PRICING, FEES & BILLING RATES

The Radical Pricing Model: Start with $25K

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Deliver more value to clients while freeing your team from timesheets.

By Jody Padar
The Radical CPA

Consider the $25K Rule.

Because this method requires heavy lifting on the front end, a good rule of thumb is to only value-price engagements of $25,000 or more. If the client falls below $25,000, they are eligible for a fixed price or fixed price plus a value add. This rule is important because if your client is a small business, it doesn’t matter how much value they perceive in your services; they will not be able to afford value pricing above a certain level.

MORE: Three Critical Factors Drive the Value Pricing Trend | Accounting Disruptors Are Heading Your Way … with Deep Pockets | The Convergence of Trends Makes Pricing Changes Imperative | Stop Looking for Talent that Does Not Exist | Advisory Work Must Be Priced by Value, Not Hours
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Most services are fixed-priced, but based on conversations with the client, those prices may drop or be raised accordingly. Some of the data points used to set pricing are the PITA factor (pain in the a#%) and the client’s gross revenue.
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How to Raise Your Rates

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Clients who complain aren’t walking away, just haggling.

By Ed Mendlowitz
202 Questions and Answers: Managing an Accounting Practice

Question: I haven’t raised my fees in three years. How do I suddenly go about it now and how much should I raise them?

MORE: Courting a Client? Don’t Give Too Much Away for Free | How to Start Providing Family Office Services | Every Accounting Firm Needs Quality Control | No One Listens to You? Change How You Talk | 47 Types of Business Valuation to Provide | Thirteen Things to Consider Before You Sell Your Practice | Uncooperative Partner Might Not be the Problem
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Also, I have many business clients where the individual returns are done as part of the yearly service with extra billing. How can I start charging for this?
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Three Critical Factors Drive the Value Pricing Trend

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Embrace the value pricing perfect storm.

By Jody Padar
The Radical CPA

Ron Baker is known as the value pricing guru in the accounting space. He was way before his time in separating the price of labor from the value of a product. Labor-based pricing is based on the difficulty of doing a task. Value pricing looks at everything from the client’s viewpoint. His argument is as follows: the value you provide your customer, regardless of the deliverable, is worth way more than the hour.

MORE: Accounting Disruptors Are Heading Your Way … with Deep Pockets | The Convergence of Trends Makes Pricing Changes Imperative | Stop Looking for Talent that Does Not Exist | Advisory Work Must Be Priced by Value, Not Hours
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While value pricing isn’t new, automation has driven it to the forefront. Automation gives CPAs up to 90 percent more time to provide valuable services based on their expertise, knowledge base and experience.

Although it was clear the cloud was going to have a disruptive impact on our business model, Ron Baker would always explain: it’s not the technology that’s going to make value pricing the way to go, the value’s always been there.

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Even with Value Pricing, Time Tracking Matters and Here’s Why

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Higher productivity equals higher capacity, which drives faster turnaround times. Faster turnaround times create happier clients. 

By Frank Stitely
The Relentless CPA

Employee productivity plays a huge factor in managing WIP (work in progress). Because capacity is the denominator in the Lean Six Sigma equation, and employee productivity is a big factor in capacity, employee productivity becomes a big factor in determining turnaround time.

MORE: End Tax Season Meetings with Clients…Seriously | Get Clients to Understand Firm Processes … or Say Goodbye | Train Now Before It Costs You Down the Road | Keep Clients from “Balance Due” Shock | It’s OK to Say No to Clients (Even the Large Ones) | You Train Your Clients, Whether You Mean To or Not | Business Owners Face One of Three Exits | How Small Firms Can Win the Talent Wars | Do You Know Your Turnaround Time?
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First, let’s dismiss all the consultants from the room who tell us that time tracking and productivity metrics don’t matter. Mostly, these consultants have never managed or owned CPA firms. Rarely have they worked in firms for any length of time. They have never known the struggles of meeting payroll during the first pay period in February when employee hours are up, but the tax season money is not rolling in yet. Goodbye. Don’t let the door hit you in the butt on the way out, or do let it hit you. That’s up to you. I hope it’s a heavy door.

Here’s an example that shows why time tracking and productivity metrics matter:

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Lack of Relevance Drives Audit Commoditization

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Premium service providers collect premium fees.

By Alan Anderson, CPA
Transforming Audit for the Future

We are all willing to pay more for something that has been custom-created just for us or when we see that the service provider has gone above and beyond to deliver additional value for us. But without relevance, there is little chance that your clients will see any additional value in the audit. For the client, the only reason to get an audit is to meet a regulatory or banking requirement.

MORE: Five Crucial Attributes for Successful Audit Leadership | Traditional Audits Don’t Deserve Premium Billing | Put the Ethics Code to Work for Your Clients and Your Firm | Turning Audit & Accounting into Assurance & Advisory | Is Audit in Crisis Because of Definitions? | Stop Sending the Wrong Message to Audit Teams | Closing the Audit Expectations Gap
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As a profession, our actions have contributed to commoditization, but every CPA firm I talk to complains about how audit is becoming commoditized. When someone complains to me about commoditization, the first thing I ask is, what do you do when you’re under a little fee pressure from your client? Oh, lower my fee. So, why are you lowering your fee? Because quite often, whether you’re thinking about it or not, you probably haven’t delivered anything more than 24 pages with an audit report on it.

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Are Accountants Charging Too Little?

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pensive woman staring while surrounded by various denominations of floating currency

Size matters in partner income. (AICPA MAP)

Hourly billing on the decline but still holding on.

By CPA Trendlines Research

By all indications,  CPA firms are outperforming the general economy by a very satisfying margin.

But are they charging enough?

MORE: ChatGPT for the Reluctant CPA | CPAs Needed to Help Small Biz Adopt AI | Revenue Growth Is Top Priority for Small Firms | Survey Shows Challenges, Priorities Shifting | Survey Shows That Tech Remains the Great Divide | Is the CPA Business Model the Clog in the Pipeline? | Can Big Data Spot Financial Fraud? | Will Unclogging the Accounting Pro Pipeline Kill Mobility? | Accountants Cozy Up to Clients with CAS | Accountants Torn Over 2024 Economy, Offer Advice | Accountants Bullish on Income
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All categories of median net fees show substantial increases from 2021 to 2023 in the latest AICPA National Management of an Accounting Practice Survey:

  • Net client fees leaped up 24 percent.
  • Net client fees earned since prior year: up 15 percent.

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The Convergence of Trends Makes Pricing Changes Imperative

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Kill the billable hour to earn what you deserve.

By Jody Padar
The Radical CPA

The speed of change is faster than ever. How are you going to react to it? That’s what I’m really preparing you for – redesigning your entire business model to become a more client-centric advisor. Value-based pricing models are the key component but not the whole story.

MORE: Stop Looking for Talent that Does Not Exist | Advisory Work Must Be Priced by Value, Not Hours
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Today’s automation, new competitors, staffing challenges and new technologies are conspiring to bring clients more value than they could have enjoyed before. All of it is shifting the way you need to think about your services, what clients value and how you get paid fairly for the expertise you bring to the table.
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Stop Looking for Talent that Does Not Exist

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Change processes to pivot from people problems. 

By Jody Padar
The Radical CPA

If you’ve posted a job for an accountant in the past few years, you know people are hard to come by. The number of responses you received was likely down if you were lucky enough to find any at all.

MORE: Advisory Work Must Be Priced by Value, Not Hours | How Hard Do You Work to Keep Your Clients? | Four Things to Know About Social Media | Internal Communications Are Underrated | Four Things Better Than a Company Song | Let’s Lose the Word ‘Image’ | The Risk In Not Understanding Risk | What Your Marketing Program Can and Can’t Do | Nine Reasons That Prospects Say Yes | How Marketing Evolved to 3.0
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According to a recent AICPA Trends Report, the number of people graduating with a bachelor’s degree in accounting is down, and we’ve seen a steady decline since 2015. All this while half of U.S. CPA firms have increased the number of new graduates they want to hire. A lot of us are looking for staff that simply does not exist.

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