How can some accountants sell so cheaply?

It's down to volume

There is a firm in the north of England (I think they are TJD or TWD Accountancy) who offer basic accounts prep and tax return for £170. But they have several thousand clients. They also offer other services where the fee is higher. I agree that many of the online services have their clients post prime documents to them - a lot of the firms that specialise in pub accounts operate in this way. Not strictly an online service.

Because of health problems, I am having to operate in this way for the immediate and probably medium term. But mine is strictly online. I get the client to send me information online; either using excel templates, or their own software which they can back-up and send to me, or online bookkeeping/accountancy software. Contact is by phone or email. It's difficult because clients are used to popping in to see their accountant whenever they feel like it. But it can be done. Overheads are really low, hence fees can be set quite low. Clients tend to be at the lower end turnover wise but appreciate my way of working because it keeps their own overheads lower. But, as I mentioned above, this method requires a large number of clients to make ends meet.

Sometimes you get what you pay for

In the case of TWD their low level of fees seems to reflect the quality of the work (although I speak from a sample of 2 clients we've taken over - both of which were bodged).  Form filling by very unobservant people unable to distinguish between capital and revenue.

But on the other hand I never cease to be amazed by the fees that some firms charge on the high end because they are providing a service in the way that the accountants want, irrespective of the clients need and wishes.  £1,000 for fancified and unreliable balance sheet accounts when all that was necessary was a hack income and expense statement.  One size doesn't fit all.

Many considerations............

Many factors make up a fee -

How much work is required (obviously). Is it a limited company, partnership, sole trader.The state of the records presented by the client, which can be anything from a fully balanced TB and ledgers with all invoces beautifully filed and indexed - rare, but it does happen - right the way through to a carrier bag full of scrunched up receipts and a few vague figures scribbled on an old envelope - which is what the average sub contractor comes along with before we have a chance to house train them.Any other complications, tax credit claims etc.

Having assessed all this, then come the more nebulous considerations -

What do I think the client can affordWhat kind of payer will he beWhat are my instincts about himWas he recommended by another client, is he a similar business to that client?  If so you really dont want to be a lot cheaper or a lot dearer for one than the other obviously.

The kind of "firms" the OP is referring to are "sausage factories" churning out accounts at rock bottom prices without checking a thing, and often use staff who simply couldnt get a job in a proper practice.  We too have seen examples of their "work" and  shudder at some of the things ommitted, and indeed some extremely dubious claims made.

On the other hand, we have seen ridiculously expensive fees charged too, perhaps the worst example I can recall was a sub-contract joiner earning about £20k a year and keeping simple but adequate records (monthly sheets of income & expenses with receipts/invoices stapled to each sheet)  who would have a CIS refund each year of around £1,500 - £2,000.  A firm not a million miles from here was getting him his refund, and charging him an annual fee of £1,500.   

Margins and strategy

Some are working on volume, some are just happy to be working but what about accepting a 15% net profit and selling financial services and/or other services.

Bob

Portfolio Marketing

Sounds cheap, but expensive in the long run

Unfortunately some businesses just look at the headline rate without realising what they are getting.

Firstly, the accounts/tax returns tend to be prepared by low grade staff and riddled with errors.

Secondly, they are often not reviewed properly, either to make sure that they have been prepared properly or to see if there are any possible tax savings to be had.

So the client ends up with accounts/tax returns which are more likely to be the subject of an enquiry. The client also ends up generally paying more tax - when I review accounts and tax returns I can often save more tax than my fees, so in reality the client is often worst off going with the cheapest option.

Standards

...one wonders if the clients records are relied on soley, and the tax return is just a form filing exercise, what service those clients are receiving for £170...sounds like an accident waiting to happen, especially with the new penalty regime!!  You pay for what you get in most cases, I just hope those clients are aware of exactly what they are getting (doubt it though)!!

But like other comments i've seen accounts prepared and tax returns for £130, and a decent job done, and those paying £2000, where a £300 fee would have been adequate in my view.

The constant debate here is what is a fair price, but there is no answer as the standard and level of the service supplied, overheads and profit sought, varies. 

I would imagine the cost of a set of Accounts & Tax Return for a sole trader earning £20,000 a year prepared by someone doing it to earn additional income on the side would be considerably lower, than a 5 partner firm where the partners employ 20 staff and the partners drive around in BMW's and spend their weekend siting on the ride-on lawn mower, sipping Pimms.

Different accounting bodies publish from time to time average prices over different regions, which can be used as a rough guide.

Cheap jobs

One firm I am associated with uses bookkeepers based in India. Large cost savings but they still need volume and cannot match £200 jobs.

I have run into some of those"cheap" accountants  myself and made money sorting out the clients affairs when they got caught with inadequate/rubbish data. You can only do the cheap jobs if the client does the work and you essentially import direct into software with no checking, no adjustments, no advice and importantly no name of yourself as the accountants reflected anywhere.

I have a view on that kind of stuff but I suppose there is a market for it.

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Seems to make sense