The title of this article may sound extreme – but it is true. And here’s why…
I have spent 15 years researching the UK accounting profession, learning from thousands of accountants, dispelling the myths and gathering the facts. My findings haven’t always made comfortable reading. But they have been hailed as “invaluable”, “inspiring and “brilliant” by the likes of David Maister, Ron Baker and ICAEW President Mark Spofforth respectively.
Please let me be crystal clear though. I am categorically not telling you all of that to impress you. Instead, I am saying it solely to impress upon you the basis for the profoundly important statement of fact that I am about to make.
And here it is…
Most accountants don’t charge enough. And not charging enough is the cause of almost every major problem they face.
Three damaging compromises you must avoid
Not charging enough inevitably leads to one or more of three types of extremely harmful compromises:
- Financial compromises: Either the practitioner settles for earning less, which means that they and their family’s financial security and prospects are compromised and harmed.
- Personal compromises: The practitioner attempts to rectify matters by working longer hours and doing more of the work himself, rather than paying others to do it – which compromises and harms his life-work balance, the time he is able to spend with his family, and perhaps even his health.
- Service compromises: The practitioner cuts corners on service in order to keep things “within budget” – compromising and harming the interests of his clients
And, as you will see later, the first of these alone will probably steal £225,000 from you if you don’t do something about it straight away.
IMPORTANT NOTE: The good news is that at the end of this article I will also point you to some free training specifically designed to prevent you losing out in this way.
Sadly, the evidence suggests that UK practitioners are being forced to make all three of these compromises. As a result not only are they failing to achieve anything like excellence, but they, their families and their clients are all losing out very substantially. For example:
1. Financial compromises evidence – Ongoing benchmarking research by The Accountants Club suggests that over half of all practicing accountants are making what economists would regard as losses (i.e. their notional profits are less than the full arm’s length market salary they would have to pay to someone as good as them to do their job). Their 2011 research also suggests that 92% are not happy with their results. Meanwhile, 2012 research by the Chartered Accountants Benevolent Association (‘CABA’) found that 61% of accountants are worried about their financial future.
2. Personal compromises evidence – 2010 research by CABA found that 82% of accountants suffer from stress, 77% think they work too many hours, and 71% say that their life-work balance is a problem.
3. Service compromises evidence – 2010 research by CCH found that 36% of clients are not highly satisfied with the tax service they get from their accountants. UK200 Group and Clydesdale Bank research from 2008 suggests that 90% of clients don’t believe their accountant is saving them as much tax as they should. And 2011 research by the Accountants Club found that over 90% of firms recognise the need to “substantially improve” client service.
Ours is a great profession, filled with honourable people who work hard and want to do the very best for their clients.
But charging too little means that there simply isn’t always enough time in the budget to do things properly. So corners often need to be cut in order to stay within budget.
Where corners are being cut
In my experience the corners are not generally cut on the things we actually do for clients. Where corners are cut tends to be on the things that we should be doing for customers, but aren’t.
For example, despite claiming to be proactive in their marketing literature, most of the accountants I talk to admit they aren’t anywhere near as proactive as they should be with advising on:
- The full tax savings to be made from incorporating, capitalising goodwill, and drawing down loan accounts
- The full range of profit extraction options from a company
- Other more advanced tax planning – such as Patent Box, R&D credits and capital allowance reclaims
- Benchmarking their clients against the rest of their industry
- Profit and cashflow improvement
- Identifying and measuring the right Key Performance Indicators
- Retirement planning
- NB: These are merely examples. There are many other types of advice that accountants admit they are not truly proactive with. Buy I am sure you get the idea.
In this way, despite their best intentions, sadly many accountants fall very far short of delivering true service excellence.
And, as a consequence, they also miss out on all the extra fees (and respect) they could be earning from helping clients more fully in the types of areas described above.
It also explains why, in a major 2011 study by The Accountants Club, practitioners said that in 42% of all the new clients they take on they find omissions – i.e. things that should have been done by the previous accountants, but weren’t actually done. Even more shockingly, over a third of all these omissions were described by the new accountant as “major”.
For the good of the profession, their clients, their firms and their families, accountants must start getting much better at pricing.
Some pricing tips that will really help
Research shows that successful firms recognise that the only sustainable way to provide a premium service is to charge a premium fee.
The most successful firms understand that clients hate surprise bills, and so rarely use timesheets for billing purposes. They also understand that, to clients, every bill is a value bill, since the client will not be happy unless it represents good value. So, wherever possible they use value pricing to make it crystal clear that the value far exceeds the fee. And where value pricing is not possible, they use pricing software to generate fixed prices that are acceptable to the client, and fixed price agreements to formalise the arrangement.
They also use Extra Work Orders to ensure that extra work is translated into extra fees.
And they collect most of their fees by direct debit, often by instalments and usually in advance of completing the work.
Two facts that will shake you to the core
FACT 1: No matter what you previously thought, there is categorically no such thing as “the market price” for accountancy services. If there were, everybody would be charging that same price. And yet all (and I really do mean ALL) the evidence shows that, even in the same town, different firms charge different prices. So prices are a choice. They are your choice. The better you are at making those pricing choices, the more you will gain. And the worse you are at those pricing choices, the more you will lose.
FACT 2: Most of the accountants I work with have been able to increase their prices by 20% without losing any significant number of clients. And that even applies to those who used to believe that their prices were already high. Even after allowing for some client losses, for most accountants that probably equates to extra profits of at least £45,000 per partner per year. And over the next five years that adds up to at least £225,000 extra per partner.
On the other hand, if you don’t act on this article, every partner in your firm will lose that £225,000. So inaction will cost you and your family dearly.
The best way to start
The fastest, easiest and safest way to start is by tapping into the huge body of evidence that already exists so that you can replicate what has already been proven to work, and can avoid the things that don’t work.
That is precisely why I am inviting you to a “Proactivity” training day. Thanks to generous sponsorship the day won’t cost you a single penny, since you will be able to attend as my VIP guest. And during the day I will:
- Show you the research-proven ways to avoid losing your £225,000
- Reveal the practical steps you can do to price much more profitably – even when you think your clients won’t pay a single penny more
- Explain how you can be proactive in ways that clients really value – so that they gladly buy more of your services, and gladly pay you more for them
- Give you all the practical insights, guidance and shortcuts you need to make it all easier than ever before
- Show you how to get a further 5 months of practical guidance, support and training that won’t cost you a single penny if you don’t want it to
So if you don’t want to lose £225,000, please attend as my VIP guest by clicking here.[Image courtesy of ScottChan/FreeDigitalPhotos.net]