Setting Prices that Sell: A Comprehensive Guide for Accounting Firms
If you’re a CPA or bookkeeper, pricing your services can be a daunting task. How do you know what to charge? How much discount do you give a new client? And what about those dreaded comparison shoppers? Do you buckle to their demands? All this is enough to make you want to bury your head in the sand (and never come up for air again).
There’s a lot of debate regarding pricing your accounting services. Some people think you should charge by the hour, while others believe you should price your services based on the project. Things are not helped by the fact that clients prefer more value for their money, and who can blame them.
But luckily, you’ve come to the right place. In this blog post, we’ll walk you through everything you need to know when it comes to pricing your accounting services. So read on and breathe easy – we’ve got this covered.
Why pricing is necessary for accounting firms but challenging for most
There is no denying that pricing proves to be challenging to accountants. The one group of people who help others deal with their prices often falter with their pricing models.
And who can blame them? Accounting firms often have different clients with different needs. Even if you get clients in the same industry, their accounting needs will differ. That ultimately means that the prices will be different, but to what extent?
Accounting firms have an age-old problem as the different pricing models are never 100% certain. You charge clients per hour; they are not confident you will give them results. You charge a fixed price, and chances are; you won’t get good value for your input.
All this is not helped because prices are such a critical part of any business. Get it right, and your practice will prosper, get it wrong, and your firm starts to struggle.
The different pricing strategies that accounting firms should adopt
With the pricing quagmire for accounting firms getting murkier, they have developed different pricing strategies. All to try and accommodate the different needs and views of the clients. Some of the available pricing models include:
- Hourly rate
- Flat fee
- Competition based
- Cost-plus pricing
Throughout the history of the accounting practice, hourly rates have been the go-to pricing option. Accountants and bookkeepers alike have been charging billable hours on the work done. Its simplicity and ease of calculations have always meant that every hour worked is an hour paid.
But cracks started appearing as it meant that accountants had to work more to earn more. Work-life balance became a hard nut to crack as accountants had to work late and miss essential family functions.
Billable hours become a performance measurement tool that demoralizes employees. Firms didn’t care about your expertise and knowledge as long as you clocked in the hours.
The clients, on the other hand, were not sure that hours billable were equal to the work done. Then came the issue of being certain of the total amount charged. Clients started demanding the total budgets beforehand for accounting services.
And just like that, hourly rates started declining as the most used pricing model for accounting firms. In fact, a study by AICPA shows that there has been a steady decline of hourly rates by up to 21% across accounting firms of different sizes.
Charging an hourly rate is not entirely wrong, but with changing times, it might be a strategy to leave behind. It will work best for the accounting firm and the clients, but they must first agree on the scope of the tasks.
Flat fee or Fixed pricing
Some accounting firms result in charging a fixed rate on all their clients. The firms will have some sort of predetermined packages where they offer certain services at specific rates. This way, it does not matter how well the accountant knows the craft or how long it takes, the price is the same.
While this sounds absurd, bear in mind how complex some accounting tasks are. It’s perfect for repetitive tasks such as filing tax returns. But it’s also prudent to determine the amount of work needed before coming up with final prices. Have a sit down with your clients first and understand their different needs and scope of work.
Sometimes, clients will have added services they want to be done at the same price. To avoid having such conflicts, it’s best to clearly state what the prices include and what it takes to have added services.
The best way to deal with flat-rate pricing is to have different packages. Divide the prices into several packages, each with different solutions. Be sure to include that for additional services, and additional prices will apply. On top of that, keep reviewing the prices now and then to align with the changing demands.
As far as accounting firms are concerned, value pricing is the most convenient pricing model.  Not only are your time and expertise honoured, but it also factors in any other eventualities. Value is in the eye of the beholder. One person’s value can be another client’s waste!
The first step to achieving a successful accounting business, then, should always involve developing an understanding between parties. For example, what they perceive worth from any particular service or product. This includes both tangible items like software packages and intangible ones such as financial advice.
We all know that prices vary depending on who you’re buying from. But what many people don’t realize is the value of their service. One client may be willing to pay an affordable price for tax returns while another won’t settle for anything less than the top dollar!
While there are always going to be those clients that want something a little different, most of them will likely have specific needs when it comes down to their advisory-led service. You can find out more about what they’re looking for by meeting with them in person or on a webcam.
This way, you’ll know how much value is actually put into providing this type of expertise. Rather than just charging based on an hourly rate alone without taking any other factors like industry knowledge, contentment level, etc, into account.
Of course, many will have different views on how to go about the pricing of an accounting firm. But ultimately, it comes down to value-based pricing vs. fixed-rate pricing. Choose the one that works best for you and your accounting firm while giving clients good value for money.
[Related Post: 55 Catchy Accounting Business Name Ideas]
Tips to help set the right prices for your accounting firm
Getting it right with your prices can be the main difference between success and failure. But with the correct information, you can get the most from the accounting service without harming your business and giving clients valuable services.
Wondering how much should you charge for your accounting services? Try these tips.
They say comparison is the theft of joy, but it can work to your advantage in this case. We all know that when shopping for clothes, cars or any other product we compare prices. Why? Because it’s our nature to buy things by comparing them with their counterparts.
It’s often easier than deciding what the best quality is going to be in each situation individually!
This is the same reason why name-brand products often sit next to their generic counterparts in the grocery store. It’s because they want you to see how great this “less expensive” option really is!
All this comes to a concept known as anchor pricing. We mean anchored in terms “ancillary” (value add) features like weekly progress reports, planning and forecasting, extended warranty or any other additional services you offer.
The crux of price anchoring is that it gives you a way to show your buyer the true value of your services.
There are many different types of packages you can offer your customers, but the core purpose is not to entice them into buying one package. Instead, it’s about showing off how great everything else is in comparison with what they would otherwise get!
Facing the reality of your firm’s cash flow, and its clients who often don’t pay on time? Upfront billing is a great way to ensure that you’ll always have enough money in hand for those pesky invoices.
We are not talking about charging extra at closing or later – we mean making sure there are no worries about collecting every last penny from these clients (or else!).
It may be best practice though; after all, we know how some people get away with never paying what they owe even if everything goes perfectly throughout the working period.
Upselling is a great way to up your revenue. The trick, though, involves not just adding more services but finding those that are right for you and your client’s business needs as it grows to get even higher rates of return on investment!
The most common way for a business to change their requirements is when they grow. For instance, a company in the early stage will have needs that vary greatly from those of larger companies in the same category.
However, as growth happens and new services become available or need arises-accounting firms should be flexible enough to adjust their packages accordingly!
Packaging the deal is everything
If you want to get your point across in a way that will make it stick, then create an engaging brochure. This can help potential clients see the value of working with your firm and not just another company on their list of applicants.
A professional-looking document is key because this makes sure all aspects are articulate well enough so there’s no confusion when pricing out services or products.
Showcasing your full-service offering in an informative brochure is certain to impress potential clients.  They’ll be less price-sensitive and more likely to engage with you on value pricing, so it’s important for their sake as well!
Turn to technology
The beauty of being tech savvy is that you get to minimize time spent on basic tasks. This frees up time to focus on the more demanding side of things. Take Envoice, for instance, it slashes the time you use to collect data by using AI to help capture the information for you.
Envoice is a revolutionary software that streamlines and simplifies an accountant’s work by automating tasks like extracting data from invoices, complete expense reporting, categorisation, and purchase management solutions.
If you’re looking to save your time and money by automating the workflow for managing accounts payable, then Envoice is a perfect product. This software as a service (SaaS) will help accountants & bookkeepers be more efficient with their daily tasks while also making it easier than ever before!
With Envoice, you can finally stop wasting time and resources on tedious tasks like manually recording expenses. Let us take care of everything so that your business is free to focus its attention where it belongs: growing revenue!
Pricing your accounting services can be difficult, but it is important to find the right price for your services. You want to make sure you are making a profit, while also being competitive in the market.
By using some of the tips we’ve provided, as well as tools like Envoice, you can make pricing easier and ensure that your business thrives.
We will automate many of the tasks involved in bookkeeping and accounting so that life is easier for both you and your clients. We guarantee that the automatic extraction is accurate and the advanced verified extraction is perfect for large corporations. Try Envoice for free and be on your way to an easy, paper-free accounting business.
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