The accountant's guide: How to negotiate fees

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istock_BrianAJackson

In the dim and distant past, many clients seemed happy enough to accept whatever fees accountants wished to charge them. In these commercially savvy days when every penny counts and both businesses and individuals seem keener than ever to get bargains, that is rarely the case.

Even where a fee has been agreed in advance, there are quite often extras that you will expect to recover and the client will not be willing to pay without a fight. This could be anything from expenses to additional costs for work that you did not anticipate at the start but the client believes was included in the initial quote.

Clearly, when the amount that you wish to charge has not been agreed in advance, even where a methodology for calculating them has, there is even greater room for dispute.

Short-term pain for long-term gain

The first step might be to consider your firm’s philosophy. If a valued client suggests that rather than the £20,000 you wish to charge them they would like to stick with the originally agreed figure of £17,000, you have a number of choices.

  1. Stick to your guns and demand the higher figure whatever happens
  2. Concede and accept the lower figure
  3. Try to negotiate somewhere in between

If you do the first of these then you risk damaging the long-term relationship with your client. If nothing else, they are likely to be suspicious about your charging basis in future and could challenge every fee for quite some time. They will also badmouth you to any friends who might need an accountant.

The second choice is low risk and should protect your business from the chance of losing a significant client. However, you might get a reputation as a pushover and end up backing down in every future fee negotiation. There is also the chance that a suspicious client might assume that you were trying it on with the higher fee.

Therefore trying the third option can be the best solution in the long run. A very polite suggestion that your client might wish to split the difference in order to please all parties is often accepted. At the worst, you can always negotiate to an amount in between or eventually back down but at least you will maintain self-respect and show the client a little backbone.

Alternatively, you could decide that the only clients worth working for are those who will pay any fee demanded. This is an interesting business model and in a booming market might be the best way forward.

Negotiating tips

Looking back at the article on communication, there are a number of different ways of approaching what can be one of your most important roles.

After all, managing to get an extra £1,500 with minimal effort is clearly very good news for both you and your practice.

When you have done valuable work, tell the client that this is the case. Often, they (and sometimes your colleagues) have a nasty tendency to ignore this important point.

Trying to negotiate by e-mail can become tedious very quickly. It is likely to lead to a long chain, which can become angry and unpleasant if the client does not agree with your point of view.

Picking up the telephone is much better, even if this can get the heart racing. Most clients will be willing to have a sensible conversation and it is much easier to gauge their thoughts by listening to the tone of voice. This gives you a chance to press or back down depending upon the situation.

For larger sums and more important clients, a face-to-face meeting gives you even greater opportunity to reach an optimum position.

Strangely, I frequently come away from conversations about fees with additional work. Any opportunity to speak to a client can elicit a referral or an additional project, even something that starts out as a fee dispute.

Finally, if you are losing the battle and end up in a head-to-head dispute, it can be a good idea to step back and let somebody else take over the battle. This can often clear the air and speed up a conclusion.

Give and take

You should always bear in mind the desired outcome when entering into a fee negotiation. Ideally, you could treat it as a kind of chess game. Sometimes it is necessary to sacrifice pawns or even knights to win.

It may be worth writing off expenses or those murky admin fees in order to get the actual fee paid. Alternatively, perhaps you could agree to a discount on the next fee, which at least ties the client into using your firm going forward.

If none of these works then taking a 10% discount is unlikely to break the business but it might make the client happy and ensure that the next fee is accepted without question or they give you a referral.

From bitter experience, when an auditor offers to discount or give away future tax work, that might well please the client but is unlikely to make any friends within the practice.

Fun

As a final observation, some of my most rewarding moments in the profession have come at the end of satisfactory discussions in which fees have been argued and agreed, and the client has obtained what they see as a good result.

Bringing in additional fees, extra work and keeping a client happy at the same time is a kind of Nirvana for me.

About Philip Fisher

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By mkowl
20th Feb 2018 10:44

Shotgun !

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20th Feb 2018 11:03

Don't think I would like to have a client that big.
I never have any trouble with my fees. Maybe that's because my clients trust me.

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20th Feb 2018 15:38

"There are quite often extras that you will expect to recover and the client will not be willing to pay without a fight."

Why? If you quoted a fixed-fee for a fixed-scope, fixed-time project that offers both parties a handsome RoI, the client will be happy to pay the fee, possibly up-front, and you can adopt the stance of "If it's within the scope, it's within the price".

And as for "Try to negotiate somewhere in between", that's not negotiating - that's haggling!

As the article eventually suggests, you need to "give and take" - That's to say if the client wants you to give them a lower price you have to take something away. If you don't know what to take away, ask them, "What would you like me to leave out in order to consider offering you a lower price?"

David Winch
Sales & Marketing Consultant
Cambridge

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21st Feb 2018 11:12

I have set my hourly rate at the price I want. That's the start and the end of it - it really is.

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22nd Feb 2018 14:47

You need to be very clear with clients what is included within your quote and what is not. Having a talk about the fees before getting into a conflict situation is also a good idea.

David - Haggling Negotiating You say tomaato I say tom8to!

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22nd Feb 2018 14:47

You need to be very clear with clients what is included within your quote and what is not. Having a talk about the fees before getting into a conflict situation is also a good idea.

David - Haggling Negotiating You say tomaato I say tom8to!

Thanks (0)