Most visitors landing on this page are potential clients seeking information on how much accountants charge. If that’s you, I’m sorry but this page is not for you.
We’ve written this article for accountants who want to benefit from an alternative view of charging clients more for their services.
Why is this? It’s because there has been significant competition in recent years within the sector leading to constant downward price pressure.
If you run a small accounting practice and the previous enjoyment and satisfaction you may have derived from being your own boss is rapidly dwindling because you feel you’re working too hard for too little reward, welcome (and I’m sorry you’re feeling this way).
We’re Hindsight and we’ve spent the last 18 months building a Xero plug-in specifically designed to give you and your staff much more time and space to do what you do better and charge a fair price for it.
The perception of value
To understand what you should be charging your clients, you need to be able to understand what value is in the mind of your clients.
Without potential clients perceiving value in your services, you’re just one accountant among thousands of others and you’ll end up competing solely on price.
Your current clients – the companies paying you a direct debit every month – will be more likely to leave you if they can’t perceive any added value in your services compared to your competitors’ services.
But what do clients want to read on your website and hear from you in person or over the phone when they’re choosing an accountant?
How the accounting market has changed
The clients of today are different from the clients of 10 years ago.
In the last decade, there has been the following two significant changes:
- the move to make payment to accountants by monthly direct debit and
- the widespread take-up of online bookkeeping and accounting platforms like Xero.
Although they may seem like two distinctly separate things, they’re actually very closely related.
Prior to online bookkeeping and accounting platforms, it’s fair to say that most accountants had a strong bookkeeping element to their service.
That bookkeeping element would be charged in one of two ways depending on the clients behaviour. You would either:
- make a charge per hour on top of your normal accounting fees because the client sent in their invoices and receipts once or twice a year by post for you and your team to sort out or
- you would charge them a fixed amount per month for a bookkeeper to visit your client’s premises, input and classify all the invoices and receipts onto a spreadsheet making sure that what was on the spreadsheet reconciled with what was in the bank account.
Many accountants decided to drop bookkeeping support entirely or significantly as they were encouraged by the online accounting packages to sell their software to clients.
It made sense even though, in a way, it severed a major part of the connection they previously had with their clients through being involved in the ongoing updating of financial records.
These new online packages were designed to shift the burden of regularly bookkeeping from you and your staff to the client.
This removal of workload from your practice might free up 20-40 hours’ worth of work per client every year – time you could instead spend expanding the number of clients you had on your books.
And that’s what many accountants did. They believed that they could replace the 20-40 hours’ worth of work they were going to save per client thanks to online bookkeeping platforms by signing up one or two more clients.
When accountants were selling their services to clients, they promised faithfully and honestly that theirs was not only an accounting firm but a consulting and advice firm too.
They weren’t there to just do the books – they were going to be a partner on their client’s journey until the time they achieved what they considered personal and professional financial success thanks to the regular supply of information they got from Xero, Quickbooks, and the like.
The penny began to drop
As existing and future clients were transitioned to online bookkeeping platforms, a number of problems began to emerge.
First, clients weren’t actually very good in the main at using the platforms.
They didn’t appreciate the importance of allocating every invoice they received and paid correctly – but why should they? It had never been their responsibility before and, if push came to shove, the accountant would just do it anyway as part of their monthly fee.
If a client took in payments via debit or credit card, it was difficult for them to figure out which invoices had been transferred into their account via the daily settlement from their merchant provider and mark them as such on their online accounting platform.
Bank reconciliation is difficult for accountants but, for many clients, the process was baffling.
A combination of these factors and others meant that the software was not used correctly or often enough.
Clients began to struggle to see the value in their online bookkeeping packages as well as wondering why you recommended to them in the first place.
Second, accountants became frustrated with the software because they were more designed for small business owners and not accountants.
Because many took the opportunity to increase the number of clients they served, they didn’t have the time required, particularly at certain points during the year, to make sure that their clients were using the software properly.
Within a few months and on a seeming continuing basis since, accountants found that, as they prepared clients’ year ends and period ends, the volume of work was daunting because of the remedial repairs which had to be made to each client’s bookkeeping records.
While that remedial work was less than the remedial work needed by the type of client who brought their invoices and receipts in once or twice a year in plastic bags, they had two to three times the number of customers to deal with than before.
Small accounting practices soon entered a constant survival mode which came at great cost to:
- clients who were oversold the level of service and insight they could expect,
- members of staff whose workloads were so high that, when they came into the office each morning, they felt crushed by the pressure, and
- owners whose dreams of providing the service they wanted to clients were unrealistic given the workload.
Clients, particularly those who had been in business 10 or more years, complain about the quality of their accountants much more than they did a decade or more ago – they’ve noticed the change and it’s not been for the better.
70% of SME owners would not recommend their accountant to other business owners – 39% of millennials are unhappy and this is the next generation of fee-paying clients.
Over a quarter said they are likely to switch accountants, according to research by Xero.
No-one is winning in this situation.
I know – I sold my old accountancy practice because I hit many of the same brick walls as you might have done.
But I still have a love and affection for the industry so I spent the following 18 months creating a plug-in to Xero with the features I would have really wanted as a small accountancy practice owner.
Discovering your true price point
Let’s start this discussion from a base point.
When I was running my own small accountancy practice, I became slightly obsessed by the number of clients I served as I considered it a mark of the success of what I was doing.
I was wrong.
If you don’t have the internal infrastructure and working procedures to cope, 100 clients is a challenge and 500 clients is a nightmare.
Every new client you add does pay money into your bank account but they also represent an incremental magnification of the problems you and your staff are already going through.
If I had my time over, I’d concentrate on providing the best possible service and adding the most value to 100 customers for £500 a month rather than providing a poor service and adding very little value to 500 customers for £100 a month.
So how do you get from one point to the other?
First, only take on the customers you want to take on. Do you get on with the other person? In 6 months’ time, would you and your staff enjoy speaking to them on the phone?
Second, charge your services out per transaction and not by anticipated time taken or turnover.
One business turning over £1,000,000 a year might issue 100 invoices at an average order value of £10,000 whereas another turning over the same amount might make 10,000 sales at £100 a time.
Set a base price per transaction that you’re not willing to go under and stick to it. If they want a Rolls Royce for the price of a Lada, send them respectfully elsewhere.
Third, view your clients’ online bookkeeping systems as an early warning system and not an enemy.
One aspect we’ve built into Hindsight is the functionality to log into every clients’ Xero account each morning.
We have introduced generic warning flags as well as the ability to create individual warning flags on the plug-in to let you know if a client’s bank account balance is too low, their debt too high, it’s taking too long for their customers to pay them, and more.
Four, share your knowledge and spread out responsibilities among your staff.
This will vary their working day and it’ll provide you with an opportunity for short daily one-to-one training sessions as you explain the business significance behind the numbers on the screen.
With degrees costing £50,000 or more, the barrier to entry to becoming an accountant has never been higher so channel your junior staff’s desire to learn and to justify their investment in themselves by giving them a grounding in dealing with clients.
Better still, by logging into clients’ accounts regularly either via Hindsight or manually, colleagues will be able to tell who is struggling to use the system and they then have the chance to talk them through what they need to be doing.
If the client still doesn’t follow through, there’s an opportunity to earn extra fees for your practice by selling your bookkeeping service.
By making sure clients’ records are up to date, this will greatly reduce pressure points at year end, period end, and at Self Assessment time.
Five, try to really sell your colleagues’ expertise and experience to your clients so that they don’t feel as if you’re too important or busy to talk to them when there’s an issue.
Other than calling clients to teach them how to use their online bookkeeping better, you and your colleagues should find some reason to get in touch at least once a quarter – good by email but even better by phone.
Every interaction makes your service and your input more vital to the client as well as creating a clearer picture in your mind and your colleagues’ mind what would make each individual client happier.
Building a team and exploiting the information provided to you by clients during conversations and via their online bookkeeping platforms gives you the opportunity to create added value.
You and your team will be seen as a partner and a consigliere to your clients – the burden of responsibility will no longer solely be borne by you as principal.
The level of dissatisfaction with most accountants right now is at a peak level and there is an opportunity to win higher value clients, share responsibility with newly-motivated and
–engaged staff, and remove some of the pressure from yourself and your team.
Selling additional services
The inverse law of sales is true in every profession.
It roughly states that the lower the order value, the more likely the client is to be an arse if things go wrong.
That’s because their money is a lot tighter in general and they need to see the value in your services much more than higher-spending clients.
By serving a smaller range of clients better and faster, you’ll be able to use the trust they’ve acquired in you to sell higher-value ad hoc services like business plan preparation, IHT planning, R&D tax credits, patent box credits, and more.
And you’ll have a much better idea of which clients need what because of the constant communication you and your staff have with them.
Find out more
I’d really appreciate the opportunity to speak with you to find out more about your practice, the types of client you serve, and what you want for your practice and for yourself in the coming 3-5 years.
My team and I have created Hindsight with the sole purpose of providing the infrastructure a practice needs to operate at its most efficient and to better utilise the time and talents of you and your staff.
To find out more, please click here to book an appointment time or email us here.