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High fees are not in the spirit of accountancy

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In an uncertain economic climate, pricing work is ever more critical. Philip Fisher questions if ripping off clients is the way for accountants to get rich. 

10th Jul 2023
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In his tribute to John Stokdyk, AccountingWEB and Sift's CEO Tom Dunkerley reminded readers that one of John’s great bugbears was an insistence that accountancy is a profession not an industry.

That distinction recently came to mind, as controversy raged over whether the stumping of Jonny Bairstow was legitimate, cheating or, more realistically, debatable when considered by reference to the spirit of cricket.

The spirit of accountancy

While accountants do not have an exact equivalent, for generations we have regarded ourselves as citizens committed to upholding the highest ethical standards. Indeed, there must have been times past when we could have been regarded as role models in the context of behaviour in tricky situations.

Would any accountant today have confidence in claiming that we and our fellows remain above reproof?

Over the years, I have worked with numerous individuals who undoubtedly took their ethical responsibilities seriously and would refuse entreaties from clients attempting to evade taxes, con stakeholders by misrepresenting a company’s financial performance and stability or even perpetrate frauds.

Starting with the Big Four and working down, they now seem to be far more people willing to compromise their standards in efforts to achieve what they believe to be desirable outcomes.

Those desirable outcomes can often be expressed in very simple English as “higher profits” or alternatively “lower taxes”.

In the knowledge that greedflation is now becoming increasingly common, to the point where the word has entered common parlance, we should all be looking at our businesses and trying to decide how to operate in this Brave New World.

One has to wonder whether some accountants are offended that the media has not yet called for windfall profits on at least some parts of our industry.

Companies in the natural resources industry pay them, banks are teetering on the brink but why are no commentators suggesting that our pricing isn’t high enough to justify at least a debate on the topic?

Given all that has happened in the last few years, pricing is becoming an increasingly tricky art form.

Act like a profession

If we want to follow the Stokdyk dictum and present ourselves as a profession, then we should be providing support to clients who are struggling and charging fair rates to those that can afford it.

This would undoubtedly allow for a modicum of inflationary increase each year so that we can give staff fair pay rises and maintain our own lifestyles but probably no more.

An alternative might be what could be referred to as the Robin Hood approach. This features squeezing wealthy or unethical clients for every penny while, at the same time, subsidising fees for those facing hard times such as charities, starving start-ups or penurious widows/widowers.

Those at the top end of what now seems increasingly to be an industry with attitudes that can sometimes be barely distinguishable from those whom we used to deride as shysters, almost certainly favour what might be described as a more commercial approach.

Their general policies and attitudes centre on maximising partner profit shares and nothing else. In order to do this, clients are charged as much as they can be persuaded to pay, while costs must be cut to the bone.

Leaving the costs to one side, the calculations on squeezing clients to the limit are not necessarily as simple as they seem. Taking a short-term approach, ramping fees up until clients leave will achieve the desired outcome.

However, in the fullness of time, this will inevitably lead to a significant proportion of the client base moving to competitors offering better prices or service, ignoring the commercially challenged that go under without ever paying your exorbitant fees.

The nature of a practice also governs much of the decision-making. If a firm does nothing but complete tax returns for a fixed fee in a highly competitive market there might be nowhere to go. For those who provide high-value consultancy services, the sky could be the limit.

Getting the balance right

Getting the balance right is therefore partly a matter of policy, are we part of an industry that tries to screw the client or a profession that prefers to operate on a fairer basis? It is then a good idea to factor in a balance between short-term profitability and long-term sustainability.

All of this is hard enough at the best of times but when neither the Bank of England nor the government seem to have solutions to control rampant inflation and the threat of recession, your average accountant is going to struggle to find the right answer to what is becoming a perpetual conundrum.

Replies (18)

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Lone Wolf
By Lone_Wolf
10th Jul 2023 13:30

We need to take a commercial view on this.

How many have heard that line in their career?

Translated, it means, the client won't like that, so we're going to knowingly allow tax evasion so we can keep getting our nice juicy fee from them that they pay us knowing we'll let them off with all this.

Sigh.

Thanks (3)
John Toon
By John Toon
10th Jul 2023 13:44

Oh dear! Someone's been on one of Mark, Reza, James or (insert name of so called pricing guru's) webinars...

Thanks (6)
Replying to johnt27:
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By CW2012
11th Jul 2023 11:11

I've seen those webinars and they drive me to distraction, there's no magic to this job, do a good job for an acceptable fee and treat your clients fairly, kick out the trouble makers and miscreants and most of all retain the decent clients, every year you do the accounts they get easier and quicker.

Thanks (10)
paddle steamer
By DJKL
10th Jul 2023 14:21

Notionally one should see charities as a public good and soften fees for them, reality is a lot of charity executives, in my personal experience, get overpaid for what they appear to do so my sympathy for them can be somewhat muted (at one time 1/3rd of our tenants were charities and they would plead poverty at rent review time whilst swanning in to work post 9.00 a.m. driving cars provided by said charity and often packing up at 4.00 pm)

I think accountants have since the 1980s/1990s delivered fairly significant cuts in fees in real terms, certainly compared with other professions . I received engagement terms on Thursday for a very small property purchase we are undertaking (bit of land , £150k) , the trainee solicitor who is doing the grunt work is quoted at >£200 per hour, the partner > £400. Now I know I will not pay this (as a retained client we tend to get fees discounted) but there are few even qualified accountants doing a routine basic v small company set of accounts receiving over £200 an hour for every hour and who are also the lowest charging staff member involved in the process.

IMHO a lot of accountants undercharge, possibly because of price pressure within an unregulated sector (Notwithstanding I do not think they should enjoy reserved status, I think others ought to be able to compete)

IMHO all professions ought to get used to it as AI will no doubt in the fullness of time press fees for compliance activities into a steep downward trajectory)

Thanks (6)
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By Hugo Fair
10th Jul 2023 14:30

The question regarding 'where do integrity & ethics lie on the priorities spectrum of a professional?' is not new - nor is the generally worsening balance specific to accountants.

It's not just the obvious (politicians and senior 'big 4' partners), it's fairly endemic throughout the senior levels of all our 'professions' (doctors, lawyers, teachers, etc) as well as those with similar power but fewer qualifications (local authority management ... and all the way on to HMRC)!

At the individual level we are each responsible for our own moral compass ... but at the societal level there are real problems (made worse by the rewards being seen as acceptable despite the widening gap between average and higher earnings).

Thanks (4)
By ireallyshouldknowthisbut
10th Jul 2023 14:38

I find being credible on fees is very important if you want to be taken seriously and for clients to come back.

We are an odd industry as repeat business is absolutely critical, and a well trained client can be dealt with in probably 1/3rd of the time as a new one of a similar size and complexity, so high client retention is key to profitability.

Fair pricing ensures repeat business. Bob Harper? remember him? Practice guru who told us we had all got is wrong, and he had the right way, and we should all be price gouging as clients are stupid. After several years of abysmal results published at Companies House, his website is no longer active, and the company dissolved. His personal results speak volumes.

Thanks (5)
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By johnthegood
10th Jul 2023 15:47

I have never been too bothered about the industry v profession thing, we are just a business like any other, providing a service and being paid for it.

I have also always taken the long term view, I still have clients that I took on when I first started 25 years ago which is exactly what I set out to do 25 years ago, the way I have done that is by providing a good service at a reasonable fee. I have always had the philosophy that I would rather have a £400 a year customer for 10 years than a one off £4000 fee (although the odd one or two of those helps each year).

Thanks (6)
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By Self-Employed and Happy
11th Jul 2023 09:22

It's really very simple, you charge based on the time you think it will take you to complete, multiplied by a risk factor, multiplied by a "don't care" factor if it's work you don't actually want.

That's it.

The ability to present ones self as belonging to a "profession" becomes difficult when ANYONE can set up and call themselves an accountant regardless of qualifications, to ACT like a profession we need the accounting bodies to protect the word accountant.

Everything else reads as though you've just watched a Go Proposal webinar.

You talk of poverty stricken widows...

Well if they are completing a tax return then they aren't as poverty stricken as most as they'd have at least sources of income (however modest)!

No current clients ever question our charges, we had 2 quotes in the last 3 years that asked us to price match and we said no, a solicitor wouldn't hesitate to charge for their time, why should a chartered accountant.

Thanks (1)
Replying to Self-Employed and Happy:
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By Liam.em
12th Jul 2023 11:50

Couldn't agree more

Thanks (0)
Richard Brewin
By Richard Brewin
11th Jul 2023 09:53

Oh my word!

Seriously, wow!

That's it then folks. Apparently we are all a bunch of money driven thieves without a thought for our clients. We need to change our ways, make even less money, give away even more of our time and expertise and spend even less time with our families, happy in the knowledge that we are being 'professional'.

Thanks (1)
Replying to Richard Brewin:
paddle steamer
By DJKL
11th Jul 2023 10:26

https://www.youtube.com/watch?v=iepNUUxVLJQ

Us accountants, descendants of........

Thanks (1)
Replying to DJKL:
Richard Brewin
By Richard Brewin
11th Jul 2023 11:37

Now, there's a theme tune to bring back childhood memories!

Thanks (1)
Replying to Richard Brewin:
paddle steamer
By DJKL
11th Jul 2023 12:31

A veritable reminder that TV choice was back then very limited (How many hours I must have spent in the 60s watching RH, the Flashing Blade etc)

Thanks (0)
By ianthetaxman
11th Jul 2023 10:49

The article does seem to paint a very poor picture of us...and whether you see what we do as a profession, trade, job, business etc. I think the majority want to provide a good service and get paid a decent fee for that service.

I appreciate that the type and level of the service will alter as will the size of the fee based on numerous factors, so each practitioner will have their own view on this, from the smaller sole trader through to the bigger national firms.

I remember an occasion probably 20 years ago when I was involved in a piece of tax planning work for a client. Something very similar had been done for another client only recently so I was able to utilise the narrative, spreadsheet etc. at a fraction of the time costs. When talking to the partner about the fee for the second client, they said it was about 'perception of value', and if we billed the first chap £500, then we should bill the second one the same, as they would still see the same benefit as the first.

Being an upright and honest profession shouldn't mean you have to give your knowledge away for free, and yet many of us will have done just that in one form or another at some point, and for various reasons that at the time seem quite acceptable.

These days, I still think about the perception of value statement, and try to combine this with how long it will take/hourly rates plus the savings/benefit that can be achieved from the work, to arrive at the quote.

There will always be someone willing to charge less to win a client but getting into a race to the bottom when it comes to fees is a slippery slope best avoided IMO.

Thanks (3)
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By Ian McTernan CTA
11th Jul 2023 12:22

It's all about valuing the advice you give based on the knowledge used to arrive at the answer.

30+ years of experience means in a lot of cases I can do the work in a fraction of the time (after checking HMRC haven't gone and changed the rules again!), but the client isn't paying me by the hour- thay are paying me for my experience and the results. I never compete on price- if someone wants cheapest, good luck to them!

I'm reminded of the old adage about a ship in dry dock where the engineer comes along, takes a look, and bangs something with his hammer, fixing the issue that had everyone stumped. Then hands over a bill for £5,000. The client says 'why are you billing me so much for 5 minutes work?' to which the engineer replies 'I'm billing you for the 30 years training and experience that led me to diagnose the fault and fix it'.

Thanks (3)
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By Dogracer
11th Jul 2023 12:46

Client’s have a choice, most fees are quoted in advance.

They can and should always see alternate quotes if the price does not appear to be value for money

We advise business to maximise profits is it wrong if any accountancy practice does the sane?

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By Crouchy
11th Jul 2023 14:27

Accountant does work and wants paying for it, what a total shocker

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By peter morgan
11th Jul 2023 23:23

Check out what an average Accountant earns compared to the national average wage. Fees across the profession are ridiculously low for the value provided. Lawyers seem to have no issue preserving their professional image whilst charging like a wounded bull.

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