PRICING, FEES & BILLING RATES

How to Spot and Stop Scope Creep

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Here’s how to tell exactly what does and does NOT fall within the lines of scoped services.

By Jody Padar
Radical Pricing – By The Radical CPA

There’s a time to increase scope and a time to let it slide. Let’s explore these two options.

It’s professional responsibility to inform a client when a request is out of scope. In this instance, you have two options: either make it a separate engagement or include it in the existing service package. It’s important to have everyone on the same page about what is within scope and what falls outside of it.

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It would be best if you always built into your pricing agreements a 20 percent buffer to protect you against pricing mistakes. This doesn’t mean you should do work outside the scope for free, but if a client asks for a service not included, you could decide to let it go if the amount is immaterial.

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Anne Napolitano: The Future of Accounting’s in Value, Not Time | The Disruptors

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“The balance sheet is where all the bodies lie.”

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The Disruptors
With Liz Farr
For CPA Trendlines

The Break-Through Blueprint for Revolutionizing the CPA Firm Business Model

Anne Napolitano used to give advisory-level guidance without charging for it. “I was doing those advisory-type services without really getting compensated for it because I just felt it was what you were supposed to offer to your clients,” she says.  

But after learning about value pricing from various resources, including Ron Baker and Ed Kless, her thinking changed. “The better we got at something, the quicker we were, the less money we were making because we could do things faster,” she says.   

MORE Disruptors with Liz Farr | CPA Trendlines Streaming Network

That realization helped her understand that clients weren’t buying time; rather, they were buying the decades of experience she and her team had as accountants and the value that comes from that experience. And today, she charges a premium for that expertise.  

“We need to value ourselves correctly and appreciate the fact that we’re really doing some great work for our clients, and we should be compensated for that,” she explains.  

Her firm, Anne Napolitano Consulting, landed on its niche specialty of restaurants, bars, breweries, distilleries, and wineries, partly because of Napolitano’s love of cooking. 

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Rule #1 of Scoping for Alignment

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Plus three more basic steps. 

By Jody Padar
Radical Pricing – By The Radical CPA

How often have you heard the old saying about having two ears and one mouth because listening is twice as important as talking? Hopefully, often, because it is as true as anything I’ve ever heard. Scoping is all about listening, so when you make a presentation, you’ll know what you’re talking about, and the client will know you know.

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Here are four basic steps you can follow to make sure you and the client are in alignment when the time comes to start a new project or present to a potential new client:

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Make Your KPIs More Meaningful

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What are employees working toward? They need to know.

By Jody Padar
Radical Pricing – By The Radical CPA

Key performance indicators separate the signals from the noise. Throwing timesheets into the trash is your opportunity to focus all your attention on what is most important to your firm’s continued success.

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Good KPIs are quantifiable measurements agreed to beforehand. They must be important to the organization as a whole and specific. Here are a few examples you might consider adopting:
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Can a Service Center Model Solve Audit Staffing Shortages?

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Providing superior client service eliminates the perception of audit as a commodity.

By Alan Anderson, CPA
Transforming Audit for the Future

Most firms have abysmal project management, which makes it nearly impossible to see if there’s any room to take on extra work. Plus, piling all the work into busy season means your people already work far beyond 40 hours a week. And, if you’re relying on timesheets as a measure of capacity, you may not be capturing the time your staff eats because the work is taking more than 40 or even 60 hours in a week to complete.

MORE: Don’t Take on Audits in an Industry You Don’t Understand | Four Questions to Make Your Firm More Successful as a Business | Say Adios to Audit Fee Pressure | Deliver More Audit Value by Getting Out of the Conference Room | Six Essential Elements in Audit Planning | Before the Audit: More Than Just Planning | Five Crucial Attributes for Successful Audit Leadership | Put the Ethics Code to Work for Your Clients and Your Firm | Is Audit in Crisis Because of Definitions?
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During the 2020-21 COVID-19 pandemic, some audit firms had to lay people off, or reduce work hours as projects got canceled or curtailed. But the long-term trend for years has been a shortfall in talent that will only get worse. Burnout from overwork is the number one cause of employee turnover.

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Aynsley Damery: Learn the Early Warning Signs That Can Point to Business Failure | The Disruptors

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 Scaling models that work for large firms don’t necessarily translate to small businesses.

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The Disruptors
With Liz Farr

Build a 7-figure firm in just 4 hours a week!

It’s not your fault that scaling advisory hasn’t worked. According to Aynsley Damery, CEO and co-founder of Clarity, the advisory model most accountants have been using was never designed for small businesses. “The model we were given is the same model that was used in the 70s and 80s by Bain and McKinsey,” Damery explains. “It was built for large corporates, and I’m not sure was ever really built for small business owner.”

MORE DISRUPTORS: Oliver: Build a Biz that Runs Without You | Daiber: Use Succession as a Growth Strategy | Cannon: Busy Season is Self-Inflicted | Carroll: When One Person Can Break the Firm |  Rampe: Build a Roadmap Even When the Road’s Not There | Chang: Killing SALY, One Agent at a Time | Vanover: 5-Star Firms Don’t Bill by the Hour | Kless: Profit Is a Result. Flourishing Is the Purpose | Whitman: Build Culture on ‘Progress,’ Not Change | Shein: No PE? No M&A? No Problem | Hood and Weber: Time to RISE | Proctor: Turn Dumb Ideas into Brilliant Solutions | Carter-Gray: How 1 Poor Review Strengthened the Firm | Hartman: Upwork to “40 Under 40” in 3 Years |

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The problem with this model is that it doesn’t scale. “The model we’ve been given is partner-reliant. It’s bespoke. Everything’s ad hoc. It takes a lot of time,” says Damery. In support of this thesis, Damery cites a Xero study in Canada that found that when firms that bolted bespoke advisory onto compliance, their profitability dropped by 30%. Damery’s own benchmarking among Clarity users confirmed this.

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Don’t Take on Audits in an Industry You Don’t Understand

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Don’t try to wear too many hats. Pick your specialty area and become a guru.

By Alan Anderson, CPA
Transforming Audit for the Future

Industry expertise is essential for businessmindedness. For me, the primary ingredient for building a successful audit practice is to avoid taking on work that you don’t understand. Too many firms say they can audit any balance sheet, but that’s when they can get into trouble. Many firms get sued because they made a bad business decision. They thought they could take on this unique industry and get it right. If you dabble in any industry, you will put your firm and yourself at tremendous risk.

MORE: Four Questions to Make Your Firm More Successful as a Business | Move to Advisory and Assurance with Relevance | How ‘Business Expert CPAs’ Get Their Own Business Wrong | Say Adios to Audit Fee Pressure | Eight Items to Cover in the Audit Exit to Deepen Client Relationships and Prove Value | Know Your Three Audit W’s | Planning Lays the Foundation of Audit Relevance | How Do We Drive Relevance in Audit? | Before the Audit: More Than Just Planning | Are You Correctly Identifying the Relevance Intersection? | Lack of Relevance Drives Audit Commoditization
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When the U.S. Department of Labor looked at the quality of employee benefit plan (EBP) audits, they found plenty of problems. That 2014 study found “a clear link between the number of employee benefit plan audits performed by a CPA and the quality of the audit work performed.” Almost half of the firms the DOL looked at performed only one or two EBP audits per year, and 75 percent of those had deficiencies. Over half of those (56%) had five or more deficiencies.

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How Client Data Comes In Is Critical

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Standardization starts here.

By Jody Padar
Radical Pricing – By The Radical CPA

Why is McDonald’s easy to price and why is their product so consistent no matter where in the world you are? You know that if you get a Big Mac in Chicago or one in New York, it will taste and cost the same. This is because of standardization, and you shouldn’t underestimate the role digitized data plays in maintaining this consistency.

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Your firm can standardize and price just like McDonald’s does, if you have the right tech infrastructure, in addition to standards related to both clients and workflow.
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