What do clients pay you for?

Are you one of those accountants in practice, who still charges fees by reference to the time you spend working on a client’s affairs?

Even if you have moved to fixed pricing, menu pricing or value pricing you may still complete timesheets to show how much of your day has been devoted to each different client.

Thinking back to when I was in practice it was many years before I realised that a timesheet may have uses as a management tool but that it did not ‘prove’ how much time had been spent doing anything. It was a guide, nothing more.

After I left practice in 2006 I continued running training courses (very different to the talks I give now) and I asked accountants what they would bill in a variety of situations. The varied answers proved that the timesheet was simply a guide and that the ‘time costs’ that it reveals are rarely the same as the fees billed (or that could be billed).

A quick search online reveals that many accountants websites still assert that “Accountants sell time”. What nonsense. This is a sad misconception. It’s based on a misunderstanding and it’s misleading. Some accountants may try to determine SOME OF their fees by reference to time. They may try to charge fees by reference to their time records but TIME is not generally what accountants sell. If it were then the corollary would be that TIME is what people who want an accountant set out to buy. And they don’t.

In my view accountants sell (or should focus on selling) Trust, Confidence and Peace of Mind. These are 3 of the key qualities, if not THE 3 key qualities, that clients seek when they want to appoint an accountant. If prospective clients do not quickly trust you, have confidence that you will do the necessary, and gain peace of mind that they can rely on you, you will not keep them as clients; indeed they may not appoint you in the first place.

Yes they may have more specific needs – such as to prepare accounts, complete tax returns or resolve issues with HMRC. They don’t really care how long it takes you to provide your services. They just want things done. What do you think clients pay you for?

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Is it better to have lots of small clients or a smaller number of larger clients?

The question I was recently asked by an accountant was actually: “Is it better to have 500 small clients paying me £500 pa or 50 larger clients paying £5,000 pa?”

A little background from the accountant concerned:

“The reason behind this question is that I have been running my practise for many years looking after clients that perhaps most others accountants wouldn’t entertain. However, these small clients are always polite and pay on time even though they can be quite messy i.e. Shoe box or carrier bag type book keeping. But I do enjoy preparing their VAT, payroll and accounts, and they are always appreciative. I also have a few much larger clients where fees are £3k – £5K but find these clients are typically very demanding and often impose strict deadlines for when their work needs to be delivered. They rarely say thank you, even when we deliver before the deadline.”

My reply picked up on the following:

The answer as to what type of practice is best depends on a number of factors including:
  • what work do you enjoy?
  • what client base do you currently have?
  • how easy do you find it to win new clients (and what type of clients)?
  • how much effort do you want to put into winning new clients?
  • where do you want your practice to be in a few years time (taking account of regulatory changes and your own plans)?
  • how do you want to make your money?

You also need to consider where and how you will find the larger new clients. Inevitably they are tougher to win than are the smaller and less demanding clients. Some accountants are happy to only go for the larger fees. Others prefer to take on up all-comers – some of whom may grow into larger clients in the future. You need a very different strategy to win larger clients than smaller ones; also different marketing messages and a different approach to sales. It suits some people, but not everyone.

I do not believe there is one perfect solution that is ‘best’ across the board. The grass often seems greener on the other side.  At meetings of The Inner Circle for Accountants the members often note that they each run their practices in different ways and that no one approach is perfect.

One member said his practice is on course to reach: 5 clients paying £25k pa and ten clients paying £5k pa.  He says he won’t take on a new client that pays less than £3,000 for recurring compliance work. And he doesn’t do any bookkeeping for clients.
Most other members have much lower average fees and minimum annual fees ranging from £250 to £1,600. Some want to grow their average site here. Others want to grow their numbers and like to play the volume game, passing over any extra advisory work to specialists. That way the accountant can just focus on doing what he does best.

 

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Why I sacked a large firm of accountants

The purpose of sharing what follows is the lessons that I hope become apparent. I have no desire to embarrass anyone so I am not identifying the client, the firm or the partner concerned. That’s not the point.

Background

Last year I took over responsibility, on a voluntary basis, for the finances of a members’ club that had long been audited by a top 20 firm. I called the audit partner for a chat and to mention that we would no longer require an audit. Turnover was less than £250k and the bulk of income and expenditure arose from mutual trading. I explained that I had engaged a bookkeeper – my predecessors having done the bookkeeping themselves. All the bookkeeping is maintained on Xero.

We agreed that an independent examination of the accounts, to be drafted by the bookkeeper, would suffice.  That was February. Our accounting date was 31 March.  The partner said that a manager would liaise with me over the timing of the work.

The service

An audit manager got in touch, but not until June, and agreed to send a fee quote, which he did. It was lower than previous audit fees and I assumed it covered all of the services to be provided for the year.

To give the firm credit, everyone who communicated with me and the bookkeeper was efficient, polite and professional. However I never once received a phone call from anyone. Not once. I simply cannot accept that this is best practice.

I find it bizarre that an accountancy practice (whatever the size) can service a client paying the firm many thousands of pounds each year without someone actually talking to their key contact at least once during the annual process. Even more so given that I was new in role.

My conclusion was, as I had anticipated at the outset, that the job was too small for the firm and that perhaps they had been waiting for us to sack them. I have no idea what paperwork is on their files re the accounts review etc but it felt as though they simply went through the process without considering the impact on us as their client. They had a few queries but proposed no changes to the draft accounts prepared by the bookkeeper.

In the event the work involved in preparing our accounts will have taken much less time than in previous years as our new bookkeeper did much of the accounts prep work.

The tax

Someone from the tax department emailed me in November to remind me of filing deadlines and to ask if I wanted them to do their work as usual. I agreed and realised only then that that the fee quotes, supplied in the summer, excluded any ref to the tax work (suggesting the traditional lack of communication between departments that I recall from my own days in practice). No one confirmed what they would do on the tax side. I was pleased however that the tax team seemed on the ball and took responsibility for getting things done.

Remember the client here is a mutual trading body with many annual recurring sources of income. I was surprised therefore to receive a number of queries from the tax team as to the taxability or otherwise of income sources. I suggested that their files or colleagues should be able to confirm which sources were taxable etc. I had my own views too of course.

The club had been client of the firm for many, many years, so it struck me as odd that the tax team were asking basic questions as if new to the affairs of the client. They were otherwise efficient and helpful so I paid the tax fees without query. However no one spoke with me or quoted for the tax fees which were simply charged without any explanation at all.

The upshot

It transpires that the 2014 accounts contained an under accrual for the audit firm’s fees for the year. Whilst they were not auditing the figures I would have hoped that they would have ensured we were adequately accruing for their full charges. Our draft figures for the year to 31 March 2015 therefore have to reflect last year’s under-accrual. Had this been correctly accrued our results would not be swinging from a surplus last year to a deficit this year.

As a side issue I also noted that postal communications from the firm’s accounts and marketing department, more than a year after I took over, continue to be addressed to my predecessor.

All in all the firm did little to cover itself in glory.

The switch

I made the decision to recommend that we replace the firm earlier this year, but thought I would wait to see when they would get in touch to plan the work for our accounts to 31 March 2015. They didn’t.

A few weeks ago I briefed 3 possible replacement firms, all of whom have since submitted fee quotes in the region of half what we paid last year. Two of the firms are in the top 20. One is in the top 30.

I sent an email last week to the old audit partner explaining much of the above. The response I received simply said:

Thank you for your email.
I am sorry to hear that you were not happy with the service you received.
We await your further information regarding our selected replacement.

The questions

Does any of what I experienced surprise you? Do you think I am being too harsh or had unreasonable expectations? I’d love to know.

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Resolving issues with problem clients

This was the main topic for discussion at last month’s meeting of The Inner Circle for Accountants.

Once again Members of <a href="http://www this hyperlink.bookmarklee.co.uk/inner-circle” target=”_blank”>The Inner Circle benefited from the willingness they all had to share their experiences and insights during our round table discussion. In accordance with one of our key membership principles everyone agreed to abide by the Chatham House Rule.

As usual I have prepared a follow up summary including members’ selected key learning points and some useful links.

What follows are simply some of the opening comments that set the scene for our round-table discussion. We started by considering the various issues that contribute to problem clients:

  • Lateness – supply of info, payment of fees
  • Rudeness – to you, colleagues, contractors, staff
  • Unreasonable demands/expectations
  • Tried to do it themselves
  • Quibblers – overly price conscious
  • Fudgers – over claiming and under disclosing
  • Time vampires – be this the client or their in-house accounts staff
  • Needy, sad and poor
  • Those who no longer fit your ideal client profile (if they ever did)

Possible solutions varied from those requiring courage to those that could generate more income even if the problem client took their business elsewhere. Members were amused but unsurprised to hear how they all had similar problem clients. The real benefit of the meeting came from the round table discussion and ideas as to how to resolve specific situations.

The Inner Circle is for the owners of smaller accountancy practices who are keen to be more successful without spending a fortune on marketing and branding. To find out more just click the link>>>

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10 shocking mistakes that frustrate your clients

During my annual networking ski trip I asked a number of my fellow entrepreneurs and business owners to talk to me about their accountants. I have since written 3 articles for AccountingWeb by reference to the notes of those conversations.The first article has been published and has already stimulated much online discussion.

By way of summary and especially if you don’t have time to read the whole thing I have summarised below the 10 mistakes which were identified as frustrating by my interviewees:

  1. Working too close to deadlines – regardless of when clients supply their information;
  2. Charging differing (time based) fees each year even when the work done is substantially the same;
  3. Failing to offer business focused advice to business clients;
  4. Taking an unreasonable amount of time to respond to client enquiries and to follow up after meetings with them;
  5. Refusing to provide regular advice sought by clients;
  6. Omitting to provide the most basic piece of advice sought by clients as it’s not embedded in the accountant’s standard procedures;
  7. Delegating work to junior staff who cannot communicate effectively with clients;
  8. Failing to make the client feel that their views and desires are important;
  9. Taking on a client even though it will become obvious the accountant has no relevant experience of that business sector and is unwilling to close the gap;
  10. An absence of processes such that client feels the accountant is disorganised and making it all up as they go along.

When these sort of issues come up during mentoring conversations I stress that what matters is the client’s perception, as their perception is their reality.

The skill comes in learning how to help clients to recognise that you are doing your best to help them, that you’re on their side, and that you understand and want to help them succeed in their business.

The language you use in conversations, emails and forms/checklists all contribute to your clients’ perceptions. How confident are you that your clients aren’t harbouring unspoken frustrations that could mean they are ready to move to a new adviser any day now?

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Lessons for accountants from….. London cabbies

Last week many of London’s black cab drivers staged a protest against the way that the authorities had treated a new competitor in the marketplace. This reminded me of the strident views that some qualified accountants express as regards the competition they face from unqualified people.

Some of the reports of the cabbies’  protest suggest that their beef was with the new competitor – ‘Uber”, an online app.  Essentially it enables prospective passengers to call for a mini cab which picks them up and then charges them a fare based on the distance they travel.

I understood that the complaint was that the authorities are not upholding the law. As a result, unlicenced cars with the ‘uber’ app are able to operate in much the same way as black cabs but without any of the safeguards or restraints that are imposed on black cab drivers. The app enables minicabs to operate in much the same way as black cabs but without the training, licence or regulation that makes black cabs generally safe, reliable and professional.

The authorities are refusing to get involved presumably as they do not agree that the rules are being broken. What lessons can accountants draw from this stalemate?

  1. There is no point complaining that unqualified competitors are stealing clients. You need to ensure you offer a compelling case for people to engage YOUR services. How do you STAND OUT from the competition?
  2. The marketplace is evolving and cloud computing makes it easier for clients to access their data online. Many will prefer the traditional service, just as many people will prefer to continue using black cabs. If however too many passengers move to uber the black cabs will have to evolve. If you find that many of your clients exercise their right to choose convenience and web, tablet or smartphone focused services you will need to adapt too.
  3. If you build strong relationships with your existing clients they may be more inclined to resist  the temptation of going with a new, easier to use alternative service provider. If you’re lucky.
  4. You need to decide whether to become an early adopter and adapt early to new services and alternative business models.
  5. Good PR can really help you to STANDOUT even if you are not that different to other accountants. The uber app does little more than does Hailo, the black cab app. Hailo enables you to find local black cabs who will then come and pick you up. Uber does the same thing with unlicenced drivers. But Hailo hasn’t had the benefit of the PR that has been generated by the fuss about uber.

What other lessons can accountants learn from London cabbies?

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Ten ways to make clients listen to your advice

It can be frustrating when you give clients advice which they then either ignore or misunderstand.  You want to get them to trust your advice and you want to be able to influence them to follow your advice.

Here are ten ways to increase the likelihood that clients will listen to you:

  1. Ask more and better questions before you give your advice. If you don’t do this your advice will seem generic and not worth following. When I was young I had a tendency to recognise a pattern of facts and to leap to premature conclusions. It didn’t engender confidence if I shared my conclusions too soon, Practice asking good open questions and, where appropriate, good closed questions too. This way, you can ensure that your advice, when you give it, takes account of all key information.
  2. Evidence your experience by supporting your advice with reference to similar previous situations, relevant case law, legislation or rules.
  3. Ensure the way you phrase your advice is focused on your client. It should never be about you showing off how much you know. 
  4. The more your client feels that you have been listening to them the more inclined they will be to follow your advice. Nodding your head as you listen is one way to do this. Making notes of (at least) key words they use is another.
  5. Hear your client out and get all of the facts on the table before you draw conclusions and give your advice – based on your past experience.
  6. Try to paraphrase and reflect back to your client the information they have provided to you and on which you are basing your advice. You can do this face to face or in writing.
  7. Ensure you come across as confident in your advice. Avoid going too far and appearing to be arrogant though. It’s not an attractive quality in an accountant. If you have insufficient experience to advise in a specific situation, have the confidence to admit this to the client. Recommend that you or they take a second opinion from someone with more specialist experience. Your client will respect you for this and will have more confidence in your advice when you do give it. They will get to know that you don’t attempt to fake it. That, in itself, instills confidence.
  8. Be aware of first impressions.  If you have previously tried to persuade your client to do something but were ignored or if it became obvious you were making it up, then it will take time for your client to see you differently. You may have sowed the seed for them to routinely question or challenge your advice.
  9. Give your client space and time to think through your advice. If your advice is unwelcome then allow your client time to think it over. Do not attempt to pressure them into agreeing with you immediately.
  10. Remember clients generally want advice, not just answers. Accountants are renowned for being indecisive. There is even a joke about the client who went in search of a one-armed accountant. He wanted someone who wouldn’t start their advice with: “On the one hand…”I remember being trained years ago what to do if I felt compelled to tell clients that there were two or more options for them to consider. We need to remember that clients prefer paying to get advice, than for simply getting a list of options. We have to be prepared to reach a conclusion and offer our advice, for example with a phrase such as, “If it was me…”

A longer version of this blog post originally appeared in my weekly column on AccountingWeb.co.uk

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How naturally good are you at what you do?

Some people assume that all of the important non-technical skills evidenced by successful accountants and partners can be developed merely by working alongside experienced colleagues.

A common view is that some people are naturally ‘good’ at things as though their experiences, background and training were irrelevant. Thus no more formal training is necessary. Older partners didn’t have such training. Anyone who needs training or support in ‘soft’ skills is not worthy of becoming a full equity partner.  Is this true actually?

Many people believe that these skills develop over time and that no support or assistance is required.They repeat the old mantra ‘Practice makes perfect’. Yet this is very misleading. ‘Practice’ alone doesn’t make ‘perfect’.‘Practice’ makes ‘permanent’. And this is not always a good thing.

If you develop bad driving habits and practice driving, you won’t become a better driver. You will merely reinforce your bad driving habits. Equally we have probably all experienced at least one senior professional who is an unpleasant selfish bully. They practiced their approach and ‘perfected’ it. But no one would suggest that such an approach is ideal.

If you’re not naturally brilliant at something do you give up or take more lessons?  Or are you good enough? Does everyone else agree with you?

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