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Fixed Fees

Fixed Fees

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I am looking to offer fixed fees to my clients where possible and collect by monthly standing order....... or direct debit eventually.

without fixed fees I might have quoted say £1,000 per year accounts/tax £75 per quarter VAT and £25 per month PAYE.

So with fixed fees on standing order this adds upto £1,600 and therefore £133.33 per month

I am interested to know how other people work a situation where you gain a new client who is already past their year end or even part way throught their financial year.

1) do you raise a one of bill in respect of the work that is in arrears (the previous years accounts)?

- This is best for my cash flow and risk but i'm worried it doesn't look good for new clients... "I do fixed fee's payable on standing order.... but by the way here's a bill for a £1,000 to start us off!".

2) do you do the work that is in arrears as part of your monthly standing order but stipulate that the standing order must run for twelve months?

- if the the accounts are due straight away I dont like the idea of doing £1,000 of work immediately and then taking 7.5 month to get paid by which time the next years accounts will probably be due... and that sounds like a vicious cycle to me.

3) or is there a another way i haven't thought of?

Tony Hawkins

Replies (11)

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By rhangus.
23rd Nov 2008 02:31

not difficult
You write to client with a split of a full years bill and show what this would be by monthly s/o.
Explain that inevitably there will be a catch up period for all monthly clients paying in advance for the system to work. Suggest small catch up payments ASAP to avoid a large one off final bill.
12 months bookkeeping at 40 plus say 20 for VAT and say 50 for accounts and 20 for tax total of 130 per month for a full year. had 7 payments of 130 before the 1st of the new year payments start on 1/4/08

service may be 7 at 40 for bookkeeping plus 2 1/3 quarters vat say 140 plus registering for vat say 60 plus 1st year accounts 600 (no discnt as 1st year is exp) tax return of say 240 =1320 and had 910 so i can just bill for this diff of 410 if not paid some catch up payments.

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By Dave Paveley
20th Nov 2008 15:42

Monthly billing?!

Wow.

12 invoices a year plus a 13th 'mop-up' invoice for all your clients.

That is going to create quite some paper trail!

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By AnonymousUser
20th Nov 2008 13:12

Monthly invoice
It depends on whether there is a balance to be billed or not.

With new clients who are prepared to pay by standing order I give them a quote for the services for the year. I then take the lower end of the quote and tell them I will bill them monthly and get them to complete a standing order to cover the monthly bill. Monthly bills are prepared and state the work is "On account of services provided" (I use an excel spreadsheet to produce all monthly bills together)

Once the first year's accounts are finished a final bill is prepared and from the total the amounts billed on account are deducted. There is therefore a small balancing payment to be paid. If it is a full fixed fee quote then there is obviously no additonal amount due.

If there is work already done which needs to be recovered then I would go with the higher initial standing order method below.

However I would still bill it monthly to match the standing order. This gets round any consumer credit problems but means that your client cannot claim all o fthe VAT on the initial invoice.

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By rushtonp
19th Nov 2008 14:10

spread initial fees over a shorter period
If the period end is close or already passed I spread initial fees over a shorter period, usually up to when I expect to complete the work. Then when after that the next years fees are divided by 12 to arrive at the new monthly payment.

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By BryanS1958
19th Nov 2008 14:05

Are we talking fixed fees or standing orders?
It seems that you are saying that if you operate you have a s.o. it has to be a fixed fee.

I always tell clients that the standing order is on account and any balance due will be payable when billed. After all, clients normally want to try and squeeze for the lowest possible fee/standing order, so accountants need room to manoevre when the usual additional work starts coming in - records not kept properly, tax advice, PAYE/VAT inspections, one-off transactions, etc!!

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By Dave Paveley
19th Nov 2008 11:32

Consumer Credit Licence?

I would go with option 1.

I thought if you allowed your clients to pay in 5 or more instalments then you needed a (very costly) consumer credit licence?

The OFT guidance seems to suggest this.

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By Anonymous
18th Nov 2008 21:19

Divide by 12
I advise the client of the fee for the year and confirm this in writing.

I then divide the charge by 12 and issue a statement showing the amounts due and the payment due dates.

It does mean some clients get credit and some pay in advance but I try to keep the invoicing as simple as possible for me and the clients.

I do exactly the same for a new client regardless of what work is due and when as soon as they become a client. I have had nothing but positive comments and certainly never had anyone question the payments.

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By MarionMorrison
18th Nov 2008 13:26

Smooth it out
Just take the current about-to-be bill, divide by 6 and get them to start their SO now so your not-yet-issued bill will be settled in 6 months. But then let it run on for another 3 months at that level, then halve it.

So, if your bill's likely to be £1,200, get £200/mo from now and another 8 months and then reduce to £100.. You get to be £200 or £400 ahead and then a few months behind and then settle into a 'fair' pattern.

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By DConlan
18th Nov 2008 12:28

Fees?
For the "catch-up", I have found the following quite useful: http://www.pclddms.co.uk/feeplan.asp

It means you get the money and the client pays in instalments. There is a cost (generally, I have taken the hit on this) and you are underwriting the clients ability to repay - having said that, that's what you do by doing any work in advance of getting paid.

I am sure there are downsides to this, but none that have caught me out.

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By Anonymous
18th Nov 2008 11:15

Option 1
In practice, my clients are always happy with the first option - they are happy to pay now for the immediate work, and start paying monthly towards the next year at the same time. If you're providing a great service they'll be perfectly fine with that.

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By geoffwolf
18th Nov 2008 10:19

you
start with a lump sum , or start with a larger than normal monthly amount for the first 12 months andf specify in the engagement letter how it is to operate

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