What do you sell? The answer is NOT time

Aug 21, 2018 | Client service, Pricing

Maybe you still use timesheets. Many accountants have moved on but plenty continue to record the time that they and their staff spend on client matters.

Throughout my years in practice I diligently recorded my time. Initially this was on monthly, then weekly and, finally, daily time sheets. In most of the firms I worked our engagement letters with clients said that our fees were dependent on the time we spent on their affairs. I don’t know how we got away with that for so many years. To this day, clients don’t generally care how long it takes us to do stuff.

This focus on the time we spend on client matters has caused a degree of confusion. What are clients buying from accountants? And are you selling what they’re buying?

In some of my talks to accountants I ask them how they would decide what to bill in a variety of situations. For example, where the time spent this year was much less than last year for doing much the same work. Or where the time spent was much higher than last year for no apparent reason.

The answers prove that the timesheet is typically only a guide. The ‘time costs’ that it reveals are rarely the same as the fees billed (or that could be billed).

I have also spoken with plenty of clients who are frustrated by their accountants who charge fees that vary each year. These clients aren’t happy as, so far as they are concerned, the service they wanted is the same as previous years. And if the service is the same why is the fee so different?

One of the accountants I mentor has used me as a sounding board before he has tough fee negotiations with clients. This exercise is often eye-opening and makes it easier for him to understand his client. Afterwards, he invariably tells me that the conversation was less painful than he expected. And the agreement regarding the disputed fee and future fees is much more positive than he could have hoped.

Maybe your website contains this popular – but incorrect – standard paragraph of text:

“How do accountants charge?

All accountants charge by time.

The longer it takes to prepare your return the dearer it’s going to be. Some businesses sell hamburgers. Real estate agents get paid commission, and ACCOUNTANTS SELL TIME.”

This is a sad misconception. It’s based on a misunderstanding and it’s a misleading myth.

I appreciate that you may look to set your fees by reference to the time it typically takes you to do the work. You may try to charge fees by reference to your time records but TIME is not generally what you are really selling. I have never heard a business person or anyone who wants their tax return completed say they want to buy some time.

On the contrary, it’s the service that they require. They don’t really care if takes you two hours or 10 hours to complete a set of accounts or to prepare a tax return. Indeed, when you think about it, if you were charging for your time, you could earn more by slowing down and being less efficient.

I appreciate that you sometimes have to justify your fees when they are higher than a client might like. And your justification is that the service takes longer than the client might imagine. There are often more stages, issues to address, checks to make and related admin tasks to complete. And, yes, they take more time. But don’t be misled, it’s the value of the service to your client that really matters.

More and more accountants these days have the courage to quote fixed fees for certain services. If you’ve not tried it I appreciate it seems scary. What if you pick the wrong figures? What if a client’s records are a complete mess? What if you have to chase the client for months to get everything you need to complete the work?

Your existing clients may be happy with the status quo. But more and more of the new clients you might like to win will be looking for a clear fee quote for the service they require.

Is it really that hard to estimate the time you typically spend to provide distinct services? On average? Obviously, you also know what factors are most likely to have a significant impact on the time it takes. Fine, so your ‘fixed’ fee is subject to some reasonable caveats.  Clients will be forewarned and forearmed. Most will prefer this as it seems fair all round.

Part of the value you provide and that clients seek is the trust, confidence and peace of mind they gain from engaging you. Over and above the service you provide, these are the three qualities I believe that you should be selling. Not your time.

What do you think you sell as an accountant in practice?

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