Fees increase unavoidable as inflation bites
As the UK economy battles with surging inflation, accountants have no option other than to finally increase their fees.
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What planet do these people live on?
I quote - “That will automatically help you to increase your price because that £1,000 a year that you were charging, you can easily then change that to £120 to £550 a month and get an increase just because you are quoting monthly.”
£1,000 to £6,600 per year!!!
I'm sure the client won't notice the extra £5,600 that they are paying because they are paying it monthly!
I had to check the date on my calendar to make sure it wasn't the 1st of April!
Thank you. I was intending to write much the same but I thought it must be the heat which had caused such nonsense to be written. In the cool of this morning the article is still there and it alone has raised my temperature.
The 'solutions' are just soundbites that don't bear close inspection.
"Because that's all pricing is: it's taking a share of the value we create" = the classic method of stating the obvious as if that on its own solved anything.
But whose version of value (client's or yours) and how do you quantify it let alone agree it?
It's actually ar$e-about-face ... common sense tells you that the correct order is:
* Ask clients (or prospects) what they don't get but need and value;
* Work out if that's something you want to offer (not just costs come into this);
* Check whether such an offering will please both parties' sense of value.
I was just thinking the same thing, but hey what do I know, our practice is tiny, only 2.5 clients
Tom
ps all numbers on this post are measurements in '000s
We are accountants. Some of us are clinging to what we were raised to believe were professional standards.
The ‘land and expand’ approach works well for management consultants and software companies who care less about their reputations.
Where we can add value I’m sure we will do so but the primary purpose should always be to ensure the clients financial health.
If I smell profiteering I tend to run away from it and advise my clients to do the same.
Back in the real world, I guess we are a fairly typical firm - for the last 20 years if we have seen that we can offer something extra to a client that will be useful to them we have quoted for it and they have either chosen to use that service or not. Does that make us a "Virtual FD", or are we making huge profits from "advisory", no, we have just done our job as accountants.
And is anyone still billing annually anymore? we introduced monthly over 10 years ago.
"is anyone still billing annually anymore?"
Well, yes.
For those clients where I just complete a tax return plus, possibly, their accounts, it is the most appropriate way to invoice someone. It seems so to me anyway; although I fully accept that many others don't see it that way.
"But as inflation is expected to peak at 11% this October, Phelan realised that it’s time accountants addressed their own business"
So lets just add more fuel to that particular fire, shall we ?
I think the premise of the article is correct, accountants do need to raise their fees, they have costs like every other business and those are rising - staff costs, software, insurance, prof subs, have all increased and will continue to do so.......whether the ways suggested are good is another matter
Accountants will need to raise fees- not least because MTDIT will incur huge amounts of extra costs.
The question is then: do I raise prices by inflation this year (and how many of my clients can afford it) or do I really hit them hard when MTDIT hits.
I'll be raising my monthly fees on 1 February next year, probably by 10%. But then I've never been c heap so I'll factor in if someone is struggling rather than just push them away. I also don't have staff so can afford the luxury of waiting- many others will need to push up prices to fund the staff pay increases that will be demanded.
I tried to get my non VAT return clients on monthly billing from April this year..... VAT clients are billed quarterly.
3 replied 'yes' to monthly payments - the rest didnt reply to the offer.
New clients = yes - they are OK with monthly. The current/more long standing clients = no.
"I tried to get my non VAT return clients on monthly billing from April this year"
Monthly billing, or a fixed monthly payment?
Not sure the profession is the one that should offer this virtual FD service.
I effectively do two FD roles for two entities, one three days a week (property investment group) the other about 80 hours a year (commercial property agents). I get paid for both via payroll. If I were inclined I might take on another couple of roles, there are people out there who would bite (though I do have to watch my non competition clause in my main contract)
The two are in related fields, I have industry experience in the property industry over the last 25 years, there is the rub, unless the party offering the FD service has something value added to offer what is his/her purpose? Platitudes about cashflows/management accounts are all well and good but really that is not where an FD adds value, value is more added in the boardroom when evaluating projects/investments etc and often that value arises from genuine hands on experience, effectively knowing the right questions to ask.
Practice might offer an FD service in niche industries where they really understand that business but frankly if they scatter their offering over myriad industries, where they have little relevant experience, then really not sure what they actually bring to the table.
“There's certainly been a realisation and an awareness from practice owners that they need to look at their pricing, because many of them have realised that they're underpriced and ended up doing a lot more work for clients during the pandemic without charging for it. They can't sustain those levels of fees those clients were on.”
That's nothing to do with underpricing that's doing work for FREE!! Those practices should have charged. No practice can continue working for FREE but this has nothing to do with underpricing your services.
"To do this, he advised Any Answers Live viewers to move to a value or monthly billing model. “That will automatically help you to increase your price because that £1,000 a year that you were charging, you can easily then change that to £120 to £550 a month and get an increase just because you are quoting monthly.”
Complete nonsense in my view!
Having been in the game for 40 years I would say that hiking the price suddenly will mean a high risk of losing a client. The article is written like we just get one Fee and that's it. No allowance is made for the fact the work comes back year after year and over time a relationship develop and looking greedy at a time of inflation does not sit well with clients. Also often you offer extra value by suggesting tax planning and management accounts etc. general feeling is the client assumes you are trying to get an extra Fee. Cautious fee increases is the way to do it.
I agree, our approach has always been to increase annually according to inflation, this year we will send out something like this "Although it is normally our policy to increase according to the rates of inflation, this year is exceptional. Although you will have seen alarmist predictions of 11% we have not yet seen that in our own costs and therefore we are taking a cautious approach and increasing this year by 5%"
A shortage of experienced people, together with inflation, have seen staff costs increase across the profession. We are not alone in this as many industries are experiencing the same.
Combine this with other rising costs such as power, fuel, software etc then fee increases are inevitable if the proprietor's income is to remain the same, even if workflow efficiencies are improved. I doubt if efficiencies can cope with a 11% inflation rate, even in the poorest run practice.
If your own income suffers due to lack of action I question whether giving businesses advice is appropriate.
With regard to offering additional services and increasing fees my 30 years experience of practice has taught me that clients' are not stupid. They won't pay for anything they don't want. That doesn't mean you cannot increase fees by giving them something that do do see value in. Giving them the choice is the key but also explaining to them the benefits they will get, because that is what is most important to them. It could be more money for them or more time. Don't assume that they won't buy from you, which is a mistake I made for quite a few years. In fact, I learnt a while ago that many clients (not all) rely on recommendations made. We are the experts in the field which is why the come to us in the first place.
It's all common sense really!
There is also the actual issue of what happens when you get the fees up to £50k to £60k they quickly take the work in house or poach your staff to work in house and you are left with a £60k whole to fill after creating a good client for someone else.
I find with the virtual FD role you need an upper cap on what you do as typically when clients ask "can you just do this" you are effectively an employee.
True- I am in my current role as in 1997 my current employer's in house accountant retired, he suggested me to the directors (he used to phone me with technical questions, we were their auditors) and the firm I was with then sold my services for a day a week. Roll on to 1999 and that was up to 2.5 days a week, the fee being charged each month was by then far more than my employment cost at which point I got headhunted as an employee and the rest is history.
There is also the actual issue of what happens when you get the fees up to £50k to £60k they quickly take the work in house or poach your staff to work in house and you are left with a £60k whole to fill after creating a good client for someone else.
I find with the virtual FD role you need an upper cap on what you do as typically when clients ask "can you just do this" you are effectively an employee.
the change to 'subscription' culture....slowly but surely tying down people so they can't escape (see IRIS), that's not about value, for some we still like to think we offer a service befitting the clients requirements.....