You shouldn’t fear raising the issue of charging for those little extras.
How often do you find yourself doing something for a client for free because it only takes a few minutes? And if you were to add up and value all those small tasks, what would they amount to at the end of the year?
“Pretty much every accounting or bookkeeping firm I talk to, when they stop and think about it, admit they probably do at least £10,000 of stuff for free every single year,” says Mark Wickersham FCA, profit improvement expert and author of Effective Pricing for Accountants.
Why do we allow this to happen?
Wickersham says accountants often don’t charge anything for writing mortgage reference letters, filing dormant company accounts, and for setting clients up on cloud accounting systems. “This is actually a form of scope creep, but for some reason accountants and bookkeepers feel like they have to give stuff away for free.”
Now imagine you’ve hired a firm of lawyers. Wickersham points out: “You know that lawyers price for everything, so if you asked them ‘While you’re doing that, could you also sort out my will?’, you know they’d charge for the will, and you would expect them to.”
Wickersham also says that because accountants are uncomfortable with pricing, they worry about having that scope creep conversation with the client and getting a negative reaction. “They are scared clients will complain and moan.” They’d rather throw in a freebie than, in their minds, risk the client relationship go sour.
Accountancy commentator and mentor Mark Lee thinks many accountants set wrong expectations at the start. “If you give away free advice during an initial meeting, your clients may well assume you’re happy to do so anytime.”
Ensure the issue doesn’t arise in the first place
Lee says that accountants should stop quoting fixed all-in-fees with no caveats. “I’m a big fan of allowing clients to call any time and not charging for the call, subject to fair use caveat. You do want them to phone when they have issues or challenges you could help resolve. But you also need them to know you will be quoting a fee for doing any work that flows from that call.”
He also suggests offering clients a choice of packages. “It’s easier to do this when you first take them on, but you can also migrate existing clients to this approach”:
- Your basic package for the essential work and no extras – £X per month.Calls and queries to result in an additional fee of (say) £50 per call.
- Your popular package 1.5 x £X pm. This includes an allowance for calls and some extras during the year.
- Your premium package 2.5 x £X pm. This should go further and include other extras.
Another approach is to attach a list of any possible extras (including all those things you find yourself doing for free) to every fixed price agreement.
Wickersham says: “You make it very clear on that list that these are the things the client can buy if the need arises and that you will give them a separate fixed price before starting any work.’
He adds: “When you do that, firstly it helps you cross-sell those other things, because they might not have known you did them. Secondly, you’re managing their expectations so that if at some later date they want one of those things, they’re already expecting to pay for it.”
In future, all you will need to do is refer them to the agreement and the list of extras, and come up with a price.
“No one’s going to object to this because it’s not a big surprise and because, as a customer, we expect to pay more for additional work since that’s the way it works in other industries,” Wickersham says.
If you were to add up and value all those small tasks, what would they amount to at the end of the year?
How to price extras
Wickersham recalls how one of his mentorees just started to charge for small tasks, when the People with Significant Control (PSC) legislation was introduced for UK corporates back in 2016.
“He calculated it would take about 10 minutes to do the PSC form for each client, emailed all relevant ones and told them he would normally charge £75, but because theirs was a relatively simple PSC he would do it for just £35, subject to being instructed by 29 February 2016.”
Wickersham says this approach was very clever. “First of all he told his clients the price should be £75, creating a reference price, or anchor, as to what the price should be. Secondly, he scheduled the work for late February, which is usually quiet.”
Ultimately, the mentoree made £3,000 from something really simple that he would have normally given away for free.
Take your pricing to the next level
Wickersham, who teaches value pricing, says a simple pricing system like the one above is perfectly sufficient for all micro tasks. You will need something more sophisticated for tasks that take more than 10 minutes, that come up more frequently, or that require more work:
“A mortgage reference letter is a good example of this. If you’ve identified that you do four or five mortgage reference letters a year and each one takes two or three hours, then I would recommend you give clients different options using menu pricing. This means giving them a bronze, silver and gold packages and letting them choose what they want.”
Creating those packages – or a menu pricing system – will take some effort and lateral thinking.
Wickersham explains: “Think about how else you can add value to this small task. What else can you do as part of the process that would appeal to certain clients so they pay you a premium price? You might have specific knowledge or connections that allow you to do more for those clients.”
Mark Wickersham’s offers free monthly training on value pricing.
Iwona Tokc-Wilde is a business journalist.