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It’s no secret the significant changes to how we live and work, intensified by the last three years, have made a deep impact on many of today’s industries. The accountancy industry is no exception. Seemingly overnight, and often at no extra cost, accountants across the UK had an influx of anxious customers looking to them for guidance and support on more personal issues, on top of the usual business advice.
As we usher in the new year, this request for additional advice has not only continued but has grown. The UK’s long recession has already seen businesses and individuals affected and left many feeling the financial pressure.
However, while some accountancy practices have adapted and updated their business models to reflect these harder times and charge clients based on the value of their service, many are pricing based on time. But to succeed in 2023 and beyond, accountants need to unlock their power and change their pricing strategy – or risk not being paid what they deserve.
Change starts now
Put simply, accountants cannot afford to give valuable work away for free. While the typical role of accountants has changed in today’s business landscape, there’s no question they should be appropriately compensated for the advisory (and some might say ‘above and beyond’) service only they can provide.
It is crucial for accountants to take a look in the mirror and realise their true worth. One way to do that is by starting the necessary shift in their pricing mindset. Nevertheless, this can often not be as easy as we think, but there are several approaches which can help further build client trust and overall success and profitability for the business.
A shift in mindset
Charging by time spent (typically by the hour), rather than value, is the standard calling card of an accountancy practice, with many relying on pricing software to dictate fees. However, as accountancy firms update their tech stacks – for tasks to take less time whilst maintaining the same or higher level of quality – this can mean the current way of pricing no longer accurately reflects the real value of the advice and services provided.
Like most, accountants know very well how hard it can be to find a moment to step back and reflect. Recent findings show while a quarter of accountants want to introduce more value-added services, they are often too busy supporting existing clients’ needs. However, adopting a new mindset can prove advantageous for both parties in the long-term.
Open conversations
The not-so-distant future of accountancy lies in value-based fee structures. Accountants should look to update their skillsets and take the time to create pricing packages for all staff to use with clients. Everyone in the practice also needs to become comfortable with having open conversations, asking clients about their business requirements, while also being transparent about the cost of the service.
To kickstart a value-based mindset, it’s always worth testing new service offerings and pricing with a few friendly clients first to gauge their response. Armed with this knowledge, they’ll have a good starting point for moving forward.
The right price for advice
When looking at pricing advice, it can be tricky to give both a fair and accurate evaluation of what a service is worth. With this in mind, many of the UK’s top firms use a similar pricing strategy. It firstly considers the cost, known as the break-even price, and looks at how much it will realistically cost the practice to deliver a specific service.
Secondly is the ideal price, this reflects the price accountants believe they should be paid for a service. To determine this and ensure good, but profitable, rates, it is advisable to do some market research, attend relevant conferences and discuss with peers.
Finally, there is the walk-away price, the lowest fee an accountant should be willing to charge for a service (this should be just below their ideal price). The aim should be to emulate as much as possible the ideal price, unless a value exchange is on the table, which typically takes the form of defined referrals.
Pricing conversations can seem scary however, now is the time to have them. Trialling new offerings should leave enough flexibility to review the pricing structure before implementing it more broadly and help alleviate the stress factor.
Pricing is an emotive subject in the accountancy world right now. A change in mindset is now essential to empower accountants to change their business model and charge according to the value delivered. 2023 is already shaping up to be another challenging year, but hope isn’t lost. Rather it is now even more important for accountants to truly embrace the entrepreneurial perspective and be fairly compensated for their crucial work.
