are you providing the value they expect?
by ed mendlowitz
call me before you do anything: the art of accounting
pricing, billing and collecting fees for services are how accountants earn their livings.
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one time, one of my fellow partners at withumsmith+brown, peter weitsen, billed a client for a lengthy phone call and a followup memo, and the client complained, saying that he did not realize he would have to pay for the work he did.
peter replied, “that’s how i make my living!” the client understood and paid the bill.
there seem to be many ways clients are charged for the work we do. and the value to the client is usually perceived differently than by the cpa.
i also have seen that the value to the client is always greater before the work is done than after, yet most accountants determine the fee and present the bill afterward. sometimes they even reduce it (before presenting it) because they think it is too high, only to have the client complain about the “high” bill.
many accountants charge by the hour and don’t know what the fee will be until the work is completed and time calculated, with the corresponding rates for each person who worked on the assignment.
i have been in business a long time, and with the exception of some rare instances, never had a client tell me they wanted to buy x number of hours. what they do tell me is that they want to buy a solution to a problem or relief from a compliance matter. they don’t buy the hours; they buy the solution, yet they are charged by the hour.
a colleague, ron baker, developed an industry within professional services in which a cpa (or any other professional) and client decide before the job starts
- what the value is to the client,
- what work is needed and
- the price and terms of the engagement.
before any work is started, the client knows what it will cost. many cpas i know think this is crazy because how do they know how much time it will take? well, baker says it doesn’t matter. what does matter is the value of what you are delivering.
if you cannot make money that way, then maybe you are in the wrong business.
two books i can recommend on this topic are baker’s “implementing value pricing” (published by wiley) and david cottle’s “bill what you’re worth” (published by the aicpa’s cpa2biz unit).
many years before ron baker, i started performing services for clients. mainly it was moonlighting because i had a day job. everything i did was priced beforehand (otherwise i would not have gotten the job). i figured what the value was to the client and used as a guide what my boss would charge if it were his client and came up with a number that was acceptable to the client and me. at that point i had no overhead and everything i made went into my pocket, so i did well.
i never kept track of my time – it didn’t matter. what i did keep track of was whether i was delivering value to the client and i always made sure of that by doing a little something extra – a midyear phone call or a pre-year-end projection, or a heads up about a change in the tax laws.
today, there is much controversy over whether value pricing is a good method, or whether accountants should stick to the hourly billing model. it is not so simple, but i do know one thing for sure: every time a client gets a bill, they consider the value they received in exchange for their cost. accountants
must consider this too, and make sure they provide the value.