final accounts & VAT returns (£1,500),

payroll for about 20 staff (£1,500),

processing about 400 purchase invoices per month (£1,200) and

tax returns for 3 directors (£450).

Our bid is in the brackets, for the whole year ex VAT.  Total about £4,500 per year.

They've let us know we were 4 times more expensive than their preferred bid.

Do our prices seem unreasonable for a practice based in North London?

Replies (33)

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By carnmores
06th Aug 2017 09:14

certainly not! are you sure that your quote is 4 times the preferred bidder. I can see that some figures eg payroll may be deemed a bit high but not much. also its a bit difficult to tell how much work is involved in preparing the vat etc and if you do that and look after the purchase side preparing the accounts is or should be fairly easy. Finally I note that there is no mention of auto enrolment or corporation tax, whats happening there. i would probably write and inform them of the perils of a low quote and emphasise where you will be adding value.

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Replying to carnmores:
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By uknick
06th Aug 2017 09:23

carnmores wrote:

certainly not! are you sure that your quote is 4 times the preferred bidder. I can see that some figures eg payroll may be deemed a bit high but not much. also its a bit difficult to tell how much work is involved in preparing the vat etc and if you do that and look after the purchase side preparing the accounts is or should be fairly easy. Finally I note that there is no mention of auto enrolment or corporation tax, whats happening there. i would probably write and inform them of the perils of a low quote and emphasise where you will be adding value.

Re CT, I should've said we also prepare and file in the price for final accounts. I agree our payroll was high, but to be honest, it's a lot of work to do as we think they have quite a high turnover of staff due to the nature of their business and built in the extra starter/leaver work.

They said they've had quotes from KPMG small business as well as other local businesses. I find it hard to believe all the work can be done by a local company for about £1k. KPMG on the other hand could well bid very low at the start etc etc.

I think the other bids were not a like for like for what we bid so we'll go back and try to talk them through what we offer in our bid. But, I came here first just to check we were in the ball park.

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By soundadvice
06th Aug 2017 09:41

Your price looks very fair to me.

Indeed I would say your quote for writing up the purchase invoices of £1200 for 400 invoices a month is incredibly cheap. At one minute per invoice that works out at 80 hours work charged st £15 per hour. I think most SME Accountants would charge around £25 per hour for basic bookkeeping.

What about entering up sales invoices and bank transactions?

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Replying to soundadvice:
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By uknick
06th Aug 2017 10:52

soundadvice wrote:

Your price looks very fair to me.

Indeed I would say your quote for writing up the purchase invoices of £1200 for 400 invoices a month is incredibly cheap. At one minute per invoice that works out at 80 hours work charged st £15 per hour. I think most SME Accountants would charge around £25 per hour for basic bookkeeping.

What about entering up sales invoices and bank transactions?

Sorry, I should have said 400 per quarter; we did work on £25 per hour for book keeping. Maybe this lack of attention to detail is why they don't want to use us LOL

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By andy.partridge
06th Aug 2017 10:40

If your bid really was 4 times higher, why on earth would they be remotely interested in any further dialogue with you?

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Replying to andy.partridge:
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By uknick
06th Aug 2017 10:58

I don't believe it was. I think this is some form of ham fisted negotiation technique. Maybe from the school of Trumpism :-)

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Replying to uknick:
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By carnmores
06th Aug 2017 12:11

Ah yes that well known billonaire lol

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Replying to uknick:
RLI
By lionofludesch
08th Aug 2017 18:00

uknick wrote:

I don't believe it was. I think this is some form of ham fisted negotiation technique. Maybe from the school of Trumpism :-)

You're better off without this client. He's not interested in your service. He's interested in the cheapest price. Clients like that are poison.

If he comes back to you, tell him your prices have now risen by 10% and you'll require payment in advance.

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By bernard michael
06th Aug 2017 10:45

They sound difficult from day 1. Trying to negotiate with them with these 2 wide fee parameters will be impossible - walk away

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Replying to bernard michael:
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By uknick
06th Aug 2017 10:57

I tend to agree. My gut feeling is not worth the trouble. Also, I don't think they really understand what is needed from their accountant. As said above they mention processing purchase invoices but no sales or general ledger work.

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Glenn Martin
By Glenn Martin
06th Aug 2017 11:52

For me that is a very good price even if you were up North let alone London.

On its own the payroll would be a little high but you have explained why. These type of jobs need a lot of contingency built into a fixed fee as there is a lot of moving parts here and you involvement will increase over time it won't decrease.

For the invoices I would be looking to put AutoEntry in with the client doing the sending/scanning as I could see you burning costs on that.

What type of business is it, and have they been going long and are they experienced?

I say that as I see a lot of e commerce traders turning over that sort of money but actually make very little and they seem to think the Accountants fee should be relative to profits as opposed to amount of work involved.

If someone has quoted a quarter of your fee common sense should tell them that is wrong, the accountant will either end of stressed to hell (like on another post) or they will be seeking to charge extras at every turn.

The KPMG will also be very much a price from and things like staff turnover will bring in extra costs.

The fact that he has come back to you would indicate he likes you and he has concerns with the cheap quote and he needs to justify what he gets for the extra fees.

I would just explain for your quote you will give him piece of mind and that is all he will pay and you will not seek extras.

If he just wants a the cheapest fee let him go, he will be back next year when it all goes Pete Tong. It's hard letting potential decent fees go but you just don't want turnover the work has to be profitable otherwise you could end up busy as hell but making nowt.

I have been there and it takes its toll.

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Stewie
By Stewie Griffin
06th Aug 2017 12:38

We are up north and I'd be charging more than that.

Accounts & CT, around £1800. I'd consider £1500 ok if we were doing the bookkeeping

Purchase invoices at 400 per quarter would be £2,000

Payroll, same as you as Directors SATR's, same as you provided there were no rental properties etc.

I notice you haven't quoted for bank reconciliations in the bookkeeping?

If they are doing that bit, why not introduce them to Receipt Bank (or similar) and knock £1200 off your quote

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By free-rider
06th Aug 2017 17:14

Our client with similar t/o but with lower number of transactions (around 200 per quarter) just obtained a quote from another London accountant and they wanted £6,600 plus VAT for payroll (CIS), VAT, Accounts and CTR. The quote did not include bookkeeping. We currently charge this client £4,500 per annum incl bookkeeping.

So your price seems ok.

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Logo
By marks
06th Aug 2017 22:25

Seems really cheap to me for London.

We are in Central Scotland and have just run what you quoted for through our pricing software and we come out with £600 + VAT per month.

We have a client who's turnover is about £1m and we do year end accounts, company tax return, and 2 directors tax returns from reconciled SAGE records and our fee is £3600 + VAT (client does own payroll, VAT and bookkeeping). Client is happy with this as the previous accountant charged them £5400+VAT.

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Replying to marks:
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By imran
08th Aug 2017 11:31

May I ask sir what pricing software you use? Something I really struggle with is pricing accurately.
Thanks in advance.

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By uknick
07th Aug 2017 09:22

Thanks for all your input.

From what you've all said I think the company has misread or misunderstood what the others have quoted him, or they really think asking someone to drop their price by 75% is the way to do business.
I'll pass your comments to our senior partner and see what they want to do about chasing the business.

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By JimLittle
07th Aug 2017 11:25

Maybe they have got quotes from some Indian outsourcer or just trying it on. KPMG quote low (for them) but will get stung if you need some advice or support etc

You just need to emphasis the quality of service you will provide. While 4 times is a concern there is always something that doesn't meet the eye. Maybe they will come back to you later once they realise cheap does not mean quality.

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By fellowcraft
07th Aug 2017 11:30

I think your prices are spot on, poss even a little low if you are doing quarterly management accounts etc.

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By Jackie0802
07th Aug 2017 12:49

They are either pulling your leg or someone is schlepping their accounts to a sweat shop in India. I don't see anything unreasonable about your quote. If someone came in at 25% lower I would think they might be a start up looking for business or someone working from their spare bedroom. I'd advise them to keep good back-ups and wish them well!

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Replying to Jackie0802:
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By andy.partridge
07th Aug 2017 12:53

Agreed. The disparity is such that it is not worth either party wasting any more time on this than absolutely necessary.

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joe
By Smokoe Joe
07th Aug 2017 15:50

I make the payroll £6.25/payslip, if that includes auto-enrolment that is not that high.

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By Platta
08th Aug 2017 11:04

We use an exel pricing model that has stood the test of time. It is designed to ensure our pricing includes enough scope to meet the requirements of our professional body, cope with ad-hoc client issues, and do more for the clients than just bash through paperwork. From what I have seen when we take on clients - we are about mid-tier in our area.

I ran the above data through our model, and everything matches closely with your pricing, except the purchase invoices, where our charge is double - although we are doing work in this area to automate more, and reduce time taken.

If anyone is offering the whole scope for 1/4, the client is either giving them a different scope to work with, or the client is taking a huge risk using them. I don't believe for a minute that KPMG would be at this low end.

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By richardterhorst
08th Aug 2017 11:09

I would suggest on the low side.

4x higher? They are taking the [***].

Penny pinching clients. Not worth the hassle.

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By uknick
08th Aug 2017 11:17

Thanks for all the feedback.

Our senior partner has gone back commenting on how we provide a service supported by qualified accountants, not just data entry clerks. He also gave examples of how we've saved clients money by spotting errors that were missed by the client's own finance staff.

Finally, he offered them a bit of a discount, but nowhere near 75%, if they committed to a multi year appointment.

Let's see how it goes.

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By 0109461
08th Aug 2017 11:46

I have reviewed your quote and to be honest in my opinion it is around about where our quote would be (Subject to all things being ok etc). If the client is questioning your fees now then I think you need to ask what would the client be like in the future ? You do not pay a little and get a lot !

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Man of Kent
By Kent accountant
08th Aug 2017 12:37

Too low.

We're in Kent and I'd quote £6k minimum and prospect would have to use Xero with ReceiptBank/AutoEntry plus dropbox.

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By JDBENJAMIN
08th Aug 2017 13:13

Your prices look fine to me. That's about what I would quote. I bet the other quotes are not for the same work. In your shoes I would just say take it or leave it.

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By Jack the Lad
08th Aug 2017 17:43

That would be too low in Surrey, even when I was in practice 8 years ago!
Unless you can be almost guaranteed some good recommendations, or it is a good vertical market to attack, forget the low-balling and walk away!

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Glenn Martin
By Glenn Martin
09th Aug 2017 13:52

This is a worrying trend I guess.

This question is asked almost every week now, with the responses generally supporting the opinion that the fees quoted are either fair or on the low side.

A lot of low balling going on.

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Replying to Glennzy:
paddle steamer
By DJKL
09th Aug 2017 14:33

Maybe we all just have to face it that we are doomed to be replaced by technology, that any value added we had is now being steadily eroded and pricing will accordingly continue to drop as the years pass by.

The 1970s and 1980s saw the shrinking of blue collar work within Western countries, perhaps the 2010s and 2020s will see similiar re white collar work.

If I was leaving education now, and looking for a career, then I would be looking for something that needs both a skillset and movement/dexterity; possible I should now get my daughter to train as an electrician whilst my son continues to create the software that will make us all redundant.

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Replying to DJKL:
RLI
By lionofludesch
09th Aug 2017 14:53

So, if we're all going to be replaced by robots and be on tdole, where will the Government raise the money to pay the benefits?

Robots need to pay tax. I can just see them looking at their payslips and complaining to each other that "I *beep* did all that *beep* overtime last *beep* week and it all went in *beep* tax."

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Replying to lionofludesch:
paddle steamer
By DJKL
10th Aug 2017 09:19

From extra taxes on business profits as business entities shed employees, slash costs and increase profits; mind you, the transition may impact the tax take, all that AIA upon initial purchase of the robots.

Whilst webuyanyrobot.com seems to have gone, .uk looks available for my new line of activity as a secondhand droid dealer-operating using the margin scheme, of course. (we buy any droid also available)

May the Force be with you

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By sammerchant
09th Aug 2017 16:57

I refuse to negotiate on price alone. If the prospective client agrees to take on some of the work in-house, the fee could be reduced.
Some years ago, I quoted for a group of limited companies all owned by a pop star and looked after by a pricey solicitor, and I didn't get the job because my fee was too low and therefore I could not have been much good!!

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