Date posted: 20/03/2019 10 min read

How onboarding software produces profitable client relationships

Software that effectively onboards clients and manages the scope of work can increase revenue in a value-pricing practice.

In Brief

  • Switching from hourly billing in a practice to a value-pricing or fixed-price model makes managing scope creep on engagements essential.
  • Onboarding and proposal management software can set engagement guidelines. The software will alert practice staff if a request is outside the original engagement scope and should incur a further fee.
  • Accountants, rather than administrative staff, should be in charge of setting the scope and fees for an engagement initially.

By Sholto Macpherson

When accountants start thinking about automating processes, many assume it is all about autocoding and bank reconciliation. Instead, that automating can begin with client interactions, using software that onboards new clients and manages the scope of work.

Onboarding is a critical component of cloud-focused firms. It defines expectations and responsibilities for the accountant and client, and sets the foundation for an efficient, engaged, and (for the accountant), profitable relationship.

“I don’t think that enough accountants use engagement software,” says Rebecca Mihalic CA, director and co-founder at Aptus Advisory, a four-year-old cloud accounting firm. “My previous firm didn’t.”

“We’re killing three birds with one stone: properly engaging our clients, avoiding fee disputes and managing scope creep.”
Rebecca Mihalic CA, Aptus Advisory

When Mihalic initially came across software designed to automate onboarding, “I was just doing cartwheels in my head about how amazing this is.”

Value pricing means managing engagement and scope

Offering a tight proposal is far more important once a firm switches from hourly billing to a fixed fee or value-pricing model. This switch seems all but inevitable for recurring compliance work as the software industry delivers new automation.

If accounting software reduces the time it takes to produce a tax return for a client by four hours, an hourly billing model will see a drop in revenue, but a value-pricing model sees a jump in profitability.

Aptus Accounting & Advisory committed to value pricing from the start, four years ago. In that time it has grown to more than A$1 million in turnover and six full-time staff. SMEs are clearly keen to move to value pricing but the model requires accountants to have a rock-solid engagement and proposal process.

“If there’s no clear way to manage engagement and scope, they will find they end up doing a lot of work for free,” Mihalic says.

Every firm deals with write-offs. Value-pricing firms suffer more from write-offs because they have limited ability to recover work done out of scope if they hadn’t formally extended the agreement. 

Before the firm tightened its onboarding process, “we would do work that we weren’t engaged for. It might have been simple – the client had a small event occur like an audit and we would just do the work,” Mihalic says. “Because there were no time sheets we would, in effect, do the work for free.”

How software guards against scope creep

Aptus set up Practice Ignition, an onboarding and proposal management software, to standardise the way it brought in clients and managed recurring jobs. Now, when an accountant receives a query from a client, the software checks the engagement to see whether it falls under the quoted service. If it doesn’t, the accountant immediately addresses this with the client and lets them know if there will be additional charges.

Mihalic says she is careful to operate under the Chartered Accountants of Australia and New Zealand standards, and what this means for ensuring proper engagement with clients. “We’re killing three birds with one stone: properly engaging our clients, avoiding fee disputes and managing scope creep.”

Aptus spent last year tightening its proposal process and retraining accountants. It saw a 30 per cent growth in revenue in the 2018 financial year.

“Quite a lot of that was increasing our fee per client,” Mihalic says.

Lesson 1: Put accountants in charge of fees

Although Aptus had been using proposal software from the start, it didn’t really see the full benefits until it found the best process. For the first few years, Mihalic and the firm’s administrator were the only ones using Practice Ignition and then only on an ad-hoc basis, often for larger projects.

The administrative team was completely responsible for creating proposals and sending them to clients, even though they were “very disconnected from the work”. Mihalic knew the process could work better and asked Practice Ignition CEO Guy Pearson for advice.

Pearson recommended the accountants themselves use the software and create the proposal during the first call with every client. This made the accountants responsible for setting the fees. “We don’t have fee disputes because of Practice Ignition,” Mihalic says.

Lesson 2: Keep admins in charge of process

Proposal software is so important to the onboarding process because it can break down an engagement automatically into a set of tasks and push them directly into a practice management system.

When a client confirms the proposal in Practice Ignition, it creates the work in Xero Practice Manager or Karbon and assigns it to individual accountants.

The Aptus admin team creates draft proposals for new and re-signing clients. The accountants review the draft proposal for extra services and check that it aligns with the clients’ needs. “When it’s 80% done, it’s much easier to get it finalised and sent out,” Mihalic says.

The admin team hooked up Practice Ignition to their internal messaging system Slack, so that every time a new client signs a proposal the whole office is notified. “We all do a bit of a jig and get excited about it,” Mihalic says. “We don’t celebrate that enough in an accounting firm.”

Lesson 3: Become experts in pricing

It was only when Aptus decided to improve its proposal and onboarding process that it got the full benefits from the software. Mihalic says, in hindsight, the firm needed to find a staff member to really champion the project and get the team and clients engaged.

Now the accounting team discusses fees together at the end of the financial year. The firm blocks out half a week to go through all clients and assess how long the job is taking and whether the fee is appropriate. “We challenge each other on our clients and agree on the new fees,” she says.

Talking about fees and pricing is a regular topic at monthly meetings. The firm has developed an open-door policy where everyone talks about new proposals. “It’s a very open office, now,” Mihalic says. “Everything is very visible. It changes the culture.”

5 tips to improve onboarding

1. Don’t give proposals just to the admin team. The accountants need to be involved in the proposal writing process. It allows accountants to take responsibility for understanding what is covered in the proposal and what extra work falls out of scope.

2. Don’t give proposals just to the accounting team. Admin staff can set up templates and prepare the proposal for an accountant to use in the negotiation with the client.

3. Don’t switch from hourly billing to value pricing without a process. You can take every piece of work when billing hourly and calculate your invoice at the end of the month. You can’t do that with value pricing. If you don’t have a process, you will find yourself working for free.

4. Use one proposal process for all work. Ad-hoc use of a proposal system isn’t effective. You need to commit and standardise to realise big efficiency gains and improvements in revenue.

5. Teach staff how to handle scope creep. The trick to this is to have an honest conversation upfront about what is included in the price. Then when the client asks for a small job, you can price it separately and send it through.

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