Will you be increasing your fees from 1 July 2022?
With business and personal costs rising, accounting practices should be considering a fee increase come 1 July.
- Accountants need to think commercially and strategically about how to respond to costs going up in their business and personal lives.
- Many practice owners are reluctant to increase fees for fear of losing clients.
- For many accountants, a 10% increase may still not be appropriate remuneration.
There was a lot of talk a few weeks ago about that email from Xero. You know the one: it announced price increases effective from 15 September 2022 – representing an average increase of around 8%.
I know that for most people this wasn’t the most welcome news. However, it was anticipated. I, for one, factored it into budgets I've been working on with my private coaching clients since May.
I've been hearing among practice owners that they are reluctant to increase fees for fear of losing clients. They are also worried some clients simply will not survive in business if they have to pay more for their accounting and tax services.
But let's face it, all costs are going up, in both our business and personal lives, and we have to think commercially and strategically about how we respond to these increases
Reframe your thinking
Instead of seeing the announcement by Xero as a negative or a challenge, I would love to see accountants reframe this and use it as an opportunity to reset and have some really frank, honest discussions with their clients. If Xero and other companies are passing their increased costs on to their clients, it actually should make it easier for you to do the same.
Even if you were to increase fees by 10% this year, I believe this would be reasonable, as I dare say over the past few years you have most likely been absorbing increased costs – not to mention giving away much of your time and valuable advice for free.
“I dare say over the past few years you have most likely been absorbing increased costs – not to mention giving away much of your time and valuable advice for free.”
For many accountants, a 10% increase may still not be sufficient to appropriately remunerate yourself for the effort, experience, skills, value and care you provide your clients.
Think about staff remuneration
Also keep in mind the current staffing crisis – not just in our profession but across most industries. It’s important to create and nurture a winning culture and an enjoyable workplace for team members, and new-financial-year pay rises will most certainly play a part in that.
While this, too, can be a sore point, have you looked at what others are paying in the market and do you know the cost of recruiting a new staff member?
If not, here are a few insights I have been sharing of late about Australian salaries.
- The ATO’s 2022 graduate program offers a starting salary package of more than A$75,000 (A$65,609 plus 15.4% super). Upon successful completion of the program, employees will advance to a minimum of an APS 4, which has a total remuneration package of more than A$84,000 (A$73,086 plus 15.4% super).
- An AFR article in February of this year cited an example of an intermediate accountant recruit being paid A$90,000 at a mid-sized suburban accounting firm, compared with the market rate of A$70,000, which would have been on offer two years ago.
- In a 2001 Institute of Chartered Accountants of Australia (ICAA) Salary Survey, the income of a partner in NSW was up to A$200,000. In a 2021 CA ANZ remuneration survey, it had dropped to around A$124,000.
- SalaryBand is reporting that the annual salary of an accounting firm partner ranges from A$132,000 to A$238,000.
- Business Fitness, which publishes The Good, the Bad and the Ugly of the Accounting Profession Report, has been using a notional partner’s salary of A$200,000 for as long as I can remember.
Crunch the numbers
So, now it’s over to you. It’s time to crunch your own practice’s numbers. Look at your turnover and profitability over the past three-to-five years and summarise it. Prepare your 2022/2023 budget and determine your charge rates and minimum fees.
I hope this article, and the insights and metrics I’ve shared, provide you with motivation and inspiration. Know your worth. Be confident. Be brave!
P.S. If you need a hand or a little more confidence in this area, why not grab a copy of my 2022/2023 Pricing Guide and Menu of Services? Here’s the link to purchase a practical and useful document, where I’ve collated almost 70 of the most common accounting services provided by small and solo accounting practices to their SME clients. I share the fees
I charged back in 2016, which my clients happily paid, and I have indexed them to the year 2022/2023.