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Using outsourcing to price engagements and assignments effectively

1st Mar 2024
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Initor Global UK provides premium outsourced services to UK accountants and businesses.

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Many accountants find the most challenging part of their profession is pricing services to achieve the best possible profit margin while keeping clients satisfied. The ongoing discussions with clients about fees and their expectations about service levels can be exhausting. Some accountants prefer to maintain certain engagements with clients where they make no margin at all rather than have the difficult conversation about increasing fees or disengagement.

Initor Global UK | outsource accounting | pricing
Initor Global UK

We have been discussing with Initor Global customers how they are using outsourcing to support different pricing models and sustain competitive fees. 

What makes pricing accountancy services so challenging?

Accountants provide a range of services which require different skills and resources to deliver. Developments in accounting software, such as the automation of bank reconciliations, bankfeed and the impact of regulatory changes such as Making Tax Digital mean many of the recurring, compliance-based tasks typically completed by an accountant have changed significantly. External factors such as the difficulties in recruiting new talent and increased competition mean that pricing strategies can quickly become out of date.

Further challenges arise where accountants have a diverse client base. At one end of the pricing scale, accountants find some clients are comfortable maintaining their own accounting records and require services only at key points in the accounting period or tax year. At the other end of the scale, many clients are simply not interested in the mechanics of accounting and prefer the accountant to complete all bookkeeping, accounts preparation and tax filing on a recurring basis. Regardless of the services involved, accountants need to ensure they have appropriately qualified and skilled people available to deliver and meet client needs.

With such wide client expectations and service requirements, and the impact of a fast-changing external environment, it is little wonder accountants struggle to price services effectively.

Which pricing models can be used?

Many accountants remain committed to a timesheet-based approach to pricing. They provide an estimate of the cost of a service to the client and bill the amount based on hours recorded by individuals when the assignment is completed. The fee per hour is based on the skills and qualifications of accountants and other professionals based on a fixed schedule of rates.

While this may be a comfortable approach for accountants, it does present some risks. Not least where a client challenges the number of hours to complete an assignment and the obvious time lag between incurring the cost of delivering the service and billing upon completion.

The modern accountant now looks at different pricing models and takes a proportion of the fee when an assignment commences. This has the advantage of preserving cash flow and ensuring clients are fully engaged in the progress of an assignment. For recurring tasks such as bookkeeping, payroll or accounts preparation, many accountants now prefer a subscription model based on a fixed payment each month to cover the fees for all services provided. 

While using different pricing models may appear complex, automating the billing and collection of fees will ensure the amount a client pays accurately reflects the services provided. Outsourcing services to an offshore provider can help drive down costs and sustain a competitive pricing model.

Which pricing model is best for my Practice?

Accountants will need to determine a pricing model based on the type of clients they serve and the assignments which need to be delivered. They will also need to understand the costs of delivering services and the margin of profit they are seeking.

Accountants will also need an effective time recording system, to track the progress of work and the number of hours billed by individual accountants and identify other relevant costs such as accounting software or cloud-data storage.

Some pricing models will need to be tested against the market and close competitors. The subscription pricing model is commonly used by accountants where they have high numbers of similar clients. These clients tend to be small businesses who are comfortable shopping round for the best deal or introductory offer and do not mind changing accountants regularly. Other accountants prefer a more 'value' based approach to pricing, preparing fees based on the nature of the client and the value they place on the accountants’ work.  In specific circumstances, some accountants will use a contingent fee approach where the fee is calculated based on an agreed outcome resulting from an accountant's work. There are strict ethical rules for accountants working on a contingent fee basis, and they may have to commit significant resources to completing an assignment with the timing of the fee payment remaining uncertain.

Understanding client needs is essential when determining an effective pricing model. Getting to know clients’ financial performance and growth plans will ensure fees can be tailored based on a suitable model. High growth clients with an appetite for risk will require a different pricing model to an owner managed small business.

How outsourcing can help find the right pricing model

Typically, the cost of outsourcing work is 50% less than a UK resource, securing immediate reductions in the overall cost base. Accountants find that outsourcing recurring tasks such as bookkeeping, payroll or accounts preparation allows then to set more competitive fees and sustain them for longer.

If you are an accountant looking to outsource services, increase margins and improve the quality of services provided to clients, you can book a video call with one of Initor Global’s expert advisors using this link or send an email to [email protected]. You can also read our detailed guide to pricing services.