I've called myself in for a disciplinary

Can you help please?

Didn't find your answer?

Because up to around 10 years ago all my work was billed on actual time time spent, I've been a spoiled brat. Now at least 50% of it is fixed fee work and I'm increasingly finding there are too many times I feel obliged to write off time, when I also feel it's been legitimate.
I've therefore called myself in for a meeting about it, but need your advice.
Scenario - 1. Builder clients - both nice people who I would want to keep - regularly don't give me all their matching supplier bills and my lists of non matching items grow bigger each month. One of them occasionally pays with his personal credit card, but doesn't give me any clue about which ones are paid this way.
It's all taking time, and whatever I budget for it's never enough. I would rather someone else does their bookkeeping, but I'd probably spend even more time sorting that out, so I am stuck with this scenario. I've got to find a way to bill them for the extra time.
Scenario 2 - new clients have some ghastly issue that hasn't troubled them so why would they mention it to me. I quickly find a can of worms that is very difficult to budget for as I don't know what other problems will emerge as a result. All too often I sort out the problems and then realise I should have addressed the matter much sooner, but I wouldn't have known at the outset how long it would take me to get it resolved.
Scenario 3 - clients in first year - my time checking VAT returns gradually creeps up (usually because they are messy and out of control) and there's no extra money for the stat accounts and corp tax. Although I've been monitoring time, I've never had the guts to talk to client before the money runs out.

I can see I need definite cut off points after which I must take action. Do you recognise these?

Where you have the permanently untameable builder types what is an alternative to billing hourly?

What other advice would you give?

Replies (27)

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By williams lester accountants
06th Mar 2020 11:07

Do you not set out in your letter of engagement what you will be doing for the client. Then, should anything else arise, send them an extra work order outlining the additional costs?

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the sea otter
By memyself-eye
06th Mar 2020 11:21

The problem is that 'builder types' do not recognise that issues you have (like actually keeping receipts) are ones that are part of their thinking, any more than an oil change more than once every 4 years was for an executive friend of mine, for his wife's car ("the car doesn't know it needs new oil").
You either have to 'over price' expecting that, or turn the business down.
Like the trade in price after 4 years of zero servicing, the builder types will accept it or walk.

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JCACE
By jcace
06th Mar 2020 11:37

Perhaps you could set out in cost terms what you should be charging and therefore what you will have to charge next year if things don't change, and set out how the client can make the required changes.

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By Cardigan
06th Mar 2020 12:12

From your post, it seems that the best case scenario is if the clients get their act together and stop being so messy (rather than you getting paid more to tidy up the messiness).

I had a client whose books were a mess the first year. I wish I had been brave enough to ask for more money at the time, but I felt that I didn't want to lose the client. However, what I did tell him was that we would need to move him to our "Bookkeeping Gold Plan" (or whatever) next year if his books were a mess again. This gives the client a choice.

I am currently preparing his accounts and there has been a vast improvement in his bookkeeping. Happy days!

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Oaklea
By Chris.Mann
06th Mar 2020 13:00

It all boils down to communication.

Within my LOE (my understanding of your instructions, as I prefer to head it), I clearly state that the fixed fee may require adjustment, if I find that I am expending more time, than I originally anticipated.

I would expect to; evidence and support such increases, within the specifics, in writing. Alternatively, suggest that you'll find a book-keeper for them and presumably, adjust your fees accordingly.

I find that, builders in particular, have little concept for the work which we do and little patience for our expectations.

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Tornado
By Tornado
06th Mar 2020 13:27

Don't do fixed fees. Charge for what time it takes to do.

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Replying to Tornado:
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By Michael Davies
09th Mar 2020 14:05

Put yourself in the clients shoes.Would you accept a quote for say laying a carpet but the “quote” was open ended ? I had this problem a few years ago with a client,and told them that the following years fees would be 50% more ,based on a best guess.Its up to them then whether they wish to disengage.I did give them chapter and verse as to why the fee was so much more.
Against that I have had clients who won’t accept an rpi increase.But because I know their business so well,based on my charge out rate,I still make a nice profit.So carry on.At the end of the day it’s about client trust in you,that they are not being ripped off.

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Replying to Michael Davies:
By Moonbeam
09th Mar 2020 15:00

At the moment, the most troublesome clients can throw in all sorts of badly prepared stuff, causing me more time and effort, so if I don't react then they are expecting an open ended approach that works in their favour only.
Unfortunately the hourly rate is the only one that will reward them for producing substantially more relevant data sooner whilst paying me for my time if they can't be bovvered.

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By adam.arca
06th Mar 2020 13:28

Like Moonbeam, I've become disenchanted with fixed fees.

You can communicate about what you're doing until you're blue in the face (and in reality it would take several pages to cover all the possibilities) but you're always going to have problems with clients who a) are inconsistent in their approach and b) really can't see your issue. I've come round to the point of view that I don't see any difference between, on the one hand, increasing an agreed fixed fee and trying to justify it versus your prior communications and, on the other, simply charging by the hour and justifying an increase in terms of "it took longer because your records are sh*t."

The problem with fixed prices is that we the accountants take on board the pricing risk and we either suffer where the price isn't enough but we can't sell an increase to the client or we cover ourselves by charging high and then run the risk of alienating clients.

I'm sure there are accountants out there who have cracked that conundrum, but I'm not one of them so, for these and other reasons, I've made the decision to start migrating back towards hourly charging (and I'm probably on a 2:1 split at the moment towards fixed pricing).

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Replying to adam.arca:
By Moonbeam
06th Mar 2020 14:23

@Adam - glad we agree on how difficult it is. I wonder whether to say to all new clients that fixed fees are anyway based on an estimate, and if it turns out that there is a lot more to do than envisaged at the estimate stage I will need to revise my fees, including charging for time taken rather fixing.
How do your letters of engagement cover the change to hourly rate from fixed fees?

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Replying to Moonbeam:
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By Vallery Lee
21st May 2020 12:40

I have always gone for hourly rate (since 1990) I will give an estimate and accentuate that it is exactly that. Only had one client leave me over this approach.
Best of luck whichever way you go.

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Replying to Vallery Lee:
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By Southwestbeancounter
21st May 2020 14:44

Same here - since 1988

I do write quite a lot of time off but that's another issue and is left to my discretion - I make sure it is still logged on the bill before discount though so that the client knows how much time was actually expended on their work.

When I take on new clients I usually give them a range so they have a guide of what their fees will be. I keep my word though so if it ends up being a 'pig and a poke' and I take 3 times as long as I anticipated, I will stick to my top range of the estimate and warn them that it will cost much more going forwards unless their book-keeping improves etc.

It's worked for the last 32 years so I think I'll stick with it!

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Caroline
By accountantccole
06th Mar 2020 14:21

Fixed fees for year end compliance can work but anything that is bookkeeping related has to be by the hour or it gets ridiculous. Quote an hourly rate for this and point them to a local bookkeeper if they don't like the price

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Replying to accountantccole:
By Moonbeam
06th Mar 2020 14:25

Yes, bookkeeping is a major area where I've gone wrong. As you say year end only compliance fees usually work.

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Caroline
By accountantccole
06th Mar 2020 14:23

With scenario 2 - I would highlight that year 1 will always cost more, sorting historical issues, one off tax planning and structuring work etc.

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Replying to accountantccole:
By Moonbeam
06th Mar 2020 14:28

Yes, I need to add in a clause to my LOE stating that any historical issues I discover that I wasn't warned about will be done at an extra fee. Problem is to work out in advance what that fee will be when client is not very bright/hasn't got a clue of what he needs to tell me before I work out for myself what I need to ask him.

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By ohgoodgodno
06th Mar 2020 14:52

just be honest with the client and set out your position as to why extra charges need to be made - builders don't have any problem charging for extra work, so why should you

most of our year end clients are on fixed fees but we've never had an issue with going back to a client to say that a higher fee needs to be charged because X, Y or Z wasn't right or hadn't been done (usually when the client has done their own bookkeeping). we've never had a client complain or not pay the extra fees and this has in fact led to extra work as the client has recognised that actually they don't have the skills to do some things themselves

apart from a few professional types with a standard amount of work, all bookkeeping is charged hourly as there is more scope to have things run away from you and leave you out of pocket.

we also take the view that bookkeeping can't be perfect - there is a tendancy to hang on forever for clients to find missing paperwork or answer queries, but this is completely impractical and adds dead time to a job, there will always be missing invoices, we give clients 3 reminders to find info and answer queries and make it clear that its to their benefit to provide them, but if it doesn't come we'll clear them off

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By ospevack
06th Mar 2020 18:18

I give a fixed fee when I can quantify the work required. Anything that wasnt covered in my fixed fee quote is simply scope drift and charged at adhoc hourly rates. Anything fixed i do, is with the proviso that im quoting for what i expect, if theres a real world change then that gets billed on the clock. Most of my clients know when something out of the ordinary has happened and give me a heads up nowadays, usually that they are expecting it to be charged for it.

Its a two way agreement - they get certainty as long as i do..

If you insist on fixed fee, then you could build 'unknown issues' elements into your quotes.

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Slim
By Slim
08th Mar 2020 21:28

At the moment all my clients are on fixed fees and about 75% of revenue is billed monthly. I'll be honest it isn't really working for me, I think it is why I get endless questions and emails from clients which is taking up a lot of time.

At some point I will move back to an hourly rate.

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Glenn Martin
By Glenn Martin
09th Mar 2020 13:58

fixed fees are good but having gocardless in place is more important, to pick up billable extras.

Scope creep can suffocate you if you have no method of monitoring the effort that goes into a job.

I have returned to some basic time recording and also find Go Proposal is essential to regularly review pricing and give a clear message on what work you are doing and what is an extra.

I find if you explain what extras you are doing clients accept it or they do something to improve, if not do you want to work with messy jobs you dont get paid for.

I had a bit of a problem with this last but repriced everything without too much resistance

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By Moonbeam
09th Mar 2020 13:42

This is so helpful - thank-you! I had assumed that everyone else magically worked out the right fees up front. I really do love Ospevack's remark:
"..is simply scope drift and charged at adhoc hourly rates"
I will have a good look at my LOE and make a number of changes in line with this suggestion and your other excellent advice.
I have two clients who are going to have to be made aware of hourly rates and who won't like it, but I don't like working for nothing, so I'll be brave.

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By Rgab1947
10th Mar 2020 10:48

With the online software offerings saying "its a piece of cake" etc. you will never convince the "builder" or similar that you need to up your fees due to time spend.

I have a few clients where my time is taken up with fixing "garbage in, garbage out".

Even my highly educated son-in-law said "its easy" when I conveyed the frustration the bookkeeper expressed. He just could not fathem where the difficulty lay (reconciliation is Greek to him).

Another bookkeeper I tried to introduce to him refused to work when I explained he is an inveterate Amazon buyer (and returner) stating Amazon and bookkeeping is to much like hard work.

Short answer is you will not convince them so just up the fees saying its due to time spent and accept if he walks away.

FYI I charge hourly on two rates - accountant and bookkeeper. Even then I often end up giving time away.

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Replying to Rgab1947:
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By PERMON
10th Mar 2020 13:03

Rgab1947 wrote:
.............

I have a few clients where my time is taken up with fixing "garbage in, garbage out".

....

Short answer is you will not convince them so just up the fees saying its due to time spent and accept if he walks away.

FYI I charge hourly on two rates - accountant and bookkeeper. Even then I often end up giving time away.


In most cases the client doesn't understand the intricacies of book-keeping any more than we understand the intricacies of their trade/profession. I'm a long time in accountancy ( heading towards wind-down, one man operation now) but more and more I'm arriving at the conclusion that trying to do book-keeping and year-end accounts at the same time is only practical in the very smallest cases. What inevitably happens is that case A takes longer than you anticipated and before you know it you have a backlog of other cases , some waiting for information or queries to be resolved - then somehow the problem seems to transfer to us and we are the perceived "hold-up" in getting returns finished and submitted.
I like the idea of two charge rates . Perhaps there is also something in automation a la ReceiptBank or AutoEntry ( although I've only tinkered around the edges of AutoEntry)
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By pauljohnston
10th Mar 2020 10:49

Why not suggest the client uses receiptbank or something simalar. This should mean (and we can see that it does) that the quality of information given to you is much improved.

Our next thoughts are to see if some of the year end stuff can be done a lot earlier. Because the collected more quickly.

Receipt bank appears expensive but I understand that for £300 per month you can have unlimited clients.

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Replying to pauljohnston:
By Moonbeam
10th Mar 2020 11:43

Client has been using Receiptbank for years. That does not automatically mean he doesn't upload a few personal invoices/non invoices/other trash in addition to kosher invoices, or that he uploads all his invoices. Goodness knows how it would be for me if he didn't use RB, but it's the old story of data only being as good as his upload.

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Replying to Moonbeam:
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By pauljohnston
17th Mar 2020 12:02

Following on Moonbeams comment about quality of data-we have used RB for sometime and I can seperate the chocolate bars from the van diesel from aplumbers fuel staion receipts although the number of choc bars makes me wonder if knows what real food looks like.....

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By Moonbeam
14th Mar 2020 14:05

Feedback - Due to the extra confidence you all gave me I immediately approached my two builder clients and said I would need £1k more from one and £500 more from the other to finish off the accounts. They quite understood.

Two other clients who have made a fist of (a) VAT returns and running a payroll for one last year (b) not noticed their bank feed was wrong and allocated bank to cash invoices and cash to credit card invoices- I said I had run out of money for sorting the mess out and I'd have to charge on my hourly rate to sort out.

Neither of them want to pay me for the extra time, and I am pretty sure are incapable of sorting out the mess. I am not sure how it will end for either of them, but I won't care if they go as they seem to think I have an easy job.

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