Accountants – are you charging for time or on value? Traditionally you have charged for your services on a time basis with an hourly charge out rate and recorded your time in units. For example, some of my clients record in units of 5 minutes. As far as compliance work is concerned, this is probably the best way because the work takes the time that it takes. Besides which this probably suits your personality type, at least if you are a “typical” accountant, being very process-driven and to an extent it works for you. Although fixed fees may appear to be different, they are still really based on time, because you have done similar jobs in the past and so know roughly how long a certain type of job will take you, for example a tax return.
However, there are a number of disadvantages to this approach. Firstly, even with a robust time-recording system, it’s easy for time to not be recorded either unconsciously or just because you forgot (after all you are human), were interrupted or possibly even deliberately (let’s not go there!) Either way, I’m sure you’ll agree that it’s certainly not fool-proof.
In fact, I recently ran a workshop in how to charge what you’re worth and get it for the partners of a medium-sized accountancy practice and they all admitted that their time-recording was imperfect, particularly because of the number of interruptions they received. As their work is of an advisory nature rather than compliance, a significant part of what they do is thinking, both conscious and unconscious. Again they admitted that they hadn’t really considered all the thinking time involved. In particular unconscious thinking time, and time spent thinking outside of the office, either in the car or at home. Many of you, I’m sure, and certainly those at partner level are extremely conscientious when it comes to your clients, so you frequently don’t switch off outside of office hours. But perhaps none of this time is recorded, so you are missing out on fees. Of course, we are still focussed on charging for time here and not on value.
With the arrival of Xero Accounting Software, in the words of Bob Dylan, the times they are a-changing. The amount of compliance work will reduce and therefore those practices which want not only to survive but thrive need to focus on blue sky opportunities. It is with the advisory work where the possibility of charging value becomes easier, because it’s simple to demonstrate the value, particularly if the advice results in saving money for the client.
The Managing Partner of one of my clients told me recently that one of his Directors, who used to work for a large, well-known firm of accountants (which shall of course remain nameless), was approached by that organisation because one of their clients had a problem that they could not solve. The Director, who has 30+ years’ experience in tax, was able to solve the problem in about an hour. The result was that the client saved a whopping £100,000. Fortunately, he had the foresight to charge them based on value and not on time and accordingly invoiced £10,000. It takes understanding, communication and confidence to do this. The client was happy to pay. Good on him, I say. Had he based it on time, he would only have been able to invoice around £200.00.
The above story demonstrates that when you reach a certain level of experience or have specialist knowledge, then it becomes hard to charge hourly beyond a certain level, without severely under-valuing yourself and your expertise.
So I’m not proposing that you abandon charging for time altogether; rather that you become more conscious of the fact that there are opportunities to charge on value which may have gone unnoticed. It’s now time (no pun intended) to do things differently. I urge you to focus more on your value and less on time, wherever possible. In this way, you can educate your clients to shift from paying for your time to paying for the value of your service.
What would that shift be worth to your business?
If you have any questions in relation to this article, please contact me on 01202 743961 or 07957 672335 or visit my Contact Vanessa Page to book your complimentary True Worth Strategy Session.