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What Fee Should I/Would You Charge?

New client, need to quote, unsure how to pitch

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I'm a former big-4 accountant, qualified 5+ years ago, recently started practicing on my own.  I've just had a call from a new client, word-of-mouth intro, not sure what to charge.

Would be very interested to hear what you would consider a reasonable fee/monthly retainer?

It's a fairly new, rapidly growing e-commerce business selling products manufactured overseas direct to consumer.  Turnover £1.5m p.a. but aiming to get to £5m during the coming year. 

Shareholders and directors are husband/wife.  They have a bookkeeper but he's not doing a great job, so there's a bit of 'tidying up' to do - not sure of the extent yet.  The client is looking for monthly reporting (maybe slightly more regular/more insight in busy period - it's a seasonal business) and somebody to give them some insight/advice on how the business is running and ideas to help grow - what products are selling well/profitable etc.  Plus all the usual - VAT returns, payroll (5-6 employees), stat accounts and corp tax returns, plus a bit of advice on how to extract cash tax effectively from the business. 

At this point, I'm not sure quite how much time it will involve, what the current bookkeeper gets paid (though the client is obviously expecting to pay more). 

My current thinking is to suggest a monthly retainer level in the low four figures and suggest we adjust up or down after a few months dependent upon how much time it's taking up.

Is that a bad idea?  Should I have a figure in mind based upon turnover alone?  How do you quote for this kind of pitch?

Please give me your thoughts and what your fee would be!

Replies (23)

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By Truthsayer
14th Feb 2020 15:45

The 'low four figures' per month?! You will find clients this size will only pay that per year!

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Replying to Truthsayer:
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By New2Practice
14th Feb 2020 15:59

Truthsayer wrote:

The 'low four figures' per month?! You will find clients this size will only pay that per year!

How much would you quote?

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By Pukka
14th Feb 2020 15:59

Why don't you be upfront about not knowing exactly how to quote, advise them of an hourly rate and charge them based on a time basis?

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By Matrix
14th Feb 2020 16:53

I would charge a fixed fee for the stat accounts and payroll and for submitting the VAT returns and then a variable fee for the bookkeeping/management accounts based on time spent.

I don’t have any clients that big but I would imagine say £2,500 for the stat accounts/CT600, £60-£90 pcm for payroll (including pension, P11D) and maybe £100-£120 for the VAT returns, assuming all the bookkeeping has been done or include the latter in the bookkeeping fees.

I wouldn’t charge for tax planning if I was charging my usual fees for completing the Director tax returns unless they asked for additional profit extraction calculations, restructuring etc.

You need to get your fee card sorted but also not be too reliant on one client.

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Replying to Matrix:
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By New2Practice
14th Feb 2020 17:18

Hi Matrix,

Thanks for your thought out reply. I have been trying to put together some kind of fee card, but the range of prices out there is exceptional.

These guys are quite open about their fees:

https://rjaccountancy.co.uk/fees.html

And seem reasonable.

I'm based in London, as is this client, so fees are higher, though one of my clients got quoted by their (former) accountant £300 to prepare each P11D return for them!

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Replying to New2Practice:
RLI
By lionofludesch
14th Feb 2020 18:32

New2Practice wrote:

These guys are quite open about their fees:

https://rjaccountancy.co.uk/fees.html

And seem reasonable.

Less than I'd charge, I have to say.

But a lot depends on what standard of bookkeeping you're presented with.

You say the bookkeeper's not doing a great job. That's a factor.

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Replying to New2Practice:
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By NH
17th Feb 2020 07:17

I've always been confused by these charge by the turnover types - I have clients that turnover 2m that are far less work for me than those that turnover 100k

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Replying to Matrix:
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By dwgw
18th Feb 2020 13:14

You'd charge for what is essentially form filling but not for tax planning!? Which is more valuable?

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Replying to dwgw:
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By Matrix
20th Feb 2020 11:08

Sorry only just seen this. My experience is that clients begrudge paying extra fees for anything including tax planning, although I agree it is valuable.

My point was that I charge a proper fee for filing the Directors’ tax returns which includes basic profit extraction discussions. Anything else is charged in addition.

What is your experience of getting clients to pay for tax planning?

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Replying to Matrix:
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By dwgw
20th Feb 2020 13:22

Well I'm a tax adviser, not an accountant, so my clients pay for tax advice!

It's difficult to justify hourly rate fees for work that can largely be reduced to data accumulation and entry. That's a simplification and I can see you're adding tax advice to the basic process but what is it that your client values the most? They'll always be able to find someone who could do the tax return more cheaply but I expect you'd then point out to them that your fee includes the profit extraction advice. In other words, you're already getting your clients to pay for tax planning!

All I'm really saying is that I'd make it explicit that you're providing tax advice and completion of the tax return is just the final part of that.

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Replying to dwgw:
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By Matrix
20th Feb 2020 13:36

I completely agree that it is more valuable but I have not been great at selling tax planning over the years.

I like the low risk compliance work even if it is not always using my 25 years’ tax experience.

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Hallerud at Easter
By DJKL
14th Feb 2020 17:18

Whilst the sales figures hopefully transfer, with little human input, into whatever accounting system is to be used, I would take a close look on the purchases side, especially given the overseas angles re vat (you do not say where the customers are , whether the client manufacturers overseas himself or merely imports (albeit maybe not to the UK) etc

Cross border transactions tend to involve more work, so is it regular/numerous purchases/imports or just odd ones? (I had an e commerce client selling shoes but it involved only about two imports into UK warehouses a year from China, if frequent, and especially where goods go direct to other countries, care is needed re complexity/cost.)

When costing clients re posting accounts manually I used to base on volume of transactions and how they got entered, that may be a fruitful avenue of approach re record keeping costs.

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By bernard michael
15th Feb 2020 10:32

Do you have any idea what the current incumbent is charging.?
Why are they wanting to change ?
Is the client looking to carry out a fee comparison ?
Do you know the introducer - if so have a word with him re the client's expectations
From the above you may get some idea of the fee range the client will jump at

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By mjshort
16th Feb 2020 09:31

Give the client choices, 3 is a good number (Premium, standard, essential) in £ per month.
I'd probably look at 449, 599, 999 or some variation to try to get them to take up high end price.
Monthly reporting included with standard.
With tax & business advice as part of premium.
Specify exactly what you will do so that you can raise additional work orders in case of scope creap.

This will all take up some of your time but can be used in future with minor modifications.

Put in caveats for poor bookkeeping.

Look at pricing theory.

Look at AVN's ideas

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Replying to mjshort:
Hallerud at Easter
By DJKL
17th Feb 2020 11:03

mjshort wrote:

I'd probably look at 449, 599, 999 or some variation to try to get them to take up high end price.
s

I would round up to half a billion.

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Replying to DJKL:
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By Mr_awol
17th Feb 2020 11:50

DJKL wrote:

mjshort wrote:

I'd probably look at 449, 599, 999 or some variation to try to get them to take up high end price.
s

I would round up to half a billion.

Is that for premium, half arsed, or essential?

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Replying to Mr_awol:
Hallerud at Easter
By DJKL
18th Feb 2020 11:38

Half arsed of course.

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Replying to DJKL:
By mjshort
19th Feb 2020 06:23

DJKL
WHY THE STRANGE RESPONSE?

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By Alonicus
18th Feb 2020 12:13

Something to consider is what your fee will look like in relation to the rest of the potential customer's costs. Ask them for their previous accounts (or look on Companies House, if applicable), just to make sure that the fee you are considering won't be higher than they can bear. If it is, you still need to get just reward for your efforts, so it might be worth considering offering a service in "modules", which they can upgrade into as they can afford them.

E-commerce has notoriously low margins, particularly for companies pursuing high growth. A margin on sales of 1-5% is considered normal nowadays, particularly if the majority of sales are through Amazon and eBay. An annual turnover of £1.5m can mean borderline bottom line profits, especially if the directors are taking any kind of salary out. The old saying about turnover being vanity definitely applies !

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By David Gordon FCCA
18th Feb 2020 14:05

OK
Because you are new to the game;
I learned two principles, which I pass on to clients:
1)
My bank and I have an agreement, I do not lend money, the bank does not do accounts.
2)
I do not ask to share my client's profits, so neither do I share the losses.

You know what you need, and 2) wish for, to live on. So you know what your base fee should be.
Window cleaner or Pop star, if you start charging fees according to what your client does, this is unethical.
Statutory work is bog standard and may be pre-costed.
Monthly stuff, you have to take a let's run for a bit, and see how it works out.
But, from what you have written, it does seem that the client has an optimistic view of may be got for what fees.
If you really can kick off with a four figure monthly bill for client of this size, please teach me how.

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By David Gordon FCCA
20th Feb 2020 10:56

Dear mjshort:
Q
Why the strange response?
A
The question "What fee should I charge?" is indicative of a moral dilemma.
A competent accountant being honest with him or herself, in public practice, should know the answer to two basic practice management points:
1) What minimum do I need to earn in order to stay in business?
2) What, reasonably, should I set myself as a target?
It is not rocket science.
Most of us would justifiably berate a client for going into a new business without first having done some sort of costing.
I apologise if I misinterpreted the question, but to me it read:
"Hey! look what business this guy is in, maybe I may cream some of this off the top for myself?"
Fortunately the questioner enhances his integrity, by indicating through his question, hold on, is this actually proper what would others do?
Well, many of us would not behave so. On the other hand I once attended a "come-on seminar" for prospective members, given by one of the well known accounting co-operatives. Wherein the main speaker lauded such an attitude.
Take your choice.
I was trained in a practice where such behaviour was regarded as close to an old goat taking advantage of an innocent virgin.
On the other hand I had experience of one of the big firms wherein that was precisely the partner's attitude.
As said, your choice.

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Replying to David Gordon FCCA:
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By dwgw
20th Feb 2020 13:37

I'm not convinced any moral dilemma is indicated by an inexperienced practitioner eliciting guidance on fees.

I didn't read the question as "these guys make loads, so I have an opportunity to do the same", more "these guys lack in-house expertise, I can provide that but the fee structure might be different to the selling of standard accountancy products". Nothing unethical about that.

I've never once thought about the minimum I need to earn to stay in business and it certainly wouldn't enter into my consideration of the fee I should charge. I earn what I earn from the work that I do - that's even less rocket science.

Wherever possible I agree my fees with my clients in advance. The hourly rate is simply a costing tool and only has real meaning when considered in the context of the value to the client.

In the OP's case, it appears he might act as an outsourced FD. It seems he'll be much more engaged in the real time growth (or not) of this business. That being so, I think it's perfectly "moral" and ethical to consider his fees for that role in the context of what a company of that size might pay to engage a full time FD, as well as his usual hourly rate, and arrive at a suitable retainer accordingly.

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By David Gordon FCCA
21st Feb 2020 14:43

Every business, I was taught, needs to have some idea of its "Break even" point. This certainly applies to accounting practices. Especially to start-ups.
Otherwise, I am sure we have all at one time met this, we start to make allowances for "Your first year", or we will make it up next year.
It does not work.
So, therefore, even on the back of the proverbial envelope, one should set a minimum rate.
I admit I have not worked that way for at least twenty years. This is because I am now satisfied that I am able to comfortably judge what it takes to keep both myself and most clients happy.
So, 85% of my clients pay via monthly D/D. For that money I do whatever is necessary. Simples!

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