Increasing annual fees: Five approaches

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Rachael Power
Community Correspondent
Sift Media
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AccountingWEB member Thomas struck a chord with other practitioners as he asked: "How do I increase my annual fees to keep pace with inflation?"

"I've had some clients now about 12 months and need to think about increasing the fees to at least keep pace with inflation," he said. "How do I do this? Do I need to justify the increase? I'm only thinking 5%."

Nervous about scaring clients off, Thomas asked members the best way of increasing fees, notifying them about the change and whether or not he needed to justify it.

Members who had advice for Thomas included chairman of the Tax Advice Network, Mark Lee, who advised accountants to consider fee increases due to inflation when quoting them in the first place.

Register with AccountingWEB for free to read the rest of the article, which includes:

  1. Include facility for inflationary fee increases in engagement letter terms
  2. Use RPI
  3. Change from standing orders (SO) to direct debits (DD)
  4. Increase year-on-year in small chunks
  5. Become more efficient with a USP

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11th Jan 2013 19:17

My approach

I am fixed price with 75% standing orders.  I like standing orders as part of the difference between me and most locals is that the client is in full control of fees, I doubt if my main local competitors have 97% client retention or 97% client satisfaction never mind both.  This does not mean I am cheap, I have a good living.

1.  I uplift prices every 2 years.  I am halfway through the latest increase.

2.  This was 10%.

3.  It was underpinned by a contractual guarantee that the new price was fixed for 2 years unless RPI averaged over 6% in any six month period within that.

4.  Standing order clients were given 2 months' notice to change the SO to the new level, or the full 10% increase would then be billed in one lump payable on 30 days.  As a result 90% manage to change the SO in time.  The other 10% mostly turn out to be bank muck-ups, so far I have billed just 2 clients out of 40 or 50 SO clients who've had the 10% letter.


Thanks (3)
15th Jan 2013 10:39

Under normal circumstances my experience is that a client barely seems to notice a price increase based on inflation.

My clients almost all prefer not to pay monthly when I offer a choice.

Unusually, (very unsually) I increased my fee by 60% last year.  Yes, 60%.  Just 5 of approx 250 clients decided to go elsewhere.  I did this coz I am within 10 years of retiring and decided that I would like to treat myself to a better income for the last few years.

I continue to get positive feedback ... but who knows what will happen next year ..

Thanks (3)
15th Jan 2013 11:38

Engagement letter

Signed by client at outset states that our fees are based on staff charge out rates which are reviewed in April and October.

We give the option of fixed fees for any service to be negotiated each time, with the caveat that unexpected additional work will be discussed and approved before being done and charged for.

Very few take up this offer past the first year.

We are not tied into annual recurring fixed fees.

Only the smallest of our clients have exactly the same requirement from us year on year, and we aim to charge the same fee two years running followed by a small increase. This is because usually we use these types of client for training staff and it represents the average time for a competent member of staff to complete the work.

Only lost one client because of fees in past five/ six years. Director of limited company who refused to keep his own bookkeeping or complete his own VAT returns. He was experiencing a downturn in business so found someone cheaper. His prerogative. New accountant contacted us later as they did not even know how to file VAT returns online.

They get what they pay for.

Why should any client subsidise another or not pay us for our time? - thats not fair and we would not be able to stay in business.

Most of our clients see us as an essential part of their business because they trust us.


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