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How to cope with fees being squeezed

28th Apr 2015
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AccountingWEB member North East Accountant brought a common modern-day issue for practitioners to the community when he shared his experience on Any Answers recently. 

Getting fees is getting more difficult, he said, quoting two examples of a prospect and a nine-year client leaving for cheaper offerings in the space of a week. 

"We are coming across this more and more and just wanted to ask the AccountingWEB community if they are experiencing the same?” they asked.

Indeed, back in 2013 AccountingWEB carried out its own analysis into the subject, and found that there was some evidence of fees being squeezed around that time. 

A lively debate ensued, with those in practice - and even an accountant-turned business owner shared their views. 

Accountants have it easier than other professions 

Jon_griffey noted that compared to a lot of other business sectors, accountancy hasn't been that affected by the internet and online offerings. 

"There are online accountants who will work for next to nothing and you will lose some clients to this and be beaten up on price by others, but I have not noticed this as a big problem.  We have always had competition," he said. 

As such, accountants have recurring fees, there are plenty of people going self-employed and so lots of work to go around and many people choose their accountants via recommendation. Therefore, he sums up, "it could be worse".

However, there is additionally much pressure on accountants to reduce feesJim100 noted. 

"I think there are pressures from all quarters now to reduce fees - online providers, Outsourcing to other countries, more local accountants (both qualified and non qualified) etc. It is going to become tougher and suspect fees will go on a downward spiral due to the increased competition," he said.

Contractors don’t just want a filing service

Some suggested that contractor clients simply want a filing service and nothing more. But sparkler disagreed. 

Indeed, they noted, the vast majority of their contractor clients are "proud" to be a company director, take their responsibilities seriously and ask intelligent questions.

Don't aim yourself at the bottom of the market, Maslins advised. And don't cave, expect that others will be cheaper. 

Some of sparkler's clients have come from online firms. "I have often been shocked at the lack of communication between the accountant and the client. They sometimes don’t have a specific person to talk to about their accounting affairs. This is not the way I work," they said. 

Online or offline, it’s how you conduct yourself

Ken Howard has also taken on clients from online firms, and been "shocked" at the poor service they have received and at "relatively high prices".

However this isn't just limited to firms that are online - it's any firm, online, offline or high street, that chooses to conduct itself that way. 

"At the end of the day, the only true difference is talking to your client by phone or email rather than talking across a desk. Everything else just depends on the firm and how they're structured rather than whether they're online or not."

"The KPMG situation" 

The news that KPMG has made a play for the small business market with its cloud offering at lower prices, has some accountants concerned. 

However, Chris Scullard noted he's not "overly worried".

"Given big four charge out rates (when I was at PwC a qualified charge out rate was £96 per hour, and that was nearly 15 years ago) clients will either get very little done for them or have it done by the most junior staff." 

He added that during his time in a Big Four environment, the attitude to small practitioners was that small clients were not worth their while. 

"If that attitude is still there KPMG probably won't be wasting their experienced, qualified staff on companies that turnover £300k. They'll be first year trainee fodder. I can only base this on my own experiences," he added. 

He added that his best clients are those he has picked up from larger firms, who were charged a lot for little. Charging them a little for a lot therefore creates loyal clients.

Losing some clients opens the door for others

Peter Saxton has a positive way of looking at clients who choose to leave for cheaper shores: "If I lose a client my attitude is that it frees up time to give service to other clients, or relax more rather than that I am losing money." 

His advice was to concentrate on the types of clients practitioners want and don't worry about the rest.

"If you are struggling to get a reasonable number of reasonable clients there must be something wrong and you have to address it," he said.

In addition, Tim Vane noted that losing clients to cheaper competitors is losing the "lowest denominators" of the pack. "These clients are only ever trouble and never appreciate what you do. And do not worry too much about your nine-year client - there is every chance he'll be back as he'll quickly appreciate that the cheaper service comes with a cost in his time and the quality of the service he receives." 

Work on your referrals 

Accounting Mutant has been in practice for 28 years, and has seen a pressure on fees with the recession. However, they note, things are "on the up now" but most of their client base is from referrals.

"I started two-and-a-half years ago on my own and now have over 250 clients. I have taken 11 clients on this week alone which is unknown in our practice. All at proper prices, so recommendation is clearly the way," they said.

Their advice is to get into networking where there is only one accountant allowed in the room, for example Business Networking International, which the member claims that more than 90% of their clients and referrals have come via this system. 

Don’t resort to undercutting

Saxton again had some sage advice on undercutting: "I see plenty of accountants doing it and it screams inexperience." 

Examining pricing methods are one way of ensuring you and your clients are clear on the level of fees expected however. 

KPEM Online said they have changed their pricing methods recently, with "great success", having increased compliance fees and clients "now starting to see true worth in what we do".

The member in question has been working with a marketing guru in a price mentoring group, which is another option to consider - enlist the help of an expert.

Local competition 

Jim100 shared some interesting insights from his local area. He identified 40 accountancy practices and 15 bookkeeping practices - all professionally qualified - within a seven-mile radius. That may sound like a lot of competition, but he disagreed.

"Apart from one company I probably charge the lowest rates to contractors; around £85 per month for everything. I am not VAT registered," he said. 

Another company charges £55 per month, and has picked up "a lot of business". They have done so, he added, through their website and marketing, plus being based in the town centre. 

While clients may not want to move, seeing the difference in prices in the same area will lead to them potentially asking for a reduction in fees at their current firm. 

"Then perhaps a compromise is reached as the client does not want to move but expects lower fees," he noted. 

"Won't we just be a filing service? With process driven software, it should not take too long to carry out and hence high fees becomes unjustified, especially when there are more new entrants coming into the area every month. Of course, they will charge at the low end to get a foothold. Prices will just spiral downwards." 

Make the service, not the price, your selling point 

3point14, an accountant-turned business owner said from his experience, accountants are "often overpriced". He explained that this is not that their fees are too high, but rather they cannot explain what the client is getting for their money.

As a previous accountant, the member can easily compute accounts and file them. 

"What I need to be sold on is the knowledge behind the system and preparation and how for instance, the spreading of capital investment may be best placed for tax purposes.

"It's not just about the hourly rate but if you ask me for £5,000 then be prepared to break that down and justify how you come up with that number. Sell me the service and I forget about the price. As my time is money, the less I have to do the more I earn elsewhere. This is the focus which wins business, not how cheaply you can crunch the numbers," he said.

Have you found a squeeze on fees? What are your views, insights and suggestions for members experiencing the same?

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