Starting out - how to charge?

KW17 2LN

Hello

I am planning to start working for myself (as a practising MAAT) during the next year or so, and currently interested in how people set their fees and charge their clients. I'm interested particularly in charging on a fixed price (rather than time) basis and would be extremely grateful if you could give me any pointers and wise advice.

Thankyou in advance.

Fingersan

Hi KW17 2LN

I have been working for a firm of Chartered Accountants for nearly 20 years and quoting for a job is a very difficult decision.

First and foremost, you should decide an hourly rate to charge, beit £30 or £40 per hour. Although you do not want to quote an hourly rate, it is important to bear it in mind so that if a client brings in their records and you think it would take 4 hours (half a day) to prepare their accounts and Tax Return, then you should think about charging £120 to £160 based on the above.

However, you should also consider what clients are currently paying and if you can match or better their existing accountancy fee. For instance, if a client comes to you having paid their previous accountant £300 and you think it may only take you a day (7 hours) to complete the job, then if you are charging say £30 per hour, you would in theory charge £210, but I would probably up this to £250 or £275 so to cover the cost of any incidental meetings / calls from the client during the year.

I hope this helps.

deanshepherd

Quoting for me is very easy.

I look at my fixed price list and read out the figures.

T.C.

I charge depending on how organised the bookwork is, how much information I have to chase, how easy the person is to deal with, how quickly they pay etc. If you have a basic idea of what you need to charge, then you can adjust accordingly. Good luck.

BCASL

We too offer a fixed price service, so like Dean, we also look at a list and read it out to our clients/potential clients! You will need to spend some time working out what these fixed prices should be!

Good luck for the future

burg

I charge fixed fees but don't have set brackets. I use a similar methodology to T.C.

Dean & BCASL - I would be interested to hear ho you group clients on your tables. Company type, Turnover, transactions, income sources + industry and others.

Surely the tables are rather large and complex?

deanshepherd

Mine fits on one page of A4.

I have a set price for every service I offer and there are 3 factors that can then flex the total up or down:

i) Quality of bookkeeping records;
ii) Turnover;
iii) Whether they select a sufficient number of services to qualify for one of my 'bundle' discounts.

It did take quite some time to get the figures right so that I appeal to the type of clients I want to work with and I am sure I will adjust the figures as time goes on but so far it has been a much more succesful method for me than the old time-based approach.

Clients also love the certainty this gives for which you can charge a premium.

E.g. would you rather pay a fixed fee of £120 for a service or between £100 and £150 and I will tell you the final price after the work has been done?

burg

Thanks for that Dean.

All my clients are on fixed fees and they too like the fact that they know what they are paying.

I just wondered how you bracketed everyone onto a form. I suppose I do the same I just don't have a table to which I refer, mines just in my head and my gut feeling.

Maybe if I spent some time putting my thoughts for pricing down I could come up with a 'banding table' of fixed fees.

Monsoon

burg wrote: »

I just wondered how you bracketed everyone onto a form. I suppose I do the same I just don't have a table to which I refer, mines just in my head and my gut feeling.

Maybe if I spent some time putting my thoughts for pricing down I could come up with a 'banding table' of fixed fees.

We used to do that - gut feeling. We hated it, as we felt we weren't being consistent all the time and eevn though it was an educated guess, it was still a guess, which amounts to picking a figure out of the air sometimes. I'm not criticising the apporach, more saying we aren't any good at it.

We've now devised a formula which is based around time it takes to do the job x hourly rate and so far seems to be working much better, but it's still in a trial period.

Definitely think fixed fees are the way to go. We only disclose our hourly rate when absolutely necessary and when we have no hope of guesstimating the number of hours a job will take.

deanshepherd

I actually ignore time and hourly rates altogether and use value based billing.

I try to work out which services are most valuable to clients and charge more for those irrespective of time.

For example, I charge quite a lot for incorporating a company because clients generally do not want to mess it up by doing it themselves. I point out to them that they can pay £30 to a formation agent and do it online themselves but most would rather I do it for them.

I know another firm of accountants who use this approach and have charged over £18,000 for incorporating a single business. No joke.

You need to work out the value of the work you do in the eyes of your clients. If you base everything on the time it takes to physically complete the work you ignore all the years of time it took you to acquire the knowledge in the first place. When does that time get billed?