- How much should your accountant be charging you?
What exactly are you paying for?
This is a common question I get all the time.
And in this video,
I'm gonna address the key questions and considerations
that you need to take away,
whether it's with your existing accountant
or whether you're looking to engage with a new accountant,
and the three key methodologies a lot of accountants use
to price their services
and some example pricing for you to take away.
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I'm Tony Dhanjal,
and welcome to the Accounting & Tax Academy.
Now, this is a common question
I get asked time and time again,
and unfortunately there is no easy answer.
Well, it's a bit like asking the question,
"How much should you pay for a new car?"
There are many variables and factors to consider
when buying a new car, such as what mark is it,
its size, engine capacity, interior, extras, and so on.
And there lies the similarities
with an accounting and tax provider service.
Now, in this video,
I'm going to break down the three most common methods
that accountants use to price their services
so you know what you are paying for.
They are fixed fee packages,
time-based billing, and last but not least, value pricing.
Now, responses to our videos have been great so far,
and your feedback really helps us generate relevant content
such as this, so please, please do comment, like,
and subscribe and let us know in the comments below
what you want to see from us in future videos.
Now let's jump into the three accounting pricing methods.
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A fixed fee package is a set menu of services
at a regular monthly fee.
Now, in itself, there is nothing wrong with this.
These are what I call an off-the-shelf solution,
normally suitable for non-complex contractor, freelancer,
and micro-sized businesses.
Now some of the advantages
of fixed fee packages include choice.
Most providers offer three different tiers
of fixed fee services,
such as essential, gold, and platinum levels.
The higher end of the tiers normally offer you
a more comprehensive service.
Predictability.
You can be reasonably certain
as to how much you are paying every month.
Now, like a subscription service,
you know when the fee is coming
out of your business bank account.
And simplicity.
The services provide the essentials
and what I call keep out of jail services.
As a director, you have responsibilities,
and these services will make sure you comply
with Companies House and HMRC regulations here in the U.K.
Now let's talk about the cons of fixed fee packages.
First and foremost is hidden costs.
These often surface once you're on board with the service.
For example, obtaining an accountant's reference
is not often included in a fixed fee package
and could end up costing you around a hundred pounds
plus VAT per reference.
Contracts.
Some providers like to tie you into a fixed service period
of 6, 12, or sometimes 24 months,
and these can be difficult to exit,
and carry penalties to do so.
And lastly, relevance.
You can often end up with elements
of service you don't actually need or use.
So it's a bit like a phone contract
that gives you 1,000 minutes per month free,
and you only end up using 100 minutes.
And no one wants to pay for something
they are not really using.
In the U.K. market today,
fixed fee packages typically range
from between 75 pounds plus VAT per month
to 250 pounds plus VAT per month.
Now, there are providers that price outside of this,
but it's more of an exception.
Fixed fee services can vary from provider to provider
in terms of the elements of service within each fixed fee,
so look at them carefully,
and don't just focus on the headline fee.
Some are more watered down than others,
and you'll end up paying more through hidden costs later on.
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Time-based fees are services you pay for based
on the time spent on that particular task,
often by the hour or a unit of the hour,
for example, in 15-minute blocks.
Now, traditionally,
the small to medium business sector in the U.K.,
this has been the most common method of pricing.
However, there has been a trend in the last decade or so
towards both fixed fee and value-based pricing,
which we will cover next.
Now let's begin with the cons of time-based billing.
Uncertainty.
Due to the fact that you cannot be given always
an accurate estimate of time,
you could end up with a higher than anticipated bill
time inflation.
Regrettably, there are accountants and tax advisors
who will artificially inflate the amount
of time it has taken them to do a particular task.
And benchmarking.
It's difficult to compare to other like for like services
when you are paying based on time.
Now, in my opinion, it's essential that you work
with an accountant and tax provider
that you completely trust
if you are to be charged based on time.
Now, some of the advantages
of time-based billing include relevance.
You pay for a specific service that you need.
So for example,
if you only need a hundred minutes of call time,
you will, in theory, only pay for what you need.
I can't really actually think of any other pros.
Now, don't get me wrong.
Some elements of accounting advisory and tax services need
to be based on time.
However, in my opinion, the cons do outweigh the pros.
Let me know if you agree or disagree with my pros and cons.
Comment below.
What has been your experience with time-based billing?
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Value pricing is a tailor-made solution
for your accounting and tax needs.
Now, this will take the form of a fact-find
of you and your business and a tailored specific solution
and fee to fit your requirements.
So for us as a provider,
a fact-find is normally a 20-minute call
with you at your convenience to establish exactly
where your business is currently at,
where you would like it to be,
and what you would need from us to make that happen.
The aim is to create the right solution for you
at a particular phase of your business journey.
Now, some of the advantages
of value-based billing include flexibility.
Value pricing allows you to expand or contract your service
in accordance with your requirements at any point in time
without being tied into a contract.
Transparency.
As long as your provider gives you a written proposal,
using logical factors
and a roadmap of possible future services and fees,
you can make informed decisions well in advance
of engaging in that service.
And of course, value.
As the title suggests, the focus is on the value.
It provides you annual business.
For example, let's go back to our phone contract analogy.
Say you had a phone contract at 20 pounds per month.
That gives you 300 minutes, but you only need 100.
So you're paying for 200 minutes you don't actually use.
Value pricing cuts the wastage
and allows you to pay for services you actually need
or simply bank the savings.
Now let's talk about the cons of value-based billings.
I can't really actually think of any.
So let me know if you agree or disagree
with my views on value pricing.
Don't worry, there will be a future video on value pricing.
Just hit that Subscribe button
and make sure you get notified when we do release it.
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If you are in the market to buy a new car,
there's no doubt you'll go to at least a couple,
if not more dealers and obtain quotes
to make sure you're getting the most for your money.
Now, it's absolutely natural for you to want
to obtain some barometer or basis
of accounting and tax fees
to make sure you're not paying over the odds.
If you're unsure where to start
or want to get a comparison quote, click the link below,
and head on to our website
where you can get a free, no obligation quote,
or you can book a 20-minute discovery call
with me personally,
where I will conduct a fact-find with you.
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So let's recap.
We've got the three different methods of pricing
for accounting services.
Firstly is fixed fees.
This is an off-the-shelf solution for contractors,
freelancers, small to medium enterprises.
Then there's time-based billing.
Well, this is a unit of hour-based pricing,
which can be more specific,
but potentially more expensive in the long run.
And finally, you've got value pricing,
which is tailor-made a specific solution to you
and cuts out the wastage
and passes on all the savings and benefits.
Obviously, no two businesses are the same,
and there is no one size fits all,
but I really hope this video has helped you in understanding
how accountants price up their services
and to help you make an informed decision
in knowing your numbers (keys clicking)
toward success.
This is Tony Dhanjal of the Accounting & Tax Academy.
And until next time, I'll see you soon.
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