There are so many reasons for moving from hourly billing to flat fee, or value, billing. For me, it was a change I made before I started working remotely, and it came from something as simple as the fact that I was just really, really bad at keeping track of my hours and then remembering to bill for them. It was a solution that made it easy for me to create a recurring transaction in QuickBooks Online that was automatically created then emailed to the client, and made it easy for my clients to budget for the work each month.
When I made the transition, the idea of offering “packages” hadn’t ever occurred to me, so what I did was looked at each client’s 6 month billing history, then used that average for the monthly fee. For new clients, I tried to compare them to an existing client and base the fee that way.
These days, I approach it a bit different – partly because I’ve realized that I’m not just selling my time. I’m selling the 20 years of experience I have doing books, payroll and running an office. I’m selling the knowledge that I’ve gained through working with a variety of different businesses and clients, years of trial and error. I’m selling the best customer service I’m able to offer, based on communicating with clients and finding out what worked, as well as what didn’t. I’m selling my innovation – the passion that I have in seeking out technology that allows people to work better, faster, smarter – then fine tuning the processes associated with that technology so that I can pass that along to help my clients do the same.
At Kildal Services, we don’t have standard “packages” for services. We use a method we call “Base Plus” When a new client contacts us, we explain how the billing works and let the client customize services to fit their needs and/or budget. There are always going to be exceptions to this method, clients that require something more customized. Regardless of how we come to the monthly rate, I have a detailed conversation with the client – learning as much I can about their business, and have them complete a worksheet to detail what they’re doing now (if anything), what they like about it, what the pain point(s) might be, and what they WANT it to be. If they’re already using QuickBooks, I ask to review the data file.
Some clients know what they want, some don’t, and some will tell me flat out that they don’t even know what they don’t know. For that last type, I usually suggest working hourly for the first month or so. This gives everyone a chance to see what is going on, to determine what tasks the client is comfortable and capable of doing, and what he/she wants us to do.
Once we determine the set fee, I make sure the engagement letter includes something about “scope creep”. I had no idea there was a term for it, until just recently, and I love the phrase. It states that the pricing dictated is based on information provided by the client and that should the scope of work changed in any way, we reserve the right to revise it before performing any further work. Once in while, I underestimate the price because despite our best efforts, the client hasn’t been forthright or has simply forgotten to mention something (like having a PayPal account that needs reconciling). And every so often I get it wrong and overestimate the work, or the client ends up taking on more than originally planned. When any of these situations comes up, a simple phone call or email to let the client know that we need to sign a new engagement letter – for more or less – and a new credit card authorization form.
The key to flat fee/value billing is communication. Talk to the client, talk to your staff. Ask what’s working, AND what’s not. Ask for suggestions on making improvements. Let them know when something isn’t working on your end as well, but offer some possible solutions for them to choose from that will satisfy everyone.
One example I give during my live training: I had gone through the discovery process with the client (a non profit), determined pricing, signed the engagement and began work. The first month went off without a hitch; everyone was happy. The next 3 months is when the wheels started to wobble a bit. The board members had started reaching out to me for extra reports that weren’t included in the original scope. The first month, I didn’t really think about scope creep too much – I just assumed it was because it was a new fiscal year, a new bookkeeper. Then when the requests started increasing the next 2 months, I realized I had to address it before the wheels completely fell off. I met with the entire board, and explained that I was now spending double the time I had allotted for their account and had 2 solutions to choose from:
1. I could continue to pull the reports as requested by the board members, but would have to double my fee
2. I could convert them to QuickBooks Online (they were using Pro 2012, in a hosted environment) and charge them as needed to customize and memorize reports, and make each board member a report only (free) user
They were very appreciative of the feedback, and that I had come to them with options that were win/win situations for both parties.
I’ll be honest – not every client and not every project is a candidate for flat fee/value billing; I generally charge hourly to clean up a client’s QuickBooks data, or for one-on-one remote training – but I do offer that training in bulk hours at a small discount (i.e.: 5 hours at 5% off the regular rate).
I consult with other accounting professionals to determine the best approach for their practice and their clients. These accountants provide a wide variety of services, and I explain that they can offer bookkeeping/write up, payroll and annual tax prep for a monthly fee.
One recent client was at a point where she could no longer take on any new clients unless she hired someone, and she didn’t want to manage any employees. I helped her transition to a remote model, and package everything as a monthly fee. By doing this, she was able to manage time better by eliminating the need to travel to multiple clients each day, increase her revenue by 30% within the first 4 months and provide a year round revenue model. Her clients were ecstatic because they no longer had to worry about higher quarterly bills while she prepared payroll returns, or a large bill at year end for tax prep – they knew that for one flat fee every month, she had their back for all of it.
The bottom line is that implementing flat fee billing simplifies client invoicing for a practice, establishes clear expectations between the accounting professional and the client, makes budgeting easy for everyone, and doesn’t penalize the accounting professional for being super efficient and therefore working fewer hours.
Read Step 6-Specialize