Examples of Transparent Fees structure

Examples of Transparent Fees structure

Didn't find your answer?

My earlier thread on this subject has gone off course hence the reason for a new thread. Please, please, please stick to the subject here.

After a fair bit of Googling I found two websites that have transparent fee structure. I hope the owners of these businesses won't mind.

I would be grateful for any comments/opinions on above. http://www.conciseaccountancy.com/fixed-fees-accounts-packages.html is very much my way of thinking - make it very clear from the start to avoid problems and time wasters.

Replies (286)

Please login or register to join the discussion.

By petersaxton
09th Jan 2011 10:50

More comments by Bob that make unsubstantiated claims, accusatio

“@Peter - once again you have resorted to personal comments on the basis that you seem to have run out of anything constructive to add on the debate.

We have had a personal exchange and you know I have experience of implementing value pricing. What I will say is that that your personal experience creates your perception of reality, it is not reality. The reality is that you have no experience of value pricing because you record time and have a charge out rate.”

So, saying: “Bob, listening and reading is one thing, or rather - two things, but actually doing it for many years is totally different and gets a deeper understanding of how people think in these situations.” Is “resorting to personal comments on the basis that you seem to have run out of anything constructive to add on the debate”?

Why is that resorting to personal abuse and why have I got nothing constructive to add?

You say: “I have experience of implementing value pricing”. You seem to be saying that “value pricing” is ignoring costs and guessing at prices. If I charge somebody £200 for one hours work and another person £100 for one hours work you seem to think that means I’m basing my fees on time. That is clearly not the case.

I ask a simple question: “Is the price agreed before costs are considered?

If yes, then is the accountant still going to renege on the agreement if the costs are too great?

If the price is not going to be agreed before costs are considered then, by your muddled thinking, the pricing will be tainted by knowing the costs beforehand.”

Your answer: -  “@Peter - after the value has been explored and the price/budget discussed then if it is a complex project the accountant may need to go back and consider the viability with the team. If it is fairly simple the accountant could agree straight away but in reality they would put some options together below, on or even above the price/budget.” -  doesn’t answer this critical question. My question shows that your thought processes are flawed by not understanding your own philosophy. Either the price is agreed before costs are considered and then you have to renege on your agreement or prices are agreed after costs are considered and your decision is tainted by knowing your costs. Your answer fails to explain this yet I am sure you will say that it’s a question of you explaining it and everybody else “not liking the answer”.

 

Thanks (0)
avatar
By cymraeg_draig
09th Jan 2011 11:26

problem with accountants generating lots of profit

 .... I think you last comment shows why you have a problem with value pricing. You have a fundamental problem with accountants generating lots of profit from little time and effort. 

Why is value pricing more ethical than cost plus billing? Because you start with the client first, what is more ethical than that?

 

Posted by Bob Harper on Sun, 09/01/2011 - 10:12

 

 

I can assure you I have no problem with generating lots of profit from little time.  In the past I have accepted briefs at £8,000 a day (or part thereof).  I have spent 2 hours on a tax issue and charged £3,000. However, I have also done lots of pro-bono work, and sorted out many tax problems for free.

The "fundemental problem" I have is that I am not solely driven by profit, and in my opinion no professional person should be solely focused on making money.

I do start with the client first. I assess how much the job will cost to do (ie staff wages x hours required).  I also consider what can the client afford. Quite simply quoting £5,000 to prepare accounts for a sub contract bricklayer wanting to reclaim his overpaid tax, who lives in a counsel flat would be a total waste of time. There is no way of "adding value" to justify £500 let alone £5,000 in such a case.

In other words I start with a minimum price, namely basic cost, and then look at what the job is "worth", what the client can afford, what the competition would charge, and lots of other factors too, such as is this someone I want to keep as a regular client, even simply "do I like this person".  Then I set a fee which I consider fair to all parties.  It's called experience. 

 

Thanks (0)
By Bob Harper
09th Jan 2011 11:46

Consequence

@Peter - I said personal comments, not personal abuse.

I have explained this already; the price/budget for a project is set with the client’s involvement based on value. The accountant then says yes/no after they consider the value to them. This will include a costs/profitability review. So, in value pricing the accountant may turn down a client/project.

There is no problem because client agrees to this beforehand or they do not enter into the value conversation.

CD - regardless of experience you say your fundamental problem with this is issue is that you are not driven by profit. But, value pricing is driven by value, the accountants profit is a consequence.

Thanks (0)
avatar
By cymraeg_draig
09th Jan 2011 14:41

Profits are a consequence ?

CD - regardless of experience you say your fundamental problem with this is issue is that you are not driven by profit. But, value pricing is driven by value, the accountants profit is a consequence.

 

Posted by Bob Harper on Sun, 09/01/2011 - 11:46

 

What utter rubbish - do you sell double glazing in your spare time? 

"Value" has nothing to do with anything and as a concept is a total red herring. The only "value" in the majority of cases is how much tax we can save the client. Other work comes after, and as a consequence of, the taxpayer already being an established client of the practice.  From the client's point of view the "value" is how much of that tax saving stays in his pocket.  If we can save him £2k and quote him £500 (your 25% figure), and the practice down the road quotes him £200 to achieve the same £2k saving - guess who he is going to go to ?

What is becoming very clear is that you have never run a successful practice, over a long period of time, and have never developed the personal knowledge base and experience, instead you rely upon the drivel written by 3rd rate "gurus" who write any old rubbish to sell their useless books - after all they have to come up with something "different" to get you to buy it. 

Based on your "value" theory - do I take it then that if they fail to achieve the saving promised to the client, you recommend that the accountant makes up the difference himself? Or cancels his bill on the basis that he ddnt achieve what was promised when the fee was agreed ?  Or do you suggest we all promise to get the clients a £1million refund, set a fee of £200k on that basis, then tell them "sorry we couldnt get you a refund at all, but there's our bill for £200k will that be cash or credit card? " 

As for the kind of "accountants" who actually subscribe to this idea, it is my opinion that their charges should be investigated by the Institute, and if they are found to be making unrealisting "promises" and claims to maximise fees they should be struck off as they are not fit to be called professionals. 

 

Thanks (0)
By Bob Harper
09th Jan 2011 17:00

Effort or results with guarantees?

@CD - amazing - “value has nothing to do with anything” and “any firm using value pricing should be investigated by the Institute”.

Clients can try and maximize their value by moving to lower cost providers but only if they perceived no added value. The brand of the firm, the service experience, speed of delivery and guarantees all play a role and none of this will be found on a timesheet.

If you save a client £2,000 for a fee of £500 I doubt they would even look at what the competition are charging, let alone move. If they do then you must loom to add value BUT....you could offer two services one for £200 and one for £500 and let them choose. The difference could be service standards, speed of delivery and guarantees.

If a value pricing firm agreed a fee of £200k for a £1m refund and they did not get the refund they would not levy the fee, would they? However, if the firm were time/cost based they would because you would be charging for effort. Who should be investigated?

Thanks (0)
avatar
By cymraeg_draig
09th Jan 2011 18:12

.

CD - amazing - “value has nothing to do with anything” and “any firm using value pricing should be investigated by the Institute”.

Posted by Bob Harper on Sun, 09/01/2011 - 17:00

 

You have an unfortunate habit of picking quotes out of context. By doing so you simply show your inability to respond to the full comment.

 

____________________________________________________________

Clients can try and maximize their value by moving to lower cost providers but only if they perceived no added value. The brand of the firm, the service experience, speed of delivery and guarantees all play a role and none of this will be found on a timesheet.

Posted by Bob Harper on Sun, 09/01/2011 - 17:00

 

"guarantees play a role"?  What are you on about? There is only ONE guarantee any accountant MUST give - to get it right, and to make the maximum taxs saving for the client that can legally be made.  Anything else is unprofessional and should result in the accountant being struck off.  Similarly with speed of delivery, there are statutory time limits which the accountant MUST meet.

 

______________________________________________________________

If you save a client £2,000 for a fee of £500 I doubt they would even look at what the competition are charging, let alone move. If they do then you must loom to add value BUT....you could offer two services one for £200 and one for £500 and let them choose. The difference could be service standards, speed of delivery and guarantees.

Posted by Bob Harper on Sun, 09/01/2011 - 17:00

 

Of course they would look at the opposition.

As for "offering 2 levels of service" - again that would be unprofessional as there is a duty to give your best service to every client, and your suggestion would seriously damage a firms reputation (and business).

 

______________________________________________________________

If a value pricing firm agreed a fee of £200k for a £1m refund and they did not get the refund they would not levy the fee, would they? However, if the firm were time/cost based they would because you would be charging for effort. Who should be investigated?

 

Posted by Bob Harper on Sun, 09/01/2011 - 17:00

 

So, according to your "logic" the value pricing firm would not charge if they did not achieve the promised £1million refund. So, either you get someone a £999k refund for nothing (because you didnt get the full £1m), or, you deliberately underestimate your initial proposal (which is dishonest). I fail to see even a hint of professionalism in that. Sharp practice - yes, but not professional.

On the other hand a cost charging firm would say to the client, we can possibly get you £1m refund, and our time to try to do so would be x hours at xx fee. When they get a £999k refund instead of the full £1m I dont think the client is going to feel aggrieved at paying the agreed fee, and certainly there is no dishonesty or unprofessional behaviour involved.  

 

I'm afraid Bob that the more you try to promote your "added value" theory, the more you show that it is an unprofessional method of trading which would expose the practitioner to almost certain bankruptcy sooner or later.

 

Thanks (0)
By petersaxton
09th Jan 2011 19:41

Nonsense

“If you save a client £2,000 for a fee of £500 I doubt they would even look at what the competition are charging, let alone move.”

Why not? Two firms doing the same job – one does it cheaper than the other. Who would get the work? You seem to be saying that no competition exists.

I don’t subscribe to the theory that a firm should charge according to the tax saved. That tax saving is on the table anyway and the firm should achieve it without negotiation over price. In fact, what is the firm going to do – do the work to see what tax can be saved and then haggle over the price?

The whole idea is nonsense.

Thanks (0)
By Bob Harper
10th Jan 2011 07:36

Mentality

@CD - your quotes are in context and guarantees can include how the service is delivered not just what is delivered.

The £200 service could be for tax returns done April to September, £500 after that. Both are the best service and allow clients to choose and will only enhance a firm's reputation.

If the agreement was based on £1m for a fixed £200k and the firm did not get it they would not charge. This is why I would suggest firms use a percentage.

What about if it takes three times as long? Do you think they will be happy then?

@Peter - you seem to be saying that the cheapest provider always wins the work. I am not surprised you would not charge for the tax saved because you are cost plus.

Thanks (0)
avatar
By Ken Howard
10th Jan 2011 08:06

Reality is different to theory

Bob, you seem to have no idea of the reality of dealing with clients.  What you read in a book is very different to what happens in reality.  Perhaps you should study behavioural patterns or even better, get out and start talking to the average client.

If there is a £1m tax rebate on the table, then any accountant should get that refunded whatever their fee.  They'd be in breach of contract and in breach of their professional body's rules if they didn't, even if they quoted only £100 for preparing a corporation tax return.  There is no added value nor opportunity cost, etc.  A firm may well quote tends of thousands for the work, but if someone else quotes £100 and can get the refund, then the client would be a lunatic to give the work to the higher priced firm.  I accept there MAY be value added if the higher priced firm have some special/unique tax planning structure that is guaranteed to work and isn't mainsteam and therefore not actually open for other, cheaper accountants, to offer.  

As for doubling the price for late tax return info being received, you won't gain any respect from clients for that and aren't improving your practice's image to existing or potential new clients.  Regardless of whether it is right to do or not, the client will begrudge paying it and will also begrudge the suggestion of it even if they are able to bring their books in early enough.  You risk losing clients if you charge any more than a modest premium for last minute work - that's a risk only the practitioner can decide upon and clearly depends on how much of a problem last minute work is for your practice.  In theory, premium pricing close to deadlines is fine, but the punters paying the bill won't all be happy.

However much you "add value", the client is always going to shop around, compare prices, talk to your competition, etc.  The only real "added value" where you can charge high premium prices is when you can do something that your competitors can't.   Saving a client £10k on a fee of £1k is fine, but if the practice down the road can offer an acceptable service to save a client £10k but only charge £500, they'll get/keep the work instead of you.  Whatever you may think, people always shop around - maybe not every year, but sooner or later they will query whether they can get a comparable service cheaper.

 

 

Thanks (0)
By Bob Harper
10th Jan 2011 10:52

Books

@Ken - the books I read are based on behavioural patterns and case studies of real world. I do not have experience of your clients but plenty of experience with my own and coaching firms on theirs.

Value pricing is about treating each client as an individual so average does not come into it.

You said “if there is a £1m tax rebate on the table, then any accountant should get that refunded whatever their fee”….you seem to be suggesting that accountants are ethically obligated to look after their clients even if they make a loss? If not, are you suggesting there is a limit of how much profit they are allowed to make?

You have proved the point. You would accept a higher price if YOU perceived there is added value. In your case it is technical knowledge but for a client it could be something else.

Ken, your logic would mean the lowest price provider always wins. They may for low price shoppers because that is what they value most. Maybe that is what you value most but people are different, they have their own decision making processes and part of value pricing is not to impose your map of the world on clients. This is treating clients with utmost respect.

In my opinion increasing the price of last minute tax return is likely to gain more respect from clients, not less. They have an upfront choice and will get reminders and they may not like it, but that is a separate issue. My friend has a personal trainer, he does not like paying him, he does not like the guy pushing him in the gym because it hurts. But, his blood pressure is lower.

I accept a firm will risk losing clients by charging more for last minute tax returns. That is why I would suggest giving a discount for people that come early! The same thing just presented differently - I got that from a book about behaviour!

The questions are what type of clients will go somewhere else? What can you do with the resources that are freed up?

In your last sentence you say basing the opinion on “comparable services. The idea of marketing is to differentiate so the clients cannot compare. Nothing is priced too high, it is just under exclusive. 

Thanks (0)
By petersaxton
10th Jan 2011 11:21

Clients use common sense

“The £200 service could be for tax returns done April to September, £500 after that. Both are the best service and allow clients to choose and will only enhance a firm's reputation.”

You wouldn’t get the work after September.

Why would it enhance a firm’s reputation?

“@Peter - you seem to be saying that the cheapest provider always wins the work. I am not surprised you would not charge for the tax saved because you are cost plus.”

I don’t say that the cheapest would always win the work. I say that price is always taken into account. I’m not cost plus but you will say that because to you truth isn’t very important.

Why do you always ignore the questions that you find difficult to answer? For example: “what is the firm going to do – do the work to see what tax can be saved and then haggle over the price?”

“I do not have experience of your clients but plenty of experience with my own” Do you have any experience of discussing prices with you being an accountant and the potential client being interested in your accounting services?

“You said “if there is a £1m tax rebate on the table, then any accountant should get that refunded whatever their fee”….you seem to be suggesting that accountants are ethically obligated to look after their clients even if they make a loss?” If Ken has agreed fixed prices with the client with no get out then so be it. Isn’t that fair? This is my whole point about your idea. The accountant doesn’t know what tax savings are available until they do most of the work.

“Ken, your logic would mean the lowest price provider always wins.” You are getting confused between levels of service. Just because somebody charges a high price it doesn’t mean they provide a better service but when somebody is offering a low price without any indication that they are treating the client as an individual any person would be suspicious. Clients use common sense when choosing accountants.

Thanks (0)
avatar
By cymraeg_draig
10th Jan 2011 11:22

Yes

You said “if there is a £1m tax rebate on the table, then any accountant should get that refunded whatever their fee”….you seem to be suggesting that accountants are ethically obligated to look after their clients even if they make a loss? If not, are you suggesting there is a limit of how much profit they are allowed to make?

Posted by Bob Harper on Mon, 10/01/2011 - 10:52

 

 

YES - there IS an obligation to always do your best for your client regardless of whether you make a profit or not. If you dont make a profit then you should renegotiate your fee, or, cease acting for the client, however, whilst you still act for them you MUST do your best for them regardless of profit. 

The same applies to all professionals in every field. 

 

Thanks (0)
By Bob Harper
10th Jan 2011 12:18

More questions

@Peter - I accept that value pricing means the firm may lose work. In this case clients who want to leave everything to the last minute and do not pay a premium. I would probably have three fees. Maybe £500 as the standard, £200 for early information and £1,000 for really last minute because I really wouldn't want the last minute work. For me, there comes a point where the money is not worth it.

Charging more when work is late forces the client to respect the accountant, whether they stay or move. But, accountants need to respect themselves and their team first. 

We disagree on your pricing methodology and we are allowed to have our own opinions.  I have explained that I believe you are cost plus because:

You record timeHave a charge out rateFeel uncomfortable charging a percentage of tax saved

You think you are value pricing because you do not always charge time; you use a combination of time billing and fixed pricing. But, if you really value priced you would not record time, you would use management systems that are consistent with value pricing. It is just an opinion.

Yes, I have experience quoting for work as an accountant, you know that from direct communication with me.

I agree if a fee is agreed then the firm should get the refund, even if they make a loss. The question should be should a firm be allowed to charge for time if they do not?

Feel free to list any questions you think I have not answered or ask new ones; the more questions and comments the more attention is brought to the subject.

Thanks (0)
By petersaxton
10th Jan 2011 12:36

Pricing

“@Peter - I accept that value pricing means the firm may lose work. In this case clients who want to leave everything to the last minute and do not pay a premium. I would probably have three fees. Maybe £500 as the standard, £200 for early information and £1,000 for really last minute because I really wouldn't want the last minute work. For me, there comes a point where the money is not worth it.”

If you told your clients this was your pricing they would think you were making it up as you went along and would consider a more realistic accountant. I am talking about the early information providers as well.

“Charging more when work is late forces the client to respect the accountant, whether they stay or move. But, accountants need to respect themselves and their team first.”

I think respect comes from understanding you have the ability. The accountants on here seem to have that respect. I would not respect myself if I was reduced to parroting phrases from books.

“Feel uncomfortable charging a percentage of tax saved” How do you know what the base position is?

Say if you work for a client and you charge a percentage of the tax saved. They are a CIS and in one year you get a £1,000 refund – same as what any accountant could have got – what would be your idea of a fair share?

What if the next year the taxpayer has to pay £500 – what is the fee?

Thanks (0)
By Bob Harper
10th Jan 2011 13:23

Next?

@Peter - you can think what you want; you will only know if you do it and only recently I spoke to a firm in Scotland who prices tax returns that way.

Just keep an eye out, you will see options; you will see them all over the place and there is no reason why accountants should not use them.

By the way, being well read (educated) and using references is not an insult, I used to do that when I was an accountant.

You miss it; it is not my idea of fair share but the clients. A percentage of the tax is only one option for value pricing. With CIS clients I am reminded of one accountant who I knew about when Sc60’s were around would add value by advancing refunds to them. It is not only what you do but how you do it.

Thanks (0)
avatar
By Roland195
10th Jan 2011 13:30

We could offer to buy their unwanted gold too

With CIS clients I am reminded of one accountant who I knew about when Sc60’s were around would add value by advancing refunds to them. It is not only what you do but how you do it.

I am sure that ICAS and the rest would have something to say about that. It is hardly the service I would expect from a professional accountant and may in fact be illegal, depending on how it is fee'd. 

 

Thanks (0)
By Bob Harper
10th Jan 2011 13:55

Example

@Ronald - it was just an example but new services are the answer, the Profitable and Sustainable Practice report by the ICAEW suggests HR and IT consultancy, finance systems and strategic planning.

Thanks (0)
avatar
By Roland195
10th Jan 2011 15:00

But I'm an accountant

it was just an example but new services are the answer, the Profitable and Sustainable Practice report by the ICAEW suggests HR and IT consultancy, finance systems and strategic planning

I am a sole practioner who provides accounting, audit & taxation services. Some would say I already offer too much in order to be truly effective in any of them (Jack of all trades, Master of none so to speak).

I do not consider my knowledge of HR, IT, Financial Planning etc to be extensive enough to provide paid professional advice on and indeed, am restricted by my institute in some areas.

Therefore, I would venture that most of the other accountants on here feel much the same. There are good reasons why we won't venture out our comfort zone and trying to bill a client a premium for any other half arsed service I could offer would be a disaster.  

Thanks (0)
avatar
By cymraeg_draig
10th Jan 2011 15:07

Does Sir require anything for the weekend ?

 I do not consider my knowledge of HR, IT, Financial Planning etc to be extensive enough to provide paid professional advice on and indeed, am restricted by my institute in some areas.

 

Posted by Roland195 on Mon, 10/01/2011 - 15:00

 

Quite right. Providing professional services for which you are not qualified (such as IT consultancy, financial planning etc) has the potential for disaster.

Perhaps we should all buy some scissors and give clients haircuts while discussing their tax - that would be "added value" :)

Reading this thread, one thing is very clear, -

Bob believes in his theoriesno one else does.

Thanks (0)
By Bob Harper
10th Jan 2011 15:27

Mentality

@Ronald - then raise you game or narrow it.

Your and other accountant’s lack of strategy or knowledge is not a reason why value pricing doesn’t work; it is more of an excuse for not being able to implement it effectively.

I could be wrong, and spending time here makes me think I could be, but my conversations outside AW have more weight and make me believe that accountants can do much more than accounts and tax returns. I think accountants have the basis to make excellent business coaches/consultants and with Business Link being changed the door is wide open. 

But, that is not the issue, value pricing is and even if accountants just do accounts and tax, value pricing is a better approach than time/cost plus billing.

Thanks (0)
By petersaxton
10th Jan 2011 16:53

What's the fee

I’m sure you wouldn’t get very many clients due to how you are so bad at answering questions. You may say we don’t like the answers but I can’t see one for the following!:

“Say if you work for a client and you charge a percentage of the tax saved. They are a CIS and in one year you get a £1,000 refund – same as what any accountant could have got – what would be your idea of a fair share?

What if the next year the taxpayer has to pay £500 – what is the fee?”

Why do you seem incapable of giving a straight answer to a straight question?

“By the way, being well read (educated) and using references is not an insult, I used to do that when I was an accountant.”

Being well read and educated are not the same thing. Why do you think it is an insult? My point is that you litter your comments with quotes while saying nothing of substance and showing no understanding of the subject. You simply refuse to answer many of the questions asked.

Let’s see if you can answer this question: How can a company that you were a director of not be able to pay over £250,000 to HMRC and banks when it appears to be selling software to accountants? You blamed it on accountants for not getting enough clients but I fail to see how that would give you financial difficulties. This is genuinely not a question to embarrass you – I really do think that your explanation would go a long way help to other accountants understanding how you approach business in real life and not in theory.

In my position, I would have to do really badly at selling my services to go bust.

Thanks (0)
avatar
By andypartridge
10th Jan 2011 17:35

@ Peter

Ouch!

I think you'll find that MORE was sold on a fixed price basis not using value pricing methodology

-- Kind regards Andy

Thanks (0)
By petersaxton
10th Jan 2011 17:44

More

1 Why not sell it on value pricing principles - whatever that means?

2 Even if it was fixed price I don't see how anybody could run up a quarter of million pounds of debt.

Thanks (0)
avatar
By Jason Dormer
10th Jan 2011 19:30

Peter

Have you met my wife?

Thanks (0)
avatar
By cymraeg_draig
10th Jan 2011 22:28

Jason

Have you met my wife?

 

Posted by Jason Dormer on Mon, 10/01/2011 - 19:30

 

 

Never try to apply logic to the female mind. I've yet to work out how a woman can have 27 pairs of shoes and still think she needs more.  Just watch a woman walking round Tesco's - they are a salesman's dream falling for every trick in the book.

Thanks (0)
By Bob Harper
11th Jan 2011 08:15

Sad

@Peter - I did not say CIS should be billed as a percentage of the final tax position. A percentage of the refund is just one way to agree a fee where there is a refund.

Throughout this debate I have explained that under value pricing the value would be assessed with the client before agreeing to a price. So, the accountant would be able to assess the likelihood of a refund before agreeing to the price.

If the accountants could not assess the value, choose not to, was unsure of the results or wanted a rolling agreement like a CIS client they could offer the service with a minimum fee. The only rule is that both parties win by sharing value which is discussed upfront and the price is not driven by costs.

The accountant will decide to commit after establishing the price and will be aware of costs but not agreeing the price based on them. Time recording will not be used as a management system because it is fundamentally opposed to value pricing mentality.

You have no genuine interest in the liquidation, just like you have no genuine interest in my software. You seem happy to declare it as rubbish before calling a firm using it even though you ask me personally to provide a telephone number.

Enough is enough, when you have nothing to add on the debate you accuse me of having no morals because of company liquidation where 75% of distributors failed to achieve their contractual obligations. You question my experience as an accountant and my knowledge because I reference books and research on the topic being discussed. In terms of character I find gloating over someone else’s misfortune sad and you do not deserve another reply on this or any other personal subject.

As for other accountants, they should know a) they can speak with accountants I work or have worked with (including Jason) with b) know that I put my money were my mouth and c) not one of the firms I work where affected by the liquidation and many are going from strength to strength.

It seems to me that you are trying (again) to drag this discussion down so that the thread gets pulled. Regardless of your personal digs I see more value in ensuring the thread stays up and ignoring you.

@Andy - we did value price the software; the fee was based on a percentage of the time the software saves the accountant and we explored this with accountants before we demonstrated the software. But, if it is not used and left of the shelf there is no value and if there is no value there is no revenue.

Thanks (0)
By petersaxton
11th Jan 2011 09:11

What did you spend the money on?

“@Peter - I did not say CIS should be billed as a percentage of the final tax position. A percentage of the refund is just one way to agree a fee where there is a refund.

Throughout this debate I have explained that under value pricing the value would be assessed with the client before agreeing to a price. So, the accountant would be able to assess the likelihood of a refund before agreeing to the price.”

You seem to be saying that under value pricing the accountant has to do 95% of the work so they are able to estimate what “value” a client can place on the work. Total madness!

“You have no genuine interest in the liquidation,”

Yes, I do. I just cannot understand how your company can go under owing £250,000. If we knew the reason then we would better understand how you think businesses – including accountants – should be run. You say “75% of distributors failed to achieve their contractual obligations.” But it would seem quite bizarre that anybody who understood business would rely on third parties without some recourse to them if their failure to fulfil their contractual agreement affected your revenue.

“just like you have no genuine interest in my software.”

Yes, I do but you were not willing to let me trial it and comment on it.

“It seems to me that you are trying (again) to drag this discussion down so that the thread gets pulled. Regardless of your personal digs I see more value in ensuring the thread stays up and ignoring you.”

Why should anybody want to pull the thread if a question is asked about a liquidation? It’s in the public domain. I want to know your side of the story. If you choose not to give your side of the story people will make up their own minds why you make that decision.

“@Andy - we did value price the software; the fee was based on a percentage of the time the software saves the accountant and we explored this with accountants before we demonstrated the software. But, if it is not used and left of the shelf there is no value and if there is no value there is no revenue.”

Why would accountants not use the software if it is so good? Maybe it’s not as good as you claim?

Even if there is no revenue coming in then I don’t see how that would result in £250,000 of debts. What did you spend the money on?

Thanks (0)
avatar
By Ken Howard
11th Jan 2011 09:45

You're still ignoring the competition

Bob said "I did not say CIS should be billed as a percentage of the final tax position. A percentage of the refund is just one way to agree a fee where there is a refund. Throughout this debate I have explained that under value pricing the value would be assessed with the client before agreeing to a price. So, the accountant would be able to assess the likelihood of a refund before agreeing to the price.  If the accountants could not assess the value, choose not to, was unsure of the results or wanted a rolling agreement like a CIS client they could offer the service with a minimum fee."

So you've now come round to accepting a minimum fee?   What is that minimum fee based upon - time perhaps??? 

So you really think that a client will accept a "minimum fee" of say £250 for his subbie accounts and tax every year he has a tax liability, but somehow remains happy to accept a fee of say £1,000 in the odd year that there is a tax refund due to him of maybe £2,000 (i.e. the year he buys a new van).  Even the most naive client will realise that he's being ripped off because the work done by the accountant is exactly the same whether he has a liability or a refund.  The client would fall for it once, but would then move to another accountant who wasn't a rip-off merchant.

Bob, your logic is sound for one-off and special work i.e. tax planning and business development etc, but is fundamentally flawed when dealing with the recurring work for book-keeping, VAT, accounts prep and tax return prep where the work is virtually the same year on year and the client perceives no added-value as they're not interested in the results - that's never going to be premium work, but still has to be done. 

 

Your ideas may well work with larger businesses and growing small businesses but they're a small minority compared to the number of self employed and businesses which is the bread & butter of most accountancy practices.  Look at the FSB figures and you see the vast majority of businesses are very small.   You're never going to persuade the typical subbie, plumber, corner shop, B&B, cafe, IT consultant, to go along with value-added services, because they seldom need it and more often than not wouldn't pay for it even if they did need it however good was the persuasion.  

I've been there and got the T shirt - time and time again, come up with a cracking plan to save some tax, even for something simple like incorporation of a sole trader or sometimes more complicated, and even though I can demonstrate a tangible tax saving, the client just doesn't want to know, either from fear of the taxman, fear of complication, fear of solicitors (for legal agreements etc), or a 'just can't be bothered' attitude.  Some clients are lazy, some are (perceived) risk averse.  Some just don't believe you when you say that they can save tax by doing something slightly different.   That's what I mean by "behavioural aspects" - you can read all about it but actually experiencing it at the sharp end is completely different.  

At the end of the day, the accountancy profession has a problem because the typical accountant does too much. The same person does low value and high value work and the client can't understand why we want to charge different rates.  To that extent I understand your logic.  The answer is for an "added value" to simply opt out of the low end of the market, i.e. accounts prep, tax returns, VAT and book-keeping, so that his brand isn't diluted by low value work.  Answer is to concentrate on value added work and get client to use a book-keeper and/or a different accountant to do the low value compliance work.  Fair enough so far.  BUT, the client will realise that the cheap accountant doing the compliance is also able to give the same advice on value added matters so will sack you and go with them for everything.

Your logic ignores competition.  You mention your MORE software and that you evaluated the "value" of your clients using it which I suppose means the time saved etc., but did you also evaluate the competition, i.e. that a similar product could be sourced by an alternative supplier at a lower cost?  Time and time again, that's what you're missing.  I can identify a tax saving strategy for a client that can save then £1,000 per year - I can demonstrate that over 5 years, I can save them £5,000 so your logic would dictate that I should charge them say £2,500 for sharing my plan with them.  Client is accustomed to paying me £500 for their accounts and tax so smell a rat (like any right minded person would do) and do a simple internet search or arrange a couple of free consultations with other accountants, to try to work out what my plan is.  One of the accountants either tells them the plan, or offers to arrange it for them for £1,000 - I've just lost the client!!  Now, if I'd said that I'd charge only £500 for arranging it, they wouldn't have bothered shopping around as that kind of fee is proportional to what they were already paying.  Clients aren't fools and don't like being conned.  Regardless of whether we believe that a fee of £x is good value for money, if they can get the same or similar service from someone else for less, then our reputation is shot and we've lost a client.  That's open market competition.  Separating ourselves from the competition by superficial means, such as promises to answer the phone by the 3rd ring, or replying to emails same day, or having Freetrade coffee in your office machine will only impress a small proportion of the client base - as long as your competition can do a reasonable job, the client will be happy to save money by accepting that they may have to wait a couple of days for a call back.  Times are hard - money saving is money saving and the "saving" of a slightly poorer service is something most clients are willing to accept as long as the core job is done right.  Gimmicks are fine when times are good, but when times are hard, like now, it's the pounds that count, not the image.

Thanks (0)
By Bob Harper
11th Jan 2011 11:31

Perspective

@Ken - there can be a minimum fees and maximum fees but do not get hung up on percentage of tax and the billing method. It is just one way to price.

I do accept that value pricing is riskier that time billing. Profit comes from risk; income comes from time/labour. If a firm wants the lowest risk way of billing then maybe time is the way to go. I say maybe because billing time means the firm is not innovating and can become uncompetitive in the long run.

Value pricing is easier for simple recurring work. There is less scope but fees can be agree per person but the similar the people the closer the fee range will be. This is why added value is so important.

The question is should the firm be in the CIS segment? I know it can be very profitable and scalable and a saleable business. But, the law could change the law and introduce a “tick and flick” flat tax scheme like in Australia. So, there is risk with simple work.

I accept that when you adopt value pricing you start to niche and look for segments. The example I gave is OBK which has a £6,000 minimum fee and circa 10 clients per relationship. 

I am fully aware that some clients will not implement tax planning. They value something else more than the tax saving. I found the trouble with these clients is that then start to question my prices because they were not taking the value. I always parted company with them because I could generate more revenue from resources from clients who would take the tax savings. In retrospect I would have asked more about their attitude to tax planning before engaging the client.

My personal view is accountants should stop trying so hard to make margin from low value work and use the accounts/tax as the basis of the relationship, not the reason for it. Have new higher value services and work with clients that value them.

The main alternative to MORE is Excel which is free but I think the issue is that when you consider value pricing you are starting from your current position/way of working/client base and think about imposing value pricing on top. Value pricing changes the way you work, including how you engage clients. So, it could be you would need to change clients to implement and it may take years.

Back to CIS clients and the competition. The way to deal with the competition is by positioning not trying to be better, cheaper or more expensive - be different. There is not enough room to go into this here but it is about creating a new category in the customers mind. Categories come from categories so a car is now a series of categories 4x4 and MPV etc. Each has a category leader. The trouble with most accountants is they are not thinking and acting strategic, they are not positioned as anything and let the market conclude they are all the same.

An accountant with CIS clients you could offer Construction Industry resources and wider support services which help clients in this sector with things outside just the CIS tax refund. It is just a case of using your imagination and creativity and asking questions. What do these guys have hassle with? What are their pain points? What are their emotional hot buttons?

I have dealt with construction clients than make good money so they do not get refund but they struggle to read and write. They worked with me (and paid a premium) because I served them in a way they valued.

Thanks (0)
avatar
By Ken Howard
11th Jan 2011 13:48

Why is excel the main alternative to MORE?
"The main alternative to MORE is Excel which is free but I think the issue is that when you consider value pricing you are starting from your current position/way of working/client base and think about imposing value pricing on top. Value pricing changes the way you work, including how you engage clients. So, it could be you would need to change clients to implement and it may take years."

I would have thought that Freeagentcentral, Kashflow, Winweb and Xevo, and loads more online packages are the "main" alternative to MORE?

Considering Excel isn't an online offering, and isn't even an accounting software, why is it the "main" alternative. For people not wanting the online route, surely they'd be using Sage, Quickbooks, MYOB, TAS, VT, etc instead of Excel?

I think to say that Excel is the main alternative to your software is strange. What does MORE do that Freeagent or Kashflow doesn't?

MORE isn't free is it? It may be free to the client, but the accountant has to pay for use of the licence. There's nothing to stop an accountant providing any software free for the client if the accountant pays the subscription - as an aside, I do this with Freeagent and Kashflow and it works well.

There are also many accountancy practices who use their own online accounting system, the first one that springs to mind is www.cheapaccounting.co.uk whose clients get free access to their home-built online system. How is MORE different?

Thanks (0)
By Bob Harper
11th Jan 2011 14:15

MORE and Excel

@Ken - from the client’s perspective MORE is a bookkeeping system but the software is designed from the accountant’s perspective as a data collection system, a way of controlling and managing clients like a project management system.

It is specifically designed for accountants to target unsophisticated clients who do not want to go online, cannot use accounting software and/or do not want to pay for software. So, that is why I referenced Excel. I could go into more detail including the user interface, architecture of the software, features and the licensing arrangements but I do appreciate that you (and some other accountants) have seen the light and offer software for free within a fixed fee which is the MORE model.

Thanks (0)
avatar
By Jason Dormer
12th Jan 2011 16:05

Pricing

Haven't read the whole thread as haven't had the time so some of my thoughts probably already covered.

In answer to the original post I think that it is impossible to state fees as every job and very client is different.  The two sites that are quoted are both based on small business (turnover to 110k  for Concise) or contractor clients for Primus, not for general businesses.

On one of them they state a fee of £1299 work for a VAT registered business with multiple transactions and a turnover of 109k and presumably the same fee for a non vat registered business, turnover of say 30k, with 12 invoices per annum ?  It may be transparent but seems ludicrous.

The only way you can set fees on your website is to dictate to the client the service rather than vice-versa and this is not good business.

There are too many factors to think about when pricing up work:

 - Cost

 - Opportunity cost

 - Risk

- 'Going rate'

 - Opportunity for further work or referrals

 - The client

 - Time taken

 - Capacity

 - Record keeping

 - Level of support required

 And many others.

 

 

 

Thanks (0)
By petersaxton
12th Jan 2011 16:16

Agreed

I agree with your analysis, Jason.

I think the firms who set fees (as oppose to giving examples) on their website use very cheap labour and so expect to make a profit whatever the category of client.

Thanks (0)
avatar
By Jason Dormer
12th Jan 2011 16:22

Peter

Yes, and many of them dicate to their clients exactly what format to present the year end information, make no analysis of the information, and disclaim all work to the hilt.  I have seen examples of this that would mkae you wince.  It's like production line accounting.  Works well as a franchise model but not so well for clients.

This is no reflection on the two firms quoted in original post, have never come accross them before.

 

Thanks (0)
By petersaxton
12th Jan 2011 16:48

Tax returns for £49.95

Clients have come to me after being subjected to the type of accountants you mention. There's usually been problems with HMRC and the old accountant doesn't want to know. Many of these types of accountants don't provide computations or copies of tax returns and charge extra if clients ask for them. Any information provided is used and no omissions are queried.

I've had clients say "my previous accountant didn't ask all these questions" but later when it turned out I had got to the bottom of various issues they changed their tune.

 

Thanks (0)
avatar
By Jason Dormer
12th Jan 2011 17:05

.

It always makes me smile when people say 'My previous accountant didn't ask me all these questions' I usually respond along the lines of "another good reason why you no longer engage him"

Thanks (0)

Pages