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Scope creep 3: The four types of scope creep
In the third instalment of his four-part series, Mark Wickersham explores four different types of scope creep are and how to spot them before they become a problem.
You can check out the first part of this series, ‘What is scope creep?’, here.
You can check out the second part, ‘When to deal with scope creep’, here.
There are four different types of scope creep…
The unexpected problem
When you first scoped out the project to work out a price, you may not have asked the right questions. As a result, unexpected problems may have cropped up that you haven’t factored into your workload.
As hard as you try to cover everything with your questions, there will be times when you forget to ask a specific question or didn’t think of it until it was too late.
For example, I was once working on the annual financial statements for a client with a small group of companies. This client had a few inter-company accounts with which he would trade between the companies. Of course, every transaction should be reflected equally in both companies, but in reality, they never balance properly.
I never thought to ask about the use of inter-company accounts at the start of the project. It was a nightmare to sort it all out and reconcile everything. Inevitably, I ended up going way over budget and made a loss on the job.
Unexpected problems will always come up – the important thing is to learn from them and prepare for them.
If there are a few common problems that you know tend to typically arise, make a list of them. Think of what problems you could have prevented if you had just asked the client a few questions at the start of the project.
Inter-company accounts always seem to create problems, so identify if this is a potential issue and build it into your price.
Other examples of unexpected problems include mistakes made by third parties (such as the tax authorities), corrupt data supplied by the client and changes in legislation impacting on the project.
The unfulfilled promise
You scoped the project out correctly, but the client misinformed you, or they haven’t delivered on something they promised they would do. This causes you extra work that you didn’t plan for.
It was probably not the client’s intention to mislead you – it’s more likely they didn’t understand the extent of their problems.
You may be scoping out a clean-up job by asking the client a series of questions. The client might tell you that their books and records are in excellent condition, but when you get around to looking at them yourself you realize they are actually a mess.
It may also be that the client promised to get some information to you by a certain time in a certain format, but they don’t deliver on that promise. That causes you to have to take that on yourself which is more work than you intended.
You will need to become aware of these scope creep issues and have measures in place to cover you so that you never make a loss on a job.
Examples of the unfulfilled promise include the client not meeting an agreed deadline or not delivering the information as promised.
Something happens that you couldn’t have seen coming when you scoped out the project. The project extension is no one’s fault because neither you nor the client could predict it.
Perhaps the business grows over the course of the project. Perhaps you priced bookkeeping work, and six months down the line the business doubled in size and there were more transactions. Perhaps you priced a payroll job, and the business thrived and started to take on more employees.
As the business volume changes, the scope of the work is bigger, and the needs of the business become different.
This is great news because the business is growing, and you are helping that to happen!
But you need to reevaluate your prices and your engagement to stay in profit. As the scope changes, your price should also change to reflect that.
You should at the absolute minimum revisit your prices once a year, sometimes more frequently as businesses grow and change.
Examples of project extensions include increasing employee numbers when doing payroll, increasing number of transactions when doing bookkeeping and a startup business growing faster than expected.
You start some work, but during the course of the project the client asks you to do something else. You don’t want to say no and upset your client, so you just go ahead and do the extra work for free, when really it should have been priced separately.
A client might ask you to do something completely irrelevant to the work you are currently doing for them, seeing as you already have access to all of their books and records. Earlier I mentioned the example of the Mortgage Reference Letter.
It seems such a small task, so we justify doing it by telling ourselves that it will only take a few hours, and we don’t want to upset the client.
But these small tasks start to add up. I’ve seen firms throw away £10,000 or more in profit every year because of these small free tasks.
The real reason most accounting professionals don’t price these tasks though, is that they simply don’t know how…
About a third of accounting professionals don’t charge for setting their clients up on a cloud accounting system, such as Xero or QBO. Yet, some of my students are getting over £1,000 for doing this job because they are using value pricing.
This is the kind of money you are missing out on when you do these tasks for free.
In the final part of this series, we will look at how you should be dealing with scope creep up front with your clients to manage their expectations and ensure you never end up making a loss on your projects again.
If you have found this useful and want to learn more about value pricing, marketing and business strategy, I run a free live training session online every month with a different topic chosen by you. I also take Q&A at the end to answer your burning questions live. Click here to register and I will send you an invitation to the next session.
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Mark Wickersham FCA is a Chartered Accountant and public speaker. He is well known for being an excellent profit improvement expert in the accounting community.
Mark is also a widely published author on practice issues. In May 2011 his first book, “Effective Pricing for Accountants”, was a number 1 Amazon bestseller.
In 2015 Mark...