Many accountants are so daunted by the idea of raising their fees that they put off the potentially awkward conversations with clients for months, or continue to undercharge for key services.

That’s the view of Slipstream Group CEO Sharon McClafferty, who’s coached hundreds of finance and accounting executives in running their businesses more effectively.

“It’s completely natural to be intimidated by having to ring up a client and tell them you’re going to be charging more,” she tells Acuity. “Humans don’t love being in that position. However, the cost of procrastinating will be colossal, particularly with high inflation. In fact, we can show people exactly how much it’ll cost them every week if they delay the conversation.”

Pictured: Sharon McClafferty, Slipstream Group

Pricing confusion

But there’s a lot more to it than merely articulating a new rate. For a start, there may be multiple fee agreements across a range of clients, or even for the same one. Some services may incur a flat fee while others are charged by the hour.

“It can be a bit of a hodge-podge, with confusion and disagreement over whether hourly rates, project charges or a combination of the two are applied,” she says.

“Sometimes only the senior management understands it. I’ve known accounting practices where junior team members literally had to ring one of the partners while he was away on a beach holiday to run every single proposed fee past him.”

For McClafferty, the only effective solution is automating the pricing methodology through specialist software packages to gain complete transparency. But doing so requires a fundamental understanding of the value each service delivers to the client and the relative value each client delivers back.

She argues there are two ways to ascertain those values.

1. Create value for your ideal clients

“To do this, you need to establish a pricing calculator to figure out which clients are most important to your business,” she says. “It’s surprisingly common for 80% of profit to come from just 20% of clients, so ‘chopping off the tail’ can be a sensible solution if you’re labouring hard for accounts that are underpaying you. I realise it takes courage to part ways with a client – even a difficult one – but we show people how to do it.”

“It’s surprisingly common for 80% of profit to come from just 20% of the clients, so ‘chopping off the tail’ can be a sensible solution if you’re labouring hard for accounts that are underpaying you.”

2. Capture that value effectively

“This involves finding ways to reduce costs and increase prices to reflect the service,” she says. “The value is the difference between zero and what the client’s willing to pay. It’s not the price you’re currently charging.”

Services library

“The amount an accountant charges should depend on the value of the service,” says McClafferty. “Basic bookkeeping will be a very different rate to strategising or presenting projections to the board.

For that reason, a services library is very helpful as you can test each fee for profitability before it’s applied. I use Ignition’s because it creates consistency and means there’s no need to seek guidance every time you start a new project.”

ON-DEMAND PRICING & PROFITABILITY WORKSHOP

Watch an online workshop for public practitioners looking to gain better insight into client profitability.