Managing your client relationships in the right way means you’ll have the energy to give your...
Clients shouldn’t pay the same price forever. And they probably don’t expect to. It’s up to you to make sure the fee they're paying is right for the work and expertise you’re providing by regularly re-pricing accounting clients.
re-pricing clients, especially long-term clients, is often met with hesitation. Perhaps you think they can’t afford it, or other firms are charging less.
Re-pricing is important because billing at the right level means you’ll have the energy to give your clients your best attention, build your practice to what you’ve envisioned, realise an enjoyable work/life balance, and help you move up the advisory chain. There are a number of reasons why existing clients need to be re-priced.
Why Re-Price Clients
- Perhaps they weren’t correctly priced in the first place.
- Or the scope of their required work has changed.
For example, it now requires more transactions. When we buy more bananas from the fruit shop, we expect to pay more for our bananas, so why not for accounting?
- ATO changes mean more work.
Tax change events, like the ATO’s Div7A changes, can make the work you do more difficult and time-consuming.
- Perhaps their work has become more complex,
- and of course, your costs will be higher, with rent and wages always going up.
Re-pricing is not something to be feared.
“I have never, ever, ever seen a firm that’s re-priced their client base and ended up worse off than they were before.” ~ David Boyar, ChangeGPS CEO
How to Re-Price Accounting Clients
A great way to stay on top of client requirements and to make sure you’re billing at the right level is to review each relevant job after it has been completed. Set a materiality limit, for example all jobs over $1,000, and spend no longer than three minutes on the review.
- Consider the level of difficulty of this job.
- Ask if the fee was the correct price to cover your expenses.
- Determine if the customer is low or high maintenance.
ChangeGPS contains a Post Job Review to help you analyse your clients and ensure they’re being priced accurately.
Managers should look over the reviews for all jobs once a month to provide a benchmark across your portfolio of clients.
These reviews also allow you to be strategic about your clients. By severing relationships that are turning or have turned toxic, you’ll keep a good portfolio of clients, 20% of whom will likely provide 80% of your profits. Plus, removing the unpleasant clients will allow you more time to focus on your existing clients and provide them with more and better services.
Then, use the current fee scale for new clients to determine the billing for your existing clients.
The fee scale should be profitable and scalable for your business, and consider:
- The number of
- Monthly transactions,
- Bank accounts,
- Monthly invoices issued, and
- The quality of the bookkeeping,
- The complexity of the job, and
- The frequency of:
- reporting, and
- bank reconciliations.
ChangeGPS contains a fee schedule so you can be sure you’re billing at the right level.
When communicating the re-pricing with your clients, be fully transparent, list all entities and actions with their fees and explain the value using the VPP method. Do this by outlining the value you provide to the client, tell them the plan for getting this value and the work you’ll need to do to accomplish it, and then share the price with them. (For more on the VPP method, see this blog.)
Be upfront with clients that your costs have gone up. It can help to have a standard CPI increase client engagement letter to communicate this.
Focus your communications on the increase in client transactions, not the hours worked, but also explain how their fees can go up or down depending on the number of transactions. This helps to prove that you’re trustworthy and further your connection.
Always try to explain the increases in your client’s language.
For example, an explanation to a doctor could go something like this:
Our quote for your work has gone up by about 15% this year. Let me explain why. Your practice has increased the amount of work that you are doing, and your revenue has gone up significantly.
This means we need to look at a larger number of transactions. Just so you understand, it would be the equivalent of you spending 30 minutes on every 15-minute consultation. If that happened, you wouldn’t leave work until 11 o’clock at night!
ChangeGPS contains CPI increase email templates and re-pricing role plays to help you and your team prepare for client engagement.
When to Re-Price Your Clients
Don’t fall into the procrastination trap, and expect to get this all done in June. For one thing, you’re already busy and don’t need more work at this time... or a reason not to do it.
Instead, make sure you review jobs regularly – you wouldn’t want to find out after twelve months that you’ve been undercharging for the last six months.
Build updating your clients about standard CPI increases into your systems and make it the first item in your Annual Financial Statements + Tax Returns job checklists.
Tackle the engagement in batches, work first on those who prepay accounting fees before June 30 and aim to communicate with them in June. For the rest, plan to spend the second two weeks in July communicating with them once the end of the financial year rush is over.
And always use all communications as an opportunity to educate your clients on the value you’re providing.
Like to learn more about re-pricing accounting clients or better accounting billing in general? Watch this on-demand webinar with ChangeGPS CEO David Boyar and Founder Timothy Munro.
Information that matters, just like that.
Get the latest updates on frontline accounting topics, trends and tools.
Value. Plan. Price.
Workpapers serve as the backbone of the year-end process. They consolidate data organisation,...