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Empty pockets AccountingWEB Are you charging too little?
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Are you charging too little?

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Accountants are often reluctant to increase their fees but with inflation still in play, it’s time to bite the bullet. Philip Fisher urges accountants to review charging structures on a regular basis to avoid undercharging. 

4th Apr 2024
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Anyone turning on the radio or TV or picking up a newspaper on Easter Monday would have been greeted with the depressing news that the prices of everything except energy were increasing. Sadly, this was not an April Fools’ Day joke but a reflection of economic reality.

Even the good news element was somewhat misleading since energy prices have doubled in the last few years.

Perhaps the strongest measure of how bad things have got is when the aforementioned news outlets happily celebrate the news that inflation has gone down, even though it is still at a level which would have been regarded as alarming at the start of the decade.

Mysteriously, none of the media outlets chose to mention fees charged by accountancy practices in its survey of inflationary rises.

This can only be down to one of two reasons. Either, perish the thought, we are regarded as inconsequential or, which might be worse, we are not bothering to increase our fees in line with inflation or beyond.

Some readers will operate in practices that have recently increased fees, while those in larger firms do this regularly, almost certainly busting inflation every time.

Rethink your fees 

However, if you are running an office or a practice where such an exercise has not been carried out recently, this would be a good time to look at your fee structures and consider whether changes are needed.

In particular, those who charge a fixed fee for almost all of their work could be losing out to inflation. If both you and your clients have long been comfortable with a £250/£500/£1,000 fixed fee, it can be difficult psychologically to raise the sum by, let's say, 5%.

Given that costs are inexorably continuing to increase, whether these represent labour, property, utilities or more general expenditure, increasing fees is therefore a necessity.

The alternative is the wonderful myth propagated by both major political parties, “growth”, which can be translated in the accountancy sector into either bringing in more clients or cutting costs while generating the same fees.

We all know that neither of these is easy and therefore pushing up rates is the only practical solution for most of us.

A brave accountant might try the counterintuitive strategy of reducing charges to generate more work. However, since in the current economic climate, the major constraint is getting work done rather than generating it, that approach is likely to remain the exception rather than the rule for the majority of established firms.

Bite the bullet 

As a group, accountants tend to be timid when it comes to telling clients that they need to pay more.

In some cases, there will undoubtedly be a negative response. It goes without saying that this will disproportionately come from clients who fool firmly within the hellish category and such a response could present a perfect opportunity to allow your rivals to put up with their bad behaviour in future.

Given that the Bank of England’s base rate cussedly remains at 5.25%, many clients will not bat an eyelid if a firm that provides valued service increases a fixed rate charged by 5% or, for those that still charge on an hourly basis, does the same to charge out rates.

Going a step further, some might wish to use the junior doctors’ tactics and attempt to make up for some of the other inflationary losses over the last few years.

As ever, this is a situation of horses for courses and, if you have managed to cut costs for example by reducing workspace, it may be possible to increase fees by less than inflation or even freeze them for another year.

If this is your plan, shout it from the rooftops. Clients will appreciate such treatment and some will almost certainly recommend your practice to friends and family.

It is also worth bringing the nightmare of busy periods into the equation, especially if you have a large number of private clients requiring self-assessment tax returns.

An interesting compromise might be to write to some or all clients, informing them that fees are to be frozen for another year but putting in a proviso that if tax return information is not provided in full by 30 September, rates will increase by 5% for each month by which it is delayed.

Not only would this take away some of your pain over Christmas and in the New Year but could also be directed towards paying richly deserved bonuses to staff who uncomplainingly join you in burning the midnight oil.

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By johnthegood
04th Apr 2024 15:33

fixed monthly fees paid by DD, inflationary rise every year, been that way for us for about 15 years, easy peasy, everyone happy

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By mbee1
05th Apr 2024 11:31

Yes we're the same. About 20% of our client base pay by Direct Debit and we encourage as many as possible to pay that way. This year we have over 50 new ones that way. The others are encouraged to pay in full by bank transfer as the fees are lower than by credit or debit card.

We've put fees up this year although not as much as inflation. Working from home has been a big bonus and we've downsized the office and now use a serviced office facility with an all inclusive rent including parking so we've lowered our costs that way.

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