Limited supply puts you in the driver’s seat.
By Bill Penczak
The Serenity Prayer states, “Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” Keep that in mind for a moment.
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When preparing tax returns and financial statement audits, one of the biggest challenges CPA firms face is either late or incomplete client information.
One tax firm client spends an inordinate amount of time tracking down client documents, repeating requests for documentation and other low-value tasks that suck the spirit from their people and cause additional and unnecessary labor costs to the tax prep process.
On the audit side of the house, firms often find their people sitting on the bench on many Monday mornings, playing on their phones instead of billing their time, because the PBC documents are incomplete, late or non-existent.
And unless your firm is one that has implemented value billing with provisions to recover those lost costs, your utilization and ultimately your profitability suffer.
Many firms will chalk that dynamic to “things I cannot change” in the Serenity Prayer parlance. My modest proposal is having the courage (and a method) to change the things you (actually) can.
If you’ve ever tried to hail an Uber immediately before or after a sporting event, you are likely painfully aware of the company’s surge pricing model. The normally $16 ride surges to $26 at peak times and limited supply … because they can.
It is supply and demand, pure and simple. So why shouldn’t CPA firms take the same approach, as they have a limited supply (people at key filing deadlines)?
Here’s how this surge pricing might work, for example, for 1040 returns: the typically high-volume, high-margin-but lower-fees-per-client tasks that fuel revenue and profitability for smaller CPA firms:
- Submit your complete package of financial information by February 15, and your return will cost X, barring any surprises.
- Wait until February 29 (2024 is a leap year), and the same return will be 20 percent more.
- Wait until March 15, only a month before the deadline, and the price for filing goes up an additional 20 percent.
So, what’s to prevent clients from requesting an extension in an attempt to circumvent the surge pricing? The problem is the firm is still likely to have to track down client documents through multiple phone calls, emails and other pleading. There’s still a cost to that, and I would suggest setting a firm deadline (April 30, for argument’s sake). And if the client still doesn’t provide the required documentation, the surge starts over again.
While this might cause consternation on the part of some clients, you probably don’t want those kinds of chronically tardy clients anyway. Plus, those clients might become the core of your client-culling process, which many firms are doing these days. And while clients grumble, I would suggest that they have the power to control what they do and when they provide what firms need to serve the client’s needs.
Firms have the upper hand in today’s public accounting market. And some will demonstrate the courage to change the things they can, lest it drives them to drink.
