here’s what you’re looking for: august j. aquila

daily timesheets, change orders and other ways to ease your load.

by august j. aquila
price it right: how to value accounting services

is the phrase “effective billing philosophy” an oxymoron? i’m beginning to believe that it is. analysis of the results of current billing and collection procedures and policies reveals that, for the most part, they aren’t working very well.

more: get clients to accept your new pricing philosophy | getting partners to accept a new pricing philosophy | ethics question: commissions and contingencies | how competitors drive pricing | what we know about pricing strategies | when hourly billing hurts profits
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the fact is, they have not worked well for decades. while it is true that most firms have some sort of billing procedure and some even have a billing philosophy that is taught to each new biller, the fact is they are seldom followed. hence, very few firms have an effective billing and collection philosophy.
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a client who does not contribute to your bottom line is not a client.

by august j. aquila

once your partners are sold on the new pricing philosophy, you will need to communicate it to your clients. there are five ways to get clients to understand and accept the new pricing methods. each of these methods is discussed below.

more: getting partners to accept a new pricing philosophy | when to use 11 alternative pricing methods | make the value curve work for you | how to leverage demand in your pricing | make the most of your marketing mix
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believe that clients will accept a new pricing method: if you don’t believe it, you can be sure that your clients won’t either. it is not unusual for physicians, stockbrokers and attorneys to change billing methods. actually, most of your clients will understand what you are doing if you clearly communicate with them. there is a truism that good client relationships are based on trust. the clients trust that you will do the right thing for them. if they lack this trust, no matter what pricing method you employ, you will have problems with your client.
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they have to be on board before clients.

by august j. aquila

once you have decided to adopt an alternative pricing philosophy, what do you do next? changing your firm’s pricing philosophy is really a three-step process.

more: when to use 11 alternative pricing methods | 12 subjective factors for pricing your next engagement | how utility and value affect pricing | the four phases of service life | marketing orientation is what firms need
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first, you need to consider several factors before suggesting a change. second, you need to get your partners to agree that it is a good idea, and third, you need to educate your clients so that they accept and understand the new approach. the steps are not easy, but they are possible. and, remember, change does not occur overnight.

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plus why.

by august j. aquila

there are many ways to price professional services. alternative pricing methods in the legal profession have received much more attention than in the accounting profession. in fact, entire publications have been issued by the american bar association on this particular topic.

more: 12 subjective factors for pricing your next engagement | ethics question: commissions and contingencies | how competitors drive pricing | what we know about pricing strategies | when hourly billing hurts profits
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i am aware of at least 14 different approaches to billing that attorneys can use under different sets of circumstances. obviously, each method has advantages and disadvantages as well as marketing and operational implications. i maintain that several of these methods can be used by accountants and consultants in accounting firms when pricing their services.
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standard rates too often leave you short.

by august j. aquila

accountants face only two major restrictions in determining their fees – the restriction against contingency fees under certain circumstances and the taking of commissions or referral fees. we have also seen that for the most part, accountants bill their time based on a cost-plus method.

more: ethics question: commissions and contingencies | make the value curve work for you | how to leverage demand in your pricing | make the most of your marketing mix
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we don’t have to go far to find a source that suggests “that no business can survive and grow in the marketplace unless it is profit-oriented and motivated,” and “time charges at standard rates should only be the starting point for determining the amount to be billed. the real criteria is the value of the service to clients.” the source for these words of wisdom is none other than the aicpa management of an accounting practice handbook. the handbook goes on to say that “standard rates should not represent a maximum that can be billed for services; rather they should represent a minimum.”
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follow the standards.

by august j. aquila

in the old days you could go into a shoe store and purchase sneakers or gym shoes. nowadays, there are tennis shoes, running shoes, cross trainers, aerobic shoes, basketball shoes, soccer shoes and the list goes on and on.

more: make the value curve work for you | how utility and value affect pricing | the four phases of service life | marketing orientation is what firms need
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perhaps the billable hour paradigm soon will go the way of the gym shoe. accountants need to realize that in pricing their services, one pricing method will no longer do. as with athletic shoes, accounting and consulting services can be priced in many different ways.
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does your position match client perception?

by august j. aquila

there is a completely different way of looking at value and it is tied into the type of accounting or consulting work that is available in any given market and the type of accounting or consulting work that your firm provides. thirty-plus years ago william c. cobb wrote “the value curve and the folly of billing-rate pricing,” providing a great deal of insight into the concept of pricing and value. many of the ideas that follow are based on cobb’s article.

more: how competitors drive pricing | how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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in discussing legal services, cobb notes that sophisticated clients do not tie benefits to hours. rather, there are certain types of services that have a significant impact on the client’s business. the key words here are “sophisticated” and “impact.”
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eight kinds of utility and four perceptions of value.

by august j. aquila

if indeed we believe the phrase “perception is reality,” then it is the client’s perception that is the only reality. ultimately, only a client can determine the value of your service, that is, the fee he or she is willing to pay. if the client perceives that he or she has received a benefit there will be some perceived value attached to the service.

more: how competitors drive pricing | how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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consciously or unconsciously, the client’s determination of the correct fee for a service is related to two concepts: utility and value. let’s look at these two concepts and how they apply to setting prices.
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you need to know the four types of competition.

by august j. aquila

intensive price competition in most professional service industries is now a way of life, from hotels to airlines, from car rentals to telecommunications and from law firms to cpa firms.

more: how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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an important factor affecting a cpa firm’s pricing policies is competition. as clients and prospects become more educated about cpa firms in their market, more sophisticated about the services offered, and more cost-conscious, pricing becomes more important and more firms stress the price of their services, especially in competitive request-for-proposal situations. read more →

implementing service differentiation, direct sales and promotion.

by august j. aquila

economists define demand as a schedule of the various amounts of an item (a good or service) that buyers will purchase at different price ranges during a given time period. according to the theory of price elasticity of demand, there is an inverse relationship between price and the quantity of an item bought. in other words, as the price of a service decreases, the quantity demanded increases and as the price of a service increases, the quantity demanded decreases.

more: the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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it’s very difficult for professional service firms to increase demand by offering a special pricing. for example, if a law firm offered a discount divorce, would happily married couples look for a divorce, or if an accountant offered a lower price for an irs tax examination, would people who did not receive a notice be at all interested?. in short, it has been difficult for most cpa firms to accurately estimate the demand for their services.
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