What is wrong with your accountancy practice – part 2 of 5

What is wrong with your accountancy practice – part 2 of 5

This is the second in a series of 5 blogs where I’m going to focus on what I consider the 5 key areas where accountants make mistakes which have a significant negative impact on their practice.

How do I know what these problems are?

Because I have faced them in my practice.

But by tackling them head on and overcoming them I’ve seen massive gains.

These problems hold accountants back, stifle development of their businesses, mean they don’t earn enough, work too many hours and don’t spend enough time doing the activities they enjoy with the people they care about.

That could be simple things like walking the dog, having lunch mid-week with their partner, picking the kids up from school, taking a day off when they ‘feel like it’.

Or bigger goals – paying the mortgage off in 5 years, taking six weeks holiday every year or buying a holiday home in the south of France.

Running your own accountancy practice means you have the perfect opportunity to achieve these goals and much more.

But first you need to get your accountancy practice running the way you want it too.

 

Problem number two – Pricing

The earlier you get your pricing right the better.

You need to work out what you want to charge and not be influenced by other factors – how much you need the work, whether you like the client, what mood you’re in.

 

Try and remove emotion from it.

Easier said than done!

I was guilty in the early days, as are many others, of being desperate to win work and pricing low to win that work. Early on, when meeting with a prospect, I would usually ask for a copy of their previous year’s accounts and would turn straight to the detailed P&L page to see what the accountancy fees were. I’d then discount this by 10% to hopefully win the work.

What a terrible idea!

I’d often get this horrendously wrong – far too low. It then creates a situation where you resent doing the work because you’re not being paid enough, and it can be difficult going back to a client and saying you got it wrong and need to increase your fees.

Quite quickly I worked out what my fee levels should be for different types of work and sizes of business. I started to provide fee quotes off the top of my head based on a gut feel of the work required. This worked ok, but there was the occasional cock-up.

 

Menu Style Pricing

Then I produced a menu style price list, it was basic and did an alright job. I started going into meetings with my laminated price list which I referred to when discussing fees, not perfect but a step up from quoting off the top of my head.

I then moved on to an excel spreadsheet which calculated fees based on answers to a number of questions – turnover, number of bookkeeping transactions, number of employees and so on. This worked well and I often still refer to this.

I then developed my own app which produced a fee proposal and generated a letter of engagement. The theory here was good but in practice it didn’t work well enough, it was glitchy and difficult to update.

 

Go Proposal

I then moved on to Go Proposal which I have found great. The ability to create a proposal in front of a client, with complete transparency of what work you will do and the fees you will charge.

Ultimately you have to be confident that you are worth the fees you are charging. If you are happy with the fees you are charging and the client is happy with the fees they’re paying, and the level of service they’re receiving, you’ve got it right.

And, you need to work on the basis that your prices reflect the value you provide. If you start to compete on price and not level of service, you’ll end up with picky, price sensitive clients who don’t value what you do for them.

 

Value

I’m not advocating value pricing. Very few accountants use value pricing correctly. Most who say they do, actually use it for fixed fee pricing.

The true concept of value pricing is difficult to understand, difficult to communicate effectively to clients and difficult to train your team to use.

Pricing should be simple to do and transparent, no hidden costs for an agreed level of services.

 

Scope Creep

That last sentence “…no hidden costs for an agreed level of services.”

That works both ways.

You make it clear to clients what services are included for an agreed fee.

Work that falls outside of the agreed services should be charged for.

Too many accountants don’t make the service agreement clear and add in extra services for free.

The bookkeeping isn’t finished, so you finish it off before you prepare the year end accounts, even though it isn’t included in your service agreement.

You help a client with a forecast for a business loan.

You do a calculation to work out whether it’s more tax efficient to buy a car for a director through the company or personally.

You complete a mortgage application certificate.

These are examples of additional services which should be charged for.

The rule I follow is that simple queries are included for free. Anything which I can’t answer in less than 10 minutes and which requires additional research will be charged for.

 

What would a builder do?

You wouldn’t expect a builder not to charge for putting an extra window in an extension, or a painter for painting an extra wall. So, make sure you charge for additional work.

Often our clients expect to pay for this, I often tell a client there’s an additional fee and the response is “yes, that’s fine” or “I expected to pay extra for that”.

Don’t be shy. If you don’t charge extra for additional work it’s your problem, not your client’s.

If this persists, you’ll start to resent it and it will sour the relationship with your clients.

As a means of tracking this, set up an extra revenue code in your accounts software for ‘extras’ or ‘additional services’ and see how much additional revenue you receive over a 3, 6 or 12 month period.

Do this properly and you’ll be very surprised at the difference it makes.

 

Which leads nicely on to the next point I’ll cover – the right type of clients.

 

If you’re ready to start or are already running your own accountancy practice, here are 5 ways I can help you run the practice you want, the way you want:

1.      Get in touch and arrange a free 30-minute discovery call.

2.      Read my e-book about how I transformed my practice.

3.      Attend one of our free Mastermind Events.

4.      Join one of our Mastermind Groups.

5.      Work with me on a 1-2-1 basis.