Is it time to adopt fixed-fee billing in your accounting firm?

From Australia Stacey Leeke  for Tax & Accounting Insight writes: Is your accounting firm finally ready to wave goodbye to the beloved billable hour? If so, what are the alternatives to hourly billing? What are the pros and cons of different models? And what challenges can you expect when transitioning?

It’s no secret that clients are becoming increasingly demanding about price certainty and transparency. The traditional time-based billing model has long been a limiting factor for accounting practices in meeting those demands. However, despite all the talk about the pros of switching to a value-based billing model, the reality has been slow to take. In fact, 71.5 per cent of firms surveyed by BRW still charge clients by the hour.

That conservative 71.5 per cent can’t be blamed for their unwillingness to stray from the comforts of traditional time-based billing. There are costs and upheavals in a business associated with changing such ingrained systems. However, proponents of value-based pricing claim a plethora of benefits for both clients and fee earners, which have all been well publicised over the last few years.

What are the alternatives?

Value-based billing is essentially the implementation of upfront agreed-upon prices that take account of the complexity of the client, the tasks, the expertise offered by the firm and the particulars of a specific engagement.

At its simplest, value-based pricing may incorporate the adoption of an a la carte menu of fixed fee tasks or accounting packages. An increasingly common feature of firms is also a flat monthly rate for the continued provision of accounting services within a defined scope.

Can value-based billing work for all areas of accounting?

Trevor Clark, director at Clark & Associates and Focus Growth Strategies, says there’s no reason why accountants shouldn’t price their services in the same value-based manner as other industries.

“We should be able to say, ‘I know this will take me 10 hours and that’s my aim so I’m going to charge accordingly’,” Clark says.

However, some would argue that it’s impossible to accurately predetermine fees for complex, document-heavy projects without reference to time.

Matthew Tol, a chartered accountant and principal who transitioned his firm MTA Optima to fixed pricing in 2007, disagrees.

“There’s no limit to what the basic premise of value-based accounting can be applied, provided the job can be broken down into stages or outcomes, even if they are contingent.”

Transitioning tips and traps

Transitioning to value-based billing is by no means an overnight event. It will take serious planning and commitment, so be aware of these tips and traps. [snip].   The article continues at Tax & Accounting Insight, click here to continue reading...