A while back I held a Lunch & Learn presentation at our office in Knoxville, relating to controlling accounting costs. I know… I bet you didn’t know that was possible! Well, this is the 21st century, and it is definitely possible.
A Brief History of Traditional Professional Service Billing Practices
For many years, financial professionals have billed by the hour. Someone might charge $200 per hour for however long it takes to get it done. But, what does this method of billing lack? It certainly lacks any incentive to be efficient or effective in achieving the result. If you’re going to pay me $200 per hour, then what is my incentive to get to the end result quickly and without sacrificing quality for preparing, let’s say, a tax return? Not much. The only risk I run if I take my sweet time to prepare the tax return is that you are unhappy with a high bill. Your risk in being billed in this manner is that I could be inefficient and cause your accounting fees to rise as a result of my inefficiency or lack of urgency, either of which is or should be unacceptable. Acceptable use for this method of billing would include when you are being represented by a professional in front of a government body (think IRS) or for face-to-face meeting time. There are other similar services, but these are the two most common examples of a service that cannot readily be quantified and would be billed by the hour.
21st Century Billing Practices
Technologies for most financial professionals have come a long way in the past 10 years and have created efficiencies in their work. These efficiencies allow us, as professionals, to readily and reasonably quantify the value that we provide and how quickly we can provide it, without sacrificing quality. Thus “value pricing” was born. At Lawhorn CPA Group, we have been billing this way since 2003, and are committed to providing our clients with exceptional value while reducing their client-side risk for the work being done. If we are efficient and effective in the work we do, without sacrificing quality, for an agreed upon price before the work begins then we will make a profit on the service provided. If we are not efficient and effective in providing the service then we don’t make a profit. Now who holds the risk for inefficiency? The professional does. So now you, as the client, 1) know what the cost is up front and can budget for it; 2) don’t have to worry about any surprise bills; 3) receive maximum value for each dollar spent without the risk of any inefficiencies that may exist in the professional organization; and 4) you choose the level of service that will fit your needs and your budget.
Value pricing with professional services firms is now taking another leap to “Package Pricing” with the advent of Cloudware Ecosystems like that of Xero, which provide off-premise and integrated solutions to small businesses all over the world. Companies like Xero are changing how professionals and small businesses alike operate by disrupting the status quo for their industry.
What to do?
Take a close look at the relationships with your financial professionals. Are you getting the value from the relationship, or are you being blindsided by large bills and carrying the risk of inefficiencies? If your CPA isn’t quoting you a price up front for service, then you need to ask yourself and your CPA why.
If you didn’t have the opportunity to attend our live seminar and learn about how you can control and plan for your accounting costs, contact us and we would be glad to meet with you to discuss how we can help you do just that.
Jason Lawhorn, CPA,CITP,CVA,MAcc