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Set up fees?

Set up fees?

How many of you charge an initial separate set up fee when you take on clients? I haven't done before but recently have been trying to build it in to annual fees. The disadvantage of that being that with fixed fees it means a higher fee year on year which isn't great from a client point of view. I'm now considering charging a one-off fee when they join to cover all the admin time and wanted views on what clients thought if you did charge and how widespread it is as a practice.



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24th Feb 2011 10:31

It is non starter in my book

As far as I am concerned setting up a new client is mostly admin time.  

The letter of engagement , money laudering, 64-8 and standing order are admin.  

Setting the client up for PAYE, VAT and setting them up on your software should be costed in your fixed fee, as should your software licence costs.  In my case this does not mean year 1 is higher than year 2 as I take a view that the chargable set-up costs are spread over the life time of the client.  In all reality it cannot take more than 1 hour to set up VAT, PAYE (if not already done) and about 20 minutes to set up the software.


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24th Feb 2011 10:33

No Never

I would have thought there is nothing more guaranteed to p*ss off a new/prospective client than this.

Just bite the bullet and absorb the initial cost - you will then hopefully have a happy and long-lasting client. 

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24th Feb 2011 10:43

Don't do it

You are asking your prospective client to invest in you at the outset, when it should be the other way around.

You are likely to prompt the thought "do you want my business or not?".

How do you feel when banks charge an arrangement fee? I always baulk at this, asking myself "are they in the business of lending money or what?".

Adrian @topaccountants

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24th Feb 2011 11:01

Depends on circumstances -

We would not charge a "set up fee" as such. However, it is very often the case that new clients bring with them baggage from their old accountant. You know the kind of thing - "I think I've been paying too much tax", "he would neve claim for ***** ", etc.

If, as a result of that initial conversation we agree to go back over earlier years to assess if the right tax was paid, then we do charge a separate fee for that.  Usually the conversation will be along the lines of - we will look at it and charge you a percentage of any refund we obtain. Clients are usually happy with that, (no win no fee), but it does require the ability to very quickly assess "on the hoof" whether its likely there will be tax to come back, and if the amount will warrant the effort.


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24th Feb 2011 11:02

Sounds more Flash Harry than Flash Gordon

...but if that end of the market is what you're aiming for then you could state that the initial fee is offset against the year end fee. That it is done purely to counter the number of people who take a lot of free advice at the start of the relationship but who end up leaving.

BUT, the problem with all these sorts of idea is that implicit within an initial fee is the concept that you are likely to have had lots of clients who didn't value your service because you are a bad accountant or even another Ming the Merciless....and so left! Hardly the best of prospects for a new client.


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24th Feb 2011 12:49

Deep breath...

Don't just guess at what reaction you are going to get from a business decision try it or ask the client what they think of the idea. 

I've charged every new clients a setup fee ranging from £50 to £500 for 5 years now and have had neither query nor raised eyebrow it's logical and follows the business practice of lots of other industries, ie people are not surprised.

It takes a lot of effort these days to take on a new client and, even though some may see it as admin, it would not take place if that client wasn't here and so they should contribute towards it. 

In reality, if compared to any other firm who quotes fees up front there's every chance we'll end up the same it's just that my quote shows two figures rather than one.

In anticipation of accusations of bad practice, no I don't force it on them and it's tuned to their needs and circumstances especially, as CD mentioned, if a previous accountant is involved.

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By thacca
24th Feb 2011 13:08


Unless you are in the priveleged position that people are knocking down your door to be your clients then I can't see it being good for client sign up rates.

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24th Feb 2011 14:06

Hmmmm indeed

Given that prospective clients don't know about the set up fees before they have met me I'm not sure how that theory works.

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24th Feb 2011 14:41

It's how you package it........

Clients who are already in business probably perceive very little value in the initial "admin" involved in transfer (prof clearance, engagement letter, ML docs etc). For these cases, I think it's down to how you package the whole service bundle you are offering. Price it in to your overall fixed price, consider throwing it a few "freebies" in their first year and aim to develop top class relationships with each new client coming to your practice.

New startups are often easier, as they are happy to pay for costs of getting registered with HMRC etc, so demonstrate the value to these clients of taking away the hassle of all this paperwork and include your own internal admin stuff as part of a fixed price bundle.

New clients, whether new or existing businesses, will need a bit more TLC in their first year with your practice - FACT! Suck it up and move on in my opinion. Get some kind of upfront payment in any case.

I try not ot focus on indiviudal aspects of a client relationship, but on the overall picture and moreso from the client's view. Find out their needs and they will pay you more for services you can deliver in these areas! Overall you'll cover your admin stuff and make a better return, plus you'll have a very happy client!

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24th Feb 2011 15:56

What about reviewing bookeeping and making recommendations?

Would you charge for that? I'm almost tempted to say no set up fees, but get all new clients on SO (which we dont at the moment.

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By Flash Gordon
24th Feb 2011 16:49

Food for thought!

Well you've given me (and hopefully others) a lot to think about already. Though I seem to be bouncing back and forth between whether I'm erring towards it or not! I do get all new clients on standing orders (or payment upfront of work done for smaller things like tax return only) from the start, having been caught out in the past by folk who got advice and value added work done by me for free (thinking I'd have it covered in the main fee) then went to a mate to do the compliance work for cheap before paying me a penny!

My main issue is that I've been too nice in the past and got shafted by some people who've taken advantage. So now I'm a tad cynical and wanting to get paid for what I do.

In terms of a bookkeeping review and charging it depends. If its a quick look-see to pick up areas to improve (and therefore my life easier and their fees cheaper or not increasing) then it would be a freebie. But if its a fuller review of transactions for checking the vat is right and the postings are sensible etc then I'd charge. Because they'd be getting a financial or value-added advantage out of it. 

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24th Feb 2011 16:59


I agree with you. 

As I say, I doubt it makes much difference in the long run.  Whilst from year 2 onwards they get one figure, I've found it easier (for me I suppose) to break down my first annual (or more often X month's charge) into its various elements and, I'd say that makes it more transparent for clients.  You also have to decide on timing, in my case we have one billing year to 31 March and all clients fit into that, whereas others I know do it on a client by client basis.

The methodology will also depend upon the quantity & spread of services each firm provides, in my case that's making the coffee, through photography (only once so far) and back to audit etc etc.

I've just remembered that there is one circumstance in which I'm cautious over the setup fee and that's with cold clients (ie from Yell rather than recommendation).  If I really thought they were worth having, I'd certainly consider only a minor setup fee however, in my case I may only take on one of these a year, as I just find them too much grief to instal and get up to speed, it's so much easier to take on a recommendation and fees tend to be far lower in their priority list.

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24th Feb 2011 18:21

Set up fees?

No chance.

How long are you looking to keep the average client for?  10/15/20 years?  Lifetime value of client huge.  The time cost of any set up should be classed as an investment.

Example c_d gives an aside, that's not set up fees that's actual fee earning work which client values and gets a return on.

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25th Feb 2011 08:57

thacca is talking sense

thacca: “hmmmmm

Unless you are in the priveleged position that people are knocking down your door to be your clients then I can't see it being good for client sign up rates.”

Prompted the following

Paul: “Hmmmm indeed

Given that prospective clients don't know about the set up fees before they have met me I'm not sure how that theory works.”

Paul there is no sense in what you are saying. Clients presumably sign up after they meet you and after they are told about the set up fee. This is the point when they decide whether to sign up not before they meet you. If that is the case then what thacca says seems a sensible theory. 

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25th Feb 2011 09:28


Yet again you are spending so long copying & pasting, you miss the point, read what you copy.

His/Her supposition is that charging setup fees damages my rate of client take up, no it doesn't.  If it did I'd stop doing it...duh.

If I thought it might (and I was really keen on having the client) then, as I've already stated, I'd keep it to an amount that would not jeapordise my proposals (yet again the benefit of pricing according to the client in front of you).

This is getting silly.

I don't just pluck this stuff out the air, I think about methods etc, test them out, ask clients & colleagues what they think and put them in place.  If they don't work, I stop doing them or change them as necessary, but if, as in this case, they work (and this one has been a godsend) I use them.  All of this straight out of "Dummies guide to running a business".

Think I've answered the same question enough times now, I'm sure the OP understands the answer.  Off now.

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25th Feb 2011 09:40


“This is getting silly.”

So stop being silly then.

You now go off on a totally different point to that which I was making.

You tried to indicate that thacca was talking nonsense because prospective clients didn’t know about your setup fee before meeting you so how could it affect your signup rate. That would only be logical if people signed up before meeting you.

You are the one missing the point.

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25th Feb 2011 10:27

I've thought about this ....

and I can see a middle way for me. I am about to change over all SE/SA clients on to a fixed fee, DD monthly collection programme that runs 01.04 - 31.01. If I take on a new client in-year then there is a remote chance that they could leave prior to having any accounts work done and therefore would be due a refund of DD's already collected. I propose that the letter of engagement attributes part of their normal annual fee to a set-up charge e.g. 25%. So, if all goes smoothly then noone has to worry or pay any extra. If they leave prior to any tangible work then I get 25% for my trouble.

Seems fair to me.

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25th Feb 2011 10:45


What a brilliant idea! I think I will do something similar myself :)

I always take the first months payment at sign up, but I have been taken advantage of in the past with free support being taken in abundance only for them to go to a 'mate' for the real work.

We have overcome this by keeping a detailed record of all correspondence and support provided in year, but your method removes the need to provide a reason for withholding part of the advance payments.

Thank you for sharing your idea.

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25th Feb 2011 11:37

In return then .....!!!

How do you physically go about raising invoices / statements etc? I can't quite my head around dealing with 'extras' that need invoicing for when you are operating DD. Do you add them on to a later collection or simply recieve separately via cheque? How often would you send a statement to show the current position?

Also I think you said that you operated the DD based on year end. I can see that for Limited Co's but for SE & SA clients it seems easier that everyone operates April to Jan as there has to be work completed in that period.

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25th Feb 2011 12:00


We issue an invoice cum[***] payment schedule at the 'start' of their year after approval of our quotation (which we prepare each year to confirm our continuing engagement). We use an excel template for this which details the payments & tax dates. It calculates the VAT (based on payment/tax date) and the net/gross figures. If the clients requirements change (or they leave) we either raise an invoice or credit note, or just credit the whole invoice and raise a new one. The dd payments are set up according to this schedule.

If a dd payment fails (for whatever reason) we contact the client and ask if they want to give us cash/cheque, or for us to take an additional dd the following month.

We use the clients accounting year as a basis for 2 reasons.

We set the monthly payment on renewal of our engagement, which only happens after completion of their annual work.It helps spread our workload, ie. we are not rushing to get invoices out for all clients within a short period.

I am sure there are many methods that would work, and be acceptable to clients. I'll stick to our tried & tested method for now, but would be interested in hearing of others methods and the advantages/disadvantages.

Edit: extras, or services not included in annual fees, are invoiced a.s.a.p. and the invoice specifies the date the d/d will be taken.

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25th Feb 2011 12:36

Thanks Shirley ....

I was thinking (although only in an abstract way!) of something like this:

I quote a fixed fee in March each year and provide a schedule of DD collections commencing April through to Jan (as all work for SE/SA clients has to be complete by then). Client signs up to confirm this and my appointment. Fixed fee is say £500.00 per annum and DD is therefore £50.00 per month.

I tell the client that the fee breaks down as follows:

Ongoing support - 20% Billed monthly and collected as part of the DD.

Preparation of standard tax return / accounts - 80% - invoiced upon completion.

Extras - invoiced as and when completed and DD amended as in your case.

I then issue one annual invoice for the support element; the argument being that even if people don't ask me questions I still have to incur costs in training, software, insurance and those costs carry on throughout the year. The expired part of the support contract is obviously not refundable if a client should leave. I obviously issue invoices as normal for the other work as and when complete and perhaps a statement twice per annum. I will seem to automate this via email.

Just my thoughts - interested too in ho other people manage it.



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25th Feb 2011 13:08


Personally, I try to make it as easy for our clients (and us) as possible.

The reason we do it at accounts year end (but tax year end would be just as good) is because the clients are in the office to sign off the accounts or tax, and we make the new quotation and renewal of our engagement part of our 'sign off' procedure. I think, rightly or wrongly, that is better to make it part of a routine event.

I think if you start asking them to have an additional meeting just to set your fees then it may not be so easy. Also, getting 100% of your clients to approve and return documents sent by email, or post, would not be so convenient for them and you would end up chasing them (unless you inform them that no reply indicates acceptance).

How will your method work where clients bring tax data in early? ie. the annual work is completed in April or May but you dont receive full payment until the following January arrives.

Think about when you meet your clients, and try to find a convenient meeting time to add in this extra procedure, preferably after completion of the current year, so that you know whether any adjustments to fees are required.

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25th Feb 2011 13:56

Accounts done early ...

thats fine .. if I do the accounts is May then the client gets 8 months of credit (a bonus for being prompt!) if they wait until January then they have effectively paid up front (no bad thing for a last minute Lenny!). Regardless, I get paid monthly and because April is a quiet month I add to my cashflow 1/10th of my revenue which means that I will no longer be carrying a debtor balance throughout the year. I also won't be waiting for my January revenue to come in through Feb & Mar.

As for processsing, well March is the time I have least to do so producing paperwork (all electronically) will not be onerous. Once set up the DD will carry on so that is a year one issue only. In all years I will not be putting forward the payment plan as something requiring physical acceptance ... if the client has a problem obviously I will be happy to discuss but otherwise my letter of engagement is in place and will cover how everything works. It is just a rolling contract just like most service contracts that you might buy. 

For Limited companies I will probably follow your model as their work is all over the place. I will commence their DD in the 1st month of their financial year and it will last for 9 months (to match filing deadlines). Their work has to be completed in that window at some point so then it is like the SE people. In year one it will obviously take 12  months to get everyone on board starting with the March year ends who will start paying in April. The December year ends I am doing today will be billed (and expected to pay) as normal for this work and then will enter the DD scheme from nexy January.

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25th Feb 2011 15:44


Maybe I am seeing complications where none exist, but if a client gets their tax return prepared, and submitted, early, say in May, but continues to pay until January aren't you taking unnecessary risk? Or are you proposing to do a block submission in January when everyone has paid in full?

When we have acquired a 'slow payer' (which happens on occasion), the one thing that does make them get their hands in their pocket is the knowledge that the tax return doesn't get submitted until we have been paid in full. We have had to wait a while, on occasion, to get paid, but touch wood, we haven't had a bad debt for years now.

I think the monthly (and advance payments) tend to weed out those 'clients' who never intend to pay, and holding back the submission sorts out the slow payers.

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25th Feb 2011 16:43

I always file before payment anyway ....

so for me this does not increase my risk and actually reduces my exposure as statistically most clients would have paid at least something! We might just have different risk profiles in our clients i.e. I only do referral business so that helps with the moral blackmail if needed!

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