Have you ever wondered how your accountant prices up your work?
Maybe it's something you haven't given too much thought to (Really???). Or perhaps you think, well that's more or less what I expected, we usually get charged about that amount.
Or maybe you think, the poor blighter has to make a living so I trust them.
I wonder, when was the last time you questioned your accountant's bill? Are they still doing the same work for you that they did when the fees were originally agreed?
Go onto any accountant based web forum (try AccountingWEB) and you'll soon come across a question raised "How Much Should I Charge Clients?".
And so, even accountants (or let's be kind - some accountants) do not have this mystique down to a tee. And what's more - neither do I!!
You see, from my experience having worked in practice for 25 years, there is and always will be a rule of thumb approach
Clients are many splendoured things! And each client has their own business and personal characteristics. They certainly can't be pigeon holed precisely. A wily, experienced accountant will certainly be able to gage the level of work required in producing the client's requisitions, but no matter how experienced and wily that accountant may be, he or she certainly cannot ascertain how the relationship will be a fulfilling one for both parties. Will the client want to talk on the phone frequently? Will the client expect office visits? Will the client decide to leave extra work for the accountant to do because "we've already agreed our fee". Will the client not be happy dealing with junior staff? There are so many unknowns in any business relationship. And an accountant takes on a role that becomes more than just a supplier - they become a friend, a confidant, a trustee, an advisor, a port of call or even someone to blame when something unpleasant hits the fan.
So ulitmately, clients will be judged, not only on the quality of the records they forward or provide but also their requirements, personal tastes and their "hassle factor".
Many accountants proclaim - "we offer a fixed fee service". This has become envogue in the last decade or so. Clearly because clients may have become perplexed by not knowing how much they would be charged (by the traditional on the clock, hourly charge approach). But have accountants really taken the plunge here. These shrewd, finance perusers - have they gone soft or bowed to the weight of client expectation.
I believe not! I actually believe there is more scope to pad out fees when a fixed (transparent) approach is adopted. Maybe you have been unlucky enough to receive weighty solicitor bills? I know I have - many times in respect to a personal matter. But although I didn't exactly feel like I had been shopping in a discounted supermarket, I professionally scanned each bill and supporting time ledger report and begrudgingly thought, fair enough....it's what I signed up to. Of course the legal and finance professions have huge commercial similarities, but one subtle difference is that clients of accoutnats have a large degree of repeat performance services year on year. This has allowed accountants to weigh up a fixed fee approach and make it work. But who for? I see some quoted fees online such as "Our contractor package costs as little as £45 per month" and I can quickly gage the amount of work there for the accountant. I can also see the commerciality of the offering. Let's quote fees in as small a headline value as possible. Well £45 per month is £540 a year, why not quote that? Hey maybe some accountants will quote a daily rate in time (our services cost as little as 99p per day). Well, what work is performed each day for this 99p? Come to mention it, what work is performed each month for the £45? I prefer transparent pricing no matter what it is I'm buying, but let's face it, we're not buying tins of beans here. And practically all accountants will still keep a log of their time costs. What happens if they work out that a client is beiing under priced to their margins - will there be a service deterioration? (by that I mean customer care rather than a technical fall beneath best practices). Or will they have some hidden extras to bill on top of the fixed fee. Or will they see the client as being unprofitable and wish to move them on?
So although hourly rates are no longer in fashion it, the fixed fee approach is not the overwhelming ideal solution for either party and comes with pros and cons.
My advice would always be this - ask the accountant whether they are happy with the margin they are making on your job. You are all adults, you are both in business and need to earn a profit. Ask your accountant if they feel they could do more for you to save you money and if that is the case ask them how they will prove that this extra work and costs to you resulted in a benefit in the form of savings.
All in all, pricing professional work is a difficult exercise so find a good accountant with reasonable fee rates and when you've found one, work on the relationship with them as much as they will with you. You'll both get more out of it in the long run.