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Fees - unrealistic client expectations?

Does bookkeeping software usually lead to a fee reduction

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I recently quoted a sole trader tradesman. For the past couple of years he has been using Xero and receiptbank. His main gripe was that his accountant was still charging him the £400 he was charging before. On top of which he was paying nearly the same again for software. I had a quick look at his bookkeping, which was ok but not perfect, and said that whilst we could probably improve the service level a bit (there were a couple of annoyances he raised about his current accountant), we couldnt do much on the fee. He went away, presumably in search of a cheaper quote. I'm interested to hear the thoughts of others.

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By ireallyshouldknowthisbut
03rd Aug 2021 14:08

They have unfortunately been sold a lie by the software companies which has falsely set their expectations, or indeed it would seem many accountants who are lying to clients about their MTD responsibilities which they may or may not have in 12 months time.

Its just "a different set problems" vs getting an excel sheet, or a hand written notes with some receipts vs software.

I wouldn't file any full time sole trader tax return for £300-400

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By Duggimon
03rd Aug 2021 14:27

£400 is too cheap for anyone with enough transactions to warrant using Xero, or any other bookkeeping platform.

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By I'msorryIhaven'taclue
03rd Aug 2021 15:27

Our bottom line non-VAT registered low t/o sole trader fee is £520 + VAT. A while back I took on someone from our office block who took months to make the switch, largely because his previous accountant had charged him £200 a year all in.

He's very happy now, not least because his previous accountant had estimated his CGT for selling his BTL at £100k+ whereas, calculated properly, it was sub £20k.

Stick to your guns, and to your price. There's always someone willing to undercut your price and your service.

It says something about the power of advertising that your prospect values his smoke and mirrors accountancy app at a higher worth than you.

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Replying to I'msorryIhaven'taclue:
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By legerman
17th Aug 2021 12:15

I'msorryIhaven'taclue wrote:

Our bottom line non-VAT registered low t/o sole trader fee is £520 + VAT. A while back I took on someone from our office block who took months to make the switch, largely because his previous accountant had charged him £200 a year all in.

Can I ask, purely out of curiosity, what you would charge if the exact same set up was a Ltd Co.

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Glenn Martin
By Glenn Martin
03rd Aug 2021 15:40

Someone who wants to pay less than £400 for his accounts should just do it himself but save the £400 per year for when he gets in trouble for messing up.

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By lesley.barnes
03rd Aug 2021 15:55

I don't see how you can reduce your fees - presumably the clients business has grown to the point he needs to use software. If he wasn't using software he's fees might have increased anyway. You still need to do the same checks as you would with a spreadsheet. Sometimes its harder to find errors hidden in software than it is on a spreadsheet.

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By zebaa
03rd Aug 2021 16:26

It depend on his business and of that you gave no details. For example, a plasterer might have a mix of CIS & private jobs, maybe 250 or so, in a year. Not vat registered. He knows what he spent on materials from his builders merchant's invoices & statements in his shoe box. Travel ? He can estimate that. His accounts can be little more than a three line statement, income, expense & profit. This is not difficult. In fact it is less difficult than a lot of SA. £30.00 DIY computer added SA is likely his cheapest route. But you have to ask yourself; is this the type of customer I want ? If you do, you have to find a way to work cheaply.

Okay, harsh words over. As a suggestion, if you are looking at construction industry clients, then look at becoming something of a specialist with CIS, Vat & the special problems that this - very large - industry deals with. Good luck.

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By Leywood
03rd Aug 2021 18:03

Let such unrealistic clients walk on by and be glad that you dont have to deal with someone who doesnt appreciate your knowledge.

Bet he charges a fortune for his own services. Probably has less skills too.

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By CMPACDGDB
05th Aug 2021 09:52

Wise man he say: "Pay peanuts: get monkeys"
If it isn't worth your while for your skills and time investment then do something better with your time.

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Replying to CMPACDGDB:
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By I'msorryIhaven'taclue
05th Aug 2021 10:03

Did you just call the OP an ape?

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By NewACA
05th Aug 2021 11:22

There are too many accountants falling for the software sellers tactics. Definitely MS Excel for that type of client all the way. You'd make more profit with Excel, as the books would be done in half the time, and the client would save as he doesn't have to pay the xero fees. I don't understand why so many accountants feel they have to put all their clients on to monthly fee accounting software, even Rebecca Bennewith seems to have fallen into that trap now, putting all her clients on QB and then complains about the time setting up the chart of accounts etc.

Just use an excel template already set to ITSA categories and you can avoid scanning, bank recs, charts of accs, bills and so on. Clients are basically paying £250+ a year to free up loft space the size of a shoebox. Most micro clients don't need graphs and pie charts, they just want to know their profit and how much take to pay.

These accountants that think the likes of xero are their best friend are definitely going to "come a cropper", when xero etc do all the compliance and all the accountant is left is the "added value" that most micro businesses aren't interested in. Excel is never going to take away work from you by offering tax and accounts.

With ITSA MTD, there will be suppliers like 123 Sheets who will do Excel ITSA software, no doubt there will be others too.

With MTD VAT 2 years ago I picked up a number of new clients that told me their existing accountant was raising the price as they were told they had to move off spreadsheets and onto QB or Xero. I even got a multi-million client for a similar reason. That client was a UK subsidiary of a German company using German Sage software, and their UK subsidiary accountant told them that under MTD they had to move to xero and have a doubled fee. I just showed the client VAT Notice 700/22 (as the client thought what I was saying was too simple and couldn't be true), about how a digital link could be an email with attachment, so they could just send me a software export of their vat by email and I could file the return with bridging software. Really quite shocking the ex-accountant tried to force them onto xero when all their worldwide subsidiaries were on one German software type. Talk about trying to get MTD software to wag the dog!!

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Replying to NewACA:
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By DKB-Sheffield
05th Aug 2021 14:28

I would agree... to a point.

I agree that Excel is perfect for the smaller, less complex client (not VAT reg, no special reporting requirements, low transaction volume).

However, any more than 200-300 transactions per annum and I tend to use some form of software - be it traditional or cloud. The principal reason being down to the structure the software provides. It is also easier to review, and there is less likelihood of formula errors!

I never completely erradicate the use of Excel and, certainly for larger clients, I use it as a pre-analysis tool (fully digitally linked using VBA etc.) for uploads, and as a post analysis tool for PE calcs and group reporting.

Clearly, the decision on whether to go for cloud or traditional software varies by client. If the client (or I) require access on the fly, a cloud (or similarly networked) option would be a good fit (without the file corruption/ share issues related to multi-user spreadsheets). If appropriate, clients pay the discounted fee, if not I pay in the hope that, over time, advances in the software will save time in the future.

Whilst I understand your point of view regarding clients being "forced" to use one cloud package by their advisor, I am also very understanding of that advisor's position. With a larger office(s) and more staff, it makes sense to 'prefer' one package over all of the others - primarily to ensure consistency of application and training. It simply wouldn't make good business sense for the firm to support all 20 or so cloud products on the market!

Software preference is not new, it's not many years ago that many practices only accepted client software backups from Sage (the only package they owned), and the vast proportion of final accounts were prepared in Iris!

Realistically, and in theory, I firmly believe cloud IS the future. However, the likes of Sage, Xero and QBO still have a way to go before they truly replicate desktop products in terms of functionlity, speed and reliability.

I do agree that the cloud providers are looking to take over all client compliance. However, their current prime-time advertising is already targeted at the clients you refer to (shoebox). Whether we put them on cloud accounting, or the move over themselves makes no difference! And they already say that their software can file everything... even though it can't (perhaps with the exception of Sage and Nomisma)!

Finally, I am no spreadsheetophobe. I absolutely love Excel! However, times have changed and there are many (better) alternatives.

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Morph
By kevinringer
05th Aug 2021 13:35

Bookkeeping increases the fee, not reduces it, unless the client is spot on with their bookkeeping. In my experience, the only ones that are spot on are the larger (from a small practice perspective) clients who have their own bookkeepers. All the others require time to correct their errors and omissions. Sometimes this extra time is larger than it would have been to scrap the client's attempts and start from scratch. Knowing how much hassle these jobs generate, I would not take anyone on for less than £500. If potential new client thought £400 was too much I'd show them the door.

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