In order to help you the best, tell us what kind of business would describe you?

In order to help you the best, tell us what kind of business would describe you?

Accountants are looking at value over hourly billing

by | Feb 8, 2021 | 0 comments

Self-reflection for businesses as a whole. 

Service industries worldwide have been affected by the new business landscape that has been influenced by 2020. Accountants, along with every service sector, are self-reflecting and asking hard questions. Questions that are making them rethink their business and pricing strategies.

Accounts are asking themselves:

  • What do accountants do? 
  • What do accountants provide? 
  • Do accountants still provide value? 
  • What do accountants need to do to stay profitable?
  • Should accountants bill differently?

These questions need answers, especially since the future of accounting is rapidly changing.

What do accountants do?

Dating back to the Mesopotamian civilization, accountants have kept a running total of debits and credits. These activities continued to evolve as the ancient Egyptians and Babylonians bartered and extended trade to the world. 

As the world evolved, the profession of accountants became vital to merchants as they built wealth. Accountants helped support the American entrepreneur during the age of steel, and in 1896 they were given the title certified public accountants (CPA)

Throughout several depressions, wars, and economic booms, CPAs have provided the needed services to support financial success. 

With recent technological changes worldwide, accountants are redefining their offerings. Accountants can no longer afford to market themselves as money managers, tax preparers, or bookkeepers. 

The question begs to be answered by all financial professionals now more than ever; what is it that accountants do? 

What necessary value do accountants offer in today’s world?

When accounting software provides everything a business feels they need, like automated reports, dashboard, tax preparation, and more, these businesses may lose sight of why they need an accountant at all. 

Though technology can provide many accounting services, no AI can match the accountants’ vital human experience and practical business intelligence.

Over the years, accountants and clients placed high-value on physical provisions like spreadsheets, reports, and documents, while the accountant’s rich experience and unparalleled intuition were downplayed due to hourly billing. 

Accountants of the past priced their services to balance books, deliver financial statements, and prepare taxes. However, the 2021 accountants are selling year-round value such as analysis, consultation, financial strategy, and regulatory compliance, giving their clients the needed direction to compete in the quickly evolving world. 

Hourly Billing

An antiquated billing strategy.

Think about the value you provide to your clients and stop thinking in billable hours. Many accountants are afraid to implement value-based pricing since it is difficult to change their mindset because of their comfortable pricing strategy.

It was less than a century ago that America moved away from value-based billing to billable hours.  Law firm consultants championed the new hourly-billing strategy to increase profit. Soon, other service industries implemented this new pricing structure. 

With new technology, businesses can pay for software that can balance their books, automate a report, and inform them when cashflow or inventory is low. Accountants are also finding that by utilizing technology, it takes less time to perform services; therefore, they bill less. 

To your clients, hourly pricing is a nickel and dime approach and decreases your value in their minds. Clients often ask for a decrease in hours while not expecting the value to be affected. It is easy for the client to request this because their money is associated directly with your time, not your value. Have you ever had a client ask for a decrease in the value you provide?

In order to retain the client, the accountant begrudgingly decreases their billable hours, providing inferior results, and consequently losing the client to a firm that marketed their value rather than their time. 

So, how do you move from an hourly rate to value-based pricing? 

Start by letting your clients know they’re getting value, not time, in exchange for their pay. Get their mind off the hours and on to the value. 

Improve your client relationship

Value-based pricing will help you stand out from the competition.

  • Value-based pricing separates time from profit. No longer does your client see your time, but sees the value you provide. 
  • You now have the incentive to perform your work more efficiently by implementing technology that allows you to save time and provide improved advisory services.
  • Value-based pricing improves the client’s opinion of your firm. They now stop watching the clock every time they call and begin to collaborate with you. There is no end of month sticker shock for the client. 
  • Attracts new talent for your firm. New employees are looking for a thriving environment that welcomes new ideas that save time and increase value. In the past, accounting firms did not welcome time-saving ideas as this would decrease what they could bill.

Five suggestions when implementing value pricing:

1. Manage the client’s expectations.

Let your clients know their exact responsibilities and what you will be providing. More than likely, your relationship will need to change. For example, for you to provide a more valuable service, your clients might not be able to have you do their books once a year. You might need to do them monthly. 

2. Change your business mindset.

Obviously, this change needs to be accepted by the partners at the top. However, it does not stop there. It must be adopted and implemented by the staff. It is your responsibility to help them catch the vision. They are the front lines, and you need to be patient. You can’t throw this at your team and expect them to implement it without support. It takes a while. It always does when accomplishing something new.

3. Change your standard operating procedures.

It would be best if you looked at all your interactions with your clients in every medium. How is it that you market yourself to them? When implementing a new pricing strategy, you must overhaul every client interaction. Though it makes sense to you, they might not understand. Ensure you speak to them in a way that they understand how important this is to their company.

4. Use technology to save time and improve value.

In the value-based pricing strategy, there is no longer any reason to be afraid of technology. Discover time-saving efficiencies with the implementation of AI. Every piece of technology you use can increase your value and profitability. Your clients will appreciate your firm, and you will love the savings they provide.

5. Be patient when implementing new things.

It is hard at times to implement new things, but can be equally rewarding. In time, you will transform your firm into a firm of the future that provides second to none value to businesses as they make financial decisions for their future. 

By becoming progressive, you will expand your offerings, improve your client value, and increase your revenue; setting you up for future success. 

 

Audio: 5 Tips when Implementing Value Billing for your Accounting Firm.

by Jared Ballard

Hourly Billing

An antiquated billing strategy.

Think about the value you provide to your clients and stop thinking in billable hours. Many accountants are afraid to implement value-based pricing since it is difficult to change their mindset because of their comfortable pricing strategy.

It was less than a century ago that America moved away from value-based billing to billable hours.  Law firm consultants championed the new hourly-billing strategy to increase profit. Soon, other service industries implemented this new pricing structure. 

With new technology, businesses can pay for software that can balance their books, automate a report, and inform them when cashflow or inventory is low. Accountants are also finding that by utilizing technology, it takes less time to perform services; therefore, they bill less. 

To your clients, hourly pricing is a nickel and dime approach and decreases your value in their minds. Clients often ask for a decrease in hours while not expecting the value to be affected. It is easy for the client to request this because their money is associated directly with your time, not your value. Have you ever had a client ask for a decrease in the value you provide?

In order to retain the client, the accountant begrudgingly decreases their billable hours, providing inferior results, and consequently losing the client to a firm that marketed their value rather than their time. 

So, how do you move from an hourly rate to value-based pricing? 

Start by letting your clients know they’re getting value, not time, in exchange for their pay. Get their mind off the hours and on to the value. 

Improve your client relationship

Value-based pricing will help you stand out from the competition.

  • Value-based pricing separates time from profit. No longer does your client see your time, but sees the value you provide. 
  • You now have the incentive to perform your work more efficiently by implementing technology that allows you to save time and provide improved advisory services.
  • Value-based pricing improves the client’s opinion of your firm. They now stop watching the clock every time they call and begin to collaborate with you. There is no end of month sticker shock for the client. 
  • Attracts new talent for your firm. New employees are looking for a thriving environment that welcomes new ideas that save time and increase value. In the past, accounting firms did not welcome time-saving ideas as this would decrease what they could bill.

Five suggestions when implementing value pricing:

1. Manage the client’s expectations.

Let your clients know their exact responsibilities and what you will be providing. More than likely, your relationship will need to change. For example, for you to provide a more valuable service, your clients might not be able to have you do their books once a year. You might need to do them monthly. 

2. Change your business mindset.

Obviously, this change needs to be accepted by the partners at the top. However, it does not stop there. It must be adopted and implemented by the staff. It is your responsibility to help them catch the vision. They are the front lines, and you need to be patient. You can’t throw this at your team and expect them to implement it without support. It takes a while. It always does when accomplishing something new.

3. Change your standard operating procedures.

It would be best if you looked at all your interactions with your clients in every medium. How is it that you market yourself to them? When implementing a new pricing strategy, you must overhaul every client interaction. Though it makes sense to you, they might not understand. Ensure you speak to them in a way that they understand how important this is to their company.

4. Use technology to save time and improve value.

In the value-based pricing strategy, there is no longer any reason to be afraid of technology. Discover time-saving efficiencies with the implementation of AI. Every piece of technology you use can increase your value and profitability. Your clients will appreciate your firm, and you will love the savings they provide.

5. Be patient when implementing new things.

It is hard at times to implement new things, but can be equally rewarding. In time, you will transform your firm into a firm of the future that provides second to none value to businesses as they make financial decisions for their future. 

By becoming progressive, you will expand your offerings, improve your client value, and increase your revenue; setting you up for future success. 

 

In order to help you the best, tell us what kind of business would describe you?

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