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Practice Tips - charge an annual fee

15th Jul 2005
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I was talking to a sole practitioner last week, as is my habit. He was discussing various practice software packages with me as he had come to the conclusion that the time had come to upgrade the various systems he was using. Having discussed their various merits we then came to the critical bit – which was would this make him any more money?

The obvious initial answer was it would save him some time, so he might be able to take on some more work, but there was no obvious reason to see why it should of itself make him more money, especially as he bills on the basis of time expended (having always written off too much of this before he ever completes a time sheet in my opinion). On that basis, if anything, this software will cost him money and reduce his income. That was obviously not an acceptable outcome. Nor was it logical to increase all charge rates just for this one change.

The solution I suggested is simple, and works, and as he liked it, I’ll offer it more broadly. It’s this. Charge the client an annual fee for care and attention including sending chaser letters, being on your systems and for use of IT software for the preparation of their tax returns in a cost effective manner.

I used to do this to all clients when I was senior partner of a firm which prepared 800 tax returns a year. It did not matter what size the client was, on 6 April as they got the letter reminding them that they needed to prepare a return their WIP account was billed with the standing charge of about £25. And that £20,000 or so always made the April figures look quite good!

What is more, we recovered at least 90% of that WIP. Which in the case of the practitioner I was talking to would be more than enough to cover the annual costs of his new IT, and more besides. For which he was grateful.

Richard Murphy
AccountingWEB contributing editor Richard Murphy is a sole practitioner chartered accountant but was previously senior partner of a firm for 11 years. He has also been chairman, chief executive or finance director of 10 SMEs. A collection of previous articles by Richard on practice management themes is available in Practice Management Zone



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