more work = more pay.
by ed mendlowitz
call me before you do anything: the art of accounting
most of my clients, large and small, have always been on fixed annual fees, payable monthly.
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some also allowed for year-end adjustments based on time charges. at the end of each year we usually increased the fees across the board by 5 to 10 percent, depending on circumstances.
sometimes it became necessary to increase a fee by 30 to 40 percent because of stealth scope creep and when the regular increase wasn’t going to work. the scope increased over a period of years for reasons not under our or the client’s control. these included such items as
- gaap or bank reporting changes,
- the requirement to consolidate entities,
- changes in pension plan reporting,
- more complex tax returns,
- children’s simple returns becoming more involved when they got “real jobs” or
- the client investing in hedge funds with 30-page k-1s and multistate reporting.
note that special one-time-only work is not included here because these would be outside the realm of regular work and would be billed separately.
in those extreme cases the fees had to be brought up to what they needed to be. our process was to determine what the fee should be going forward, document the changes over the previous five or so years to track the increased work, and meet with each owner or decision maker one on one. in one situation i flew to florida to meet with one of the owners. this was very serious for us because we needed to get the requested increase, did not want to negotiate it, and did not want to lose the client or have them upset with the increase. this hasn’t occurred too often, but i am pleased to report that we did get the increase almost every time.
p.s.: human nature being what it is, we included some services in the new fee that had previously been an extra.