The world has changed since the days when clients had complete faith in their accountants and the value of the services provided. In principle, as long as we didn’t take advantage, those of us running practices could increase fees on an annual basis without the risk of protest or, much worse, departure.
Somewhere along the way, cynicism entered the market accompanied by much greater competition. In addition, along with every other business, we were obliged to accept that the internet has created something much closer to a perfect market, where buyers can discover exactly how much a specific product costs from every supplier that they might wish to use and also contact our competitors much more easily.
While I love this principle when I wish to negotiate a contract for PCs or mobile phones, it is less helpful when clients demand reductions in fees.
This problem has been compounded by the spreading of tender processes, whether formal or otherwise, from the largest multinationals to everybody down to one or two of my clients seeking personal tax services.
Broadly, the work that we do can be divided into two categories. For audits and other compliance type services, our product is little different to anyone else’s. As a result, nowadays we tend to charge on a fixed fee basis, which is quick and easy but not necessarily as lucrative as we’d like.
On the other hand, many of us provide high quality advisory services for which we should be able to charge the earth, since there may well be very little competition in a particular market. Even in this valuable area, clients now seem to believe that they can negotiate a low fixed fee regardless of the work involved.
In some cases that is valid. For example, some liquidations might fall into this category. On the other hand, if you look at a long, drawn-out negotiation with HMRC that could save the client millions, it is ridiculous to suggest that the costs can be scoped out before the start of the process.
In this tricky climate, and given memories of a recession that we may just about be climbing out of 10 years after the event, I have little doubt that most of us are currently struggling to maximise profits by increasing fees.
Even so, I would like to propose that with a few bank holidays in the offing, this might be a good time to step back from the day-to-day running of your practice and consider fee levels.
I know that is stating the blindingly obvious but if you can increase fees by 5% in the coming year, this will flow straight down to the bottom-line and profitability will go up by a much higher percentage.
It is rarely easy to put up prices for fixed fee work but, at the very least, you should be asking your clients whether they would countenance a modest uplift. I’m generally surprised at how often this kind of proposal is accepted.
When it comes to the high ticket work, sometimes we (and our colleagues) undervalue what is on offer. Once again, if you can increase charge out rates, or fixed fees as the case may be, for this work by 5%-10% then in a couple of years’ time you might just be able to afford the navy blue Porsche or a holiday home in the Dordogne that you have had your eyes on for ages.
I shall be fascinated to know readers views. Are you currently trying to increase fees or do you fear the loss of clients and find even a freeze the cause for celebration?
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.