Clients - First year "one off" fee

Do you charge extra in the first year?

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Evening,

Perhaps it's not the same for everyone but I find I spend around double the number of hours on a client in the first year compared to following years, due to onboarding, questions from the client, getting them into line/refining the processes etc. Especially with the clients who are new to business, tax returns and so on.

That's not so bad for a long term client but if something changes, after a year or two I'm not going to achieve the income I would want for the work.

I'm not sure if it would be better to bill the actual rate in the first year, or at lease a little extra to cover the costs.

Any thoughts?

Replies (19)

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By rmillaree
16th Nov 2023 17:41

I think most peeps would say no - the reality os how many people are going to pay double the normal cost - if 50% of the comptetion plkus just charge a normal fee and take it on the chin.

Feel free to do it but you may loose soem custom - note you might benefit here if the peeps who would appreciate you stay and all the time wasters departn to another accounatnt who does it at normal price and then they ring around year after taht to get cheaper fees on the basis the are established.

I would say teh norm is that overall fee structure probablyu normally factoring in peeps going and the like.

Note training is something completely different if clients needs to learn xero or sage

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Replying to rmillaree:
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By johnward
16th Nov 2023 18:37

I would use the fee and buy a dictionary

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Intercity
By Mr Hankey
16th Nov 2023 20:55

I don't think many charge extra in the first year (I don't). I know clients can leave when they like, but there is the potential to have a fee generating client for many years. That carrot is worth more than worrying about the extra time spent in the first year.

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By FrankTax
16th Nov 2023 22:00

I guess it depends how you sell it to them. For those who are new in business I think i's perfectly reasonable to charge them for set up and training for cloud software for example.
I wouldn't charge for internal onboarding though.

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By johnthegood
17th Nov 2023 07:05

No, its a question of percentages - take year one on the chin, do a good job and you will have a very high percentage being your bag for life

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By ireallyshouldknowthisbut
17th Nov 2023 09:07

Depends.
If its a one off eg a small SA, I certainly quote higher and make it clear what the recurring fee might be.
If its a recurring SA, then no.
If its a limited company, I charge for set up/training as typically a new company will chew up 3 times the work as an existing one and its well worth the time to training people properly from day one. I dont charge anywhere near the full time mind, its probably about half and make it clear i am doing that.

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By Maslins
17th Nov 2023 09:37

I'd suggest you think of it more as part of your sales/marketing costs.

As others have said, trying to charge that to the client when others don't may well lead to them not joining you in the first place.

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Caroline
By accountantccole
17th Nov 2023 09:54

I warn our clients to expect 50% extra in year one, but this generally includes a lot of initial one off cross border planning, establishing residency etc and a lot of ours are billed on an hourly basis with a rough estimate of expected annual fees (which we aim to keep to!)

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By Carolynne
17th Nov 2023 10:36

We provide a letter of engagement quoting the full fees chargeable plus an hourly rate for additional work. In the first year of a new business, we actually knock some money off to show willing, as there is for us not as much more to do, as we set a system up for them to complete so that things arrive in a nice order and they don't usually have a full years trade to process anyway. We explain that if preparing the work takes longer than expected there will be an additional time charge, but the fee for the accounts/tax return etc, are usually discounted in year 1. We find clients stay with us for years, and take the onboarding process as part of our admin and accept that we aren't going to be paid directly for it, but you can ensure your allow for some of the time in your fees going forward across the board, that cover this annual time drain.

If a new client comes who has been trading for years, we don't reduce the first years bill. but still implement processes for how they pass their information over to us to save time at our end.

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By Justin Bryant
17th Nov 2023 11:18

It's hard to think of a dumber marketing strategy. Your competitors would love it if you did this.

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Replying to Justin Bryant:
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By SouthCoastAcc
17th Nov 2023 14:41

I think my 3 options are

Decline
Be very strict on extras and excess time spent
Charge a little extra to help claw back the lost time over a number of years

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Replying to SouthCoastAcc:
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By Carolynne
17th Nov 2023 15:02

SouthCoastAcc wrote:

I think my 3 options are

Decline
Be very strict on extras and excess time spent
Charge a little extra to help claw back the lost time over a number of years

This is good advice. I have a time sheet on my desk that I complete, every time I do one of those additional little ad-hoc jobs, or investigative work that the client needs information on. Otherwise you ending working a quarter of your day for free!

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By SteveHa
17th Nov 2023 11:23

Not first year, but first hour is charged double than all subsequent hours to allow for the onboarding, MLR etc.

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By Tom+Cross
17th Nov 2023 16:18

In fairness and in reality I take the view that accountants absorb higher costs than anyone ever gives us credit for.

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Kitten
By Hazel Accounts
21st Nov 2023 10:22

Generally no. I never charge for onboarding - that's just a cost of business (no real benefit to client). I also don't charge for basic training on accounts software as I see that as an investment in making the job easier for myself going forwards.
Occassionally if a new client comes with a real mess I will discuss best way to fix and they can choose if they do some work or pay a bit extra for me to (eg someone who it turned out should have VAT registered 9 months earlier was the last one - had to redo half the previous year accounts!).
If a client is a new business and needs a Company formed and VAT registration etc I do charge a small one off fee for that.

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Kitten
By Hazel Accounts
21st Nov 2023 10:22

Generally no. I never charge for onboarding - that's just a cost of business (no real benefit to client). I also don't charge for basic training on accounts software as I see that as an investment in making the job easier for myself going forwards.
Occassionally if a new client comes with a real mess I will discuss best way to fix and they can choose if they do some work or pay a bit extra for me to (eg someone who it turned out should have VAT registered 9 months earlier was the last one - had to redo half the previous year accounts!).
If a client is a new business and needs a Company formed and VAT registration etc I do charge a small one off fee for that.

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By Rgab1947
21st Nov 2023 10:51

My plumber and electrician charge more per hour than I do and have no onboarding or any of the other tick box exercises loved by bureaucrats.

Every time another missive comes through on AML and I get reminded by my Institute the dire consequences of failure to comply I know I am in the wrong job.

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By Jack the Lad
21st Nov 2023 12:39

I see no reason why you should not charge for "onboarding". My initial letter has always stated clearly:
1. what the setting up charges will be (after allowing one hour free for "getting to know you" time, and basic needs of client).
2. an estimate of annual costs for specific regular work.
3. that an hourly rate will be charged for any additional work, taken from daily diaries (I am old school!).
Most new clients have come from recommendation, so these terms have usually been acceptable.

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By Husbandofstinky
21st Nov 2023 13:56

You pays your money and you takes your choice....

I treat year 1 as a sunk cost timewise and bill relatively year on year.

Year two or three they could be gone for whatever reason but this is highly unusual based on 30 years of experience. However, protentially this is the nature of the beast and I don't loose any sleep at night on the matter whatsoever. Even for the really good clients and fees.

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