Hidden costs?

Aaron C Rescue

I have been providing a bookeeping service for a local company. On the grapevine I have found out that the practise who complete their year end Financial Statements now want to undercut my book keeping services (I get £12 an hour - so it makes me wonder just how low they are going!)

The year end was completed for the end of September, and the accounts were accepted in December. I am now at the stage where I am about to use the Trial balance provided by the practise, and enter in the the invoices from October onwards for the next VAT quarter.

Do I have to give them my computerised records? Or can I simply provide a print off the full VAT report showing which invoices were included?

Also can anyone provide any clues as to what additional charges they are likely to use to clawback what they have undercut? As I struggle to believe that this extra £40 odd quid a week extra can possibly be a profitable area for this very large local practise.

T.C.

I would provide them with basic print-off only. You will never stop people trying to undercut you, but if the company are happy with your service, they may well decide to stay with him.....or maybe return to you later.

deanshepherd

Chalk it up to 'you win some, you lose some'. I wouldn't advise making life difficult for the new accountant or your client if and when they make a switch. There is nothing to be gained from doing so.

It could even have been suggested by your client. I have clients ask me 'surely it would be cheaper/more convenient/better to have everything done in-house?' but I generally say no, it's better to have a bookkeeper do the bookkeeping and an accounting doing the er.. accounting!

This scenario works both ways. I lost a couple of clients to a bookkeeper that I used to recommend. Needless to say I have not recommended any clients to her since. I guess it must be tempting when you can see how much the other party charges.

On the flip side, I have a number of mutual clients with a very good bookkeeper from these forums and wouldn't dream of taking any clients from her as I am sure she wouldn't from me.

My advice: try contacting a few local (small) accountants and say you want to build up rapport with them so you have a friendly local firm you can recommend to your clients for the tax work, and that you are also available to do bookkeeping for any clients that they perhaps do not want to do. You will eventually find a mutually beneficial relationship.

T.C.

Totally agree!

JodieR

deanshepherd wrote: »

This scenario works both ways. I lost a couple of clients to a bookkeeper that I used to recommend. Needless to say I have not recommended any clients to her since. I guess it must be tempting when you can see how much the other party charges.

It's such a tricky scenario this - I've got a good working relationship with a local accountant - we have many mutual clients who I'm happy to do bookkeeping/VAT/payroll for and then he prepares the final accounts, but one such client has a small Ltd Co (really just her) and doesn't make much money at all and her affairs are very straightforward. I know I'm perfectly capable of preparing her accounts and I genuinely can't think of any reason that she's better off having this accountant prepare them. She did hint a few months ago that she'd be happy for me to just do everything for her, but I made some excuse mainly because I couldn't face writing a clearence letter to him! As you say Dean, it will probaly turn him against me and sour our relationship and end up being way more trouble than it's worth - but what is the correct moral decision to make - surely I should be more loyal to a client than to another accountant?

And then I've had a letter from another accountant (who I've got one mutual client with) offering me I think it was a 20% cut of their fee income every year if I arrange for them to do the final accounts for any of my bookkeeping clients, but that makes me feel very weird and I can't see any clients being comfortable with that arrangement!!

deanshepherd

Remember the most important business you act for is your own. I find many accountants (myself included to some degree) undervalue the service they provide and are uncomfortable with profiting from the work they do. This often prevents them from making good business decisions. Forming mutually beneficial alliances with other professionals IS a good business decision.

JodieR wrote: »

As you say Dean, it will probaly turn him against me and sour our relationship and end up being way more trouble than it's worth - but what is the correct moral decision to make - surely I should be more loyal to a client than to another accountant?

I think the bigger issue is that you think the accountants set of accounts are worth more to the client than your own, otherwise why would you consider undercutting? If you were not concerned about maintaining the relationship with the accountant then you should say to your client "Look, I do your bookkeeping, I know your business inside and out, I have a much closer working relationship with you than your existing accountant and I believe I can offer you a better service. However, this comes at a price, so you would be paying me slightly more than you currently pay your accountant. Obviously I am more than happy to continue the status quo but if you ever feel like bringing all your affairs under the same roof then you know where I am."

At the very least that approach would make clear to the client that you are also a professional producing quality work and not the 'cheap' option she may see you as.

Of course if you do want to maintain a good relationship with the accountant then simply tell the client that you don't want to affect that good working relationship as you have other mutual clients. The client will understand. Do, however, remember to ask yourself how many referrals you get from the accountant and make sure the relationship is not just one way.

And then I've had a letter from another accountant (who I've got one mutual client with) offering me I think it was a 20% cut of their fee income every year if I arrange for them to do the final accounts for any of my bookkeeping clients, but that makes me feel very weird and I can't see any clients being comfortable with that arrangement!!

Sounds like a good offer. The only moral/professional issue is whether you know the quality of this guys work and are happy to vouch for it to clients. Why should you not get a referral fee? I give all my clients a referral fee for new business they bring in, staff too. In fact, you could even go to your other accountant (particularly if the relationship is one way) and tell him about the offer. You could take the line that you would rather continue to refer work to him but would like some recompense in return. Leave the ball in his court for a suggestion. You'll soon found out how 'valued' your relationship with him is.

JodieR

deanshepherd wrote: »

Remember the most important business you act for is your own. I find many accountants (myself included to some degree) undervalue the service they provide and are uncomfortable with profiting from the work they do. This often prevents them from making good business decisions.

I totally see where you're coming from here, you're right - the hippy in me is very uncomfortable charging perhaps what I 'could'. The accountant in question is a chartered accountant running a high-street practice, he has employees to pay and understanderbly wants to earn more than what I do. I'm so happy that I get to work from home, that I get to see lots of my daughter growing up and I'm happy earning probably a quarter of what he takes home at the end of the day.
I wouldn't dream of charging this client as much as or more than the accountant does, as I don't charge anyone else that much. Would you up your fees for a client who was previously with, say KPMG just to make sure that they weren't 'going with the cheaper option'?

It's really quite an interesting debate though - most people on here are self employed and that in itself does entail so much decision making, but the balance of what influences our decisions (money, reputation, goals, personal happiness etc) will always differ from person to person.

deanshepherd wrote: »

The only moral/professional issue is whether you know the quality of this guys work and are happy to vouch for it to clients.

Yes I do and no I won't!
When I started out I also offered a referal fee to any clients who recommended me - it worked and I have no qualms about that - but, even if I thought very highly of the accountant in question, I'd personally feel a bit weird saying to a client 'XYZ accountants will do your accounts for £1000 a year... well... actually they're only getting £800 of it and I'm scoring £200 for introducing you'.


Jodie (who's never going to become a millionaire without winning the lottery!)

PS: sorry to the OP for hijacking your thread!

deanshepherd

JodieR wrote: »

The accountant in question is a chartered accountant running a high-street practice, he has employees to pay and understanderbly wants to earn more than what I do.

All of that is entirely irrelevant to the client. They just want their accounts and tax affairs dealt with properly and efficiently.

I wouldn't dream of charging this client as much as or more than the accountant does, as I don't charge anyone else that much. Would you up your fees for a client who was previously with, say KPMG just to make sure that they weren't 'going with the cheaper option'?

I will try and keep this reply as brief as I can because I could talk for days on this issue (and I still havn't got my own pricing right yet).

Traditionally, accountants (and solicitors) have charged clients based on their own time. In other words the value to the firm. If the client then decides that represents value to them, they sign up, if not they don't. This basis means that rarely will you have an entirely fair relationship. Either the client is paying less than what he deemed to be the value to him (client profits) or the accountant charges more than the client would like (firm profits). The risk in such an unbalanced relationship is either the accountant feels he is not valued, spends insufficient time with his client and, perhaps, makes mistakes (no-one wins) or the client feels he is paying too much and always has an eye on the door looking for someone cheaper and perpetually has short-term relationships with accountants (no-one wins).

For a winning relationship the accountant must feel that his work is valued and that he receives proper remuneration for the good work he does. This keeps him motivated to do a great job for the client. The client must be happy that the value he receives equals the amount he is paying and that he can maintain a positive long-term relationship with his trusted advisor (everybody wins).

Going back to your KPMG example. If somebody went to KPMG for their accounts they went for a reason. Presumably that they place a high value on their accounts and are willing to pay a premium to get a prestigious firm to do the work. At some point in that relationship the value they perceived to be getting was less than the amount they were paying so they went looking elsewhere. That does not mean that they no longer value the work of the accountant, it just means KPMG did not meet that expectation of what they would get for the price they were paying.

What you need to do is find out how much the client values the service they want from you and decide whether you can properly provide that service at the price they want. I will always ask a client that comes to me from another firm how much they were paying and what they thought of the fee. If they come to me from a big firm paying a lot of money my eyes light up! Not because I think I can get away with over charging but because this means they place value on the services of an accountant and just need someone to step up to the plate.

Of course much easier said than done!!

deanshepherd

JodieR wrote: »

I'd personally feel a bit weird saying to a client 'XYZ accountants will do your accounts for £1000 a year... well... actually they're only getting £800 of it and I'm scoring £200 for introducing you'.

I can totally appreciate that. When I first started out I was absolutely adamant that I would not accept referral fees from anyone (and still generally don't) for the reason that I never want any of my recommendations to be influenced (or suspected of being influenced) by receiving such a fee.

If I was lucky enough to be offered such a scenario above I would always tell the client up front about what is happening and justify it to them as follows:

Hi client, I understand you are looking for somebody to do the year end tax work for you. I can highly recommend XYZ accountants as a number of my clients use them already and I get very positive feedback from them. Just so you know, for any mutual clients we have they pay me 20% of their fee. This is to cover all the liaising I do with them on your behalf to ensure there is a great line of communication between bookkeeper and accountant and that your affairs are always dealt with smoothly and efficiently. If you are uncomfortable with this arrangement or wish to use another accountant then that is no problem whatsoever. I will go with whatever works best for you.

No referral fee/commission/backhander is ever money for nothing. You will be doing extra work somewhere along the line. It is just a case of identifying it and keeping the client informed as to what you are being paid and why.

Monsoon

deanshepherd wrote: »

Hi client, I understand you are looking for somebody to do the year end tax work for you. I can highly recommend XYZ accountants as a number of my clients use them already and I get very positive feedback from them. Just so you know, for any mutual clients we have they pay me 20% of their fee. This is to cover all the liaising I do with them on your behalf to ensure there is a great line of communication between bookkeeper and accountant and that your affairs are always dealt with smoothly and efficiently. If you are uncomfortable with this arrangement or wish to use another accountant then that is no problem whatsoever. I will go with whatever works best for you.

That's good. I like that.

You've got to do what you feel comfortable with, and that fits in with your business and professional style.

There are always ways of accepting or declining an opportunity in ways that will retain good feeling or create bad feeling, and it's a case of sussing out each situation and working out what you want, and what the best way to achieve it is.

And, with regards the OP, if someone is willing to switch because they can get it cheaper elsewhere, then I let them go without a murmur. My selling point is not price, it's service, and I'm not interested in a price war or haggling. As Dean says, chalk it down to experience.