Practitioners split on hiking fees for new clientsby
Taking on a new client comes with the cost of extra work, but should the client bear the financial cost of this? The battle lines were drawn on Any Answers over this debate, with one side justifying higher fees for new clients, while others argued that this approach will only deter clients.
The first year of a new client can be hard and time consuming, requiring a lot more effort and resources. The additional burden of training the client comes at a cost to the accountant, which is why some commenters on Any Answers believe these first year clients should face a heavier financial cost.
Weighing up the pros and cons of charging clients a one off fee for the first year to cover the costs of the extra hand-holding, AccountingWEB regular SouthCoastAcc took to AccountingWEB's Any Answers forum.
“I find I spend around double the number of hours on a client in the first year compared to following years, due to onboarding, questions from the client, getting them into line/refining the processes etc. Especially with the clients who are new to business, tax returns and so on," commented the reader.
Some of the AccountingWEB community felt charging more in the first year when taking on a new client was justified.
FrankTax wrote: “For those who are new in business I think it's perfectly reasonable to charge them for setting up and training for cloud software for example.”
AccountingWEB regular Ireallyshouldknowthisbut echoed this: “I charge for set up/training as typically a new company will chew up three times the work as an existing one and it's well worth the time to train people properly from day one.”
They also make sure that when charging extra, there is transparency between them and the client. “I dont charge anywhere near the full time. It's probably about half and I make it clear I am doing that,” they added.
Accountantccole reiterated this opinion. “I warn our clients to expect 50% extra in year one, but this generally includes a lot of initial one off cross border planning, establishing residency and a lot of ours are billed on an hourly basis with a rough estimate of expected annual fees (which we aim to keep to),” they said.
They all emphasised that clear communication of costs is important to manage client expectations effectively.
While some argue that increasing the fee will fairly compensate for this effort, others in the profession believe it could deter potential clients.
Some of the AccountingWEB community advised SouthCoastAcc to focus on the long-term prospects of a new client. Mr Hankey wrote: “There is the potential to have a fee generating client for many years. That carrot is worth more than worrying about the extra time spent in the first year.”
Johnthegood agreed: “It's a question of percentages. Take year one on the chin, do a good job and you will have a very high percentage being your bag for life.”
In a highly competitive market, a client’s decision may come down to fees. Up against other firms giving discounts or low-balling quotes in order to attract clients, the AccountingWEB community warned against hiking fees.
“Trying to charge that to the client when others don't may well lead to them not joining you in the first place,” advised regular commenter Maslins.
Meanwhile, Carolynne offered a pragmatic solution. “We explain that if preparing the work takes longer than expected there will be an additional time charge, but the fee for the accounts/tax return etc, are usually discounted in year one.”
AccountingWEB put the debate to some industry leaders to get their take on charging extra for new clients.
Reza Hooda, mentor, coach and founder of Capture Accounting, told AccountingWEB: “I don’t believe we should be charging a one-off fee for onboarding,” adding, “It is a cost of doing business.”
Hooda advised practitioners to not be too concerned about the initial year's revenue from a new client and instead be focused on establishing a long-term relationship with that client. “We often forget the lifetime value of a client,” he said.
Della Hudson, speaker, author and business coach for Minerva Accountants, revealed that she had never charged an extra fee. She said: “It’s all just a cost of doing business as far as I’m concerned. We charge good fees and try to look after our clients well in return.”
Hudson also mentioned the possibility of deterring new clients with an increased fee and spoke about her experience of losing a potential client because of discounts. “I recently ‘lost’ a prospect to an accountant who provides a discount for the first year. They have assured me that they’ll transfer to me next year!”
What are your thoughts? Do you opt for added fees, stick with the status quo, or throw in a discount? Let us know in the comments below.