Pricing accounting services is a critical genre that must be treaded on carefully. While you must charge for the service you provide and the values you add, it is only normal to doubt your offerings in the competitive market. Questions like “Am I charging enough” or “Am I charging too much”, and even “Will accounting clients understand why I am charging what I am charging” continue to loom over the accounting leaders. For accounting firms and bookkeeping leaders, it is important to decide what are the key determining factors when it comes to changes in prices.
What is most important here is to convey the factors to the client in detail. However, it is important to understand that pricing is all about tapping into the psychology of your clients. When you have succeeded in that, you are most likely to succeed in your approach to determining the justified price.
Now you might wonder what they are comparing YOUR value with. There are quite a few:
– The number of services they are receiving in total
– Additional value they might see from the service
– previous prices (if they have been your customer already and you are increasing the price)
– The price of your competitors
– The estimated prices
– Their willingness to adjust
– Their inclination towards your services
In this article, Finsmart Accounting – globally trusted for outsourced bookkeeping services – will share everything about seasonal pricing to help accounting firms and CPAs increase their cost in 2024. Let’s start by understanding what makes the pricing of accounting services harder than other services.
What Makes Pricing of Accounting Services Harder to Figure Out?
In the years of accounting existing as a service, the clients have been billed on an hourly basis. This started when certified public accountants used this easy way to calculate the Return on Investment. The more hours they worked, the better they billed. Due to several factors, accounting firms have chosen to steer away from the path of the hourly billable model. Although modern accounting firms are much more forward when it comes to being upfront for the prices, many firms still struggle to get the true value of their offerings.
Modern accounting is not just about helping with bookkeeping and taxation. It is about understanding your client’s business, guiding them through the way, and having the knowledge of what you are worth!
The Accounting Pricing Psychology: What to Do?
Pricing your services is simple, really! Start by looking at the services from your client’s perspective. It is the psychology of your customer that truly reflects if your new accounting pricing strategy will work:
– Package your solution, instead of individual services:
As a firm, there is no doubt that you solve a problem. So why not price the solution, which showcases the services as a means to achieve the end goal? One of the easiest things to include is your advisory services, everyone wants them; so you might as well get the value out of it. Your pricing strategy should also be vocal about the crisis you help your clients solve – reducing the number of manhours, for example, or enhancing revenue/profit by X percentage.
Recommended reading: Learn everything about auditing in accounting!
– Price your overall program, not the resource:
While you have to earn the value that you provide the accounting client and your resources’ costs, you do not have to deliberately mention that. That can either stay underlying or not stay at all. Instead of talking about your higher rates, talk about the results your services will deliver. It is in the entirety of your program that your clients will find the value you truly want to showcase.
– Create roadmaps:
For each of your bookkeeping or taxation services, outline the roadmap – what is it, who needs it, and why. However, do not forget to keep your avenues open for customization. Creating roadmaps and individual customer journeys not only solves business problems but also gives your customers clarity on what it is they are paying for. It also makes it harder for professional buyers to compare your prices directly with competitors.
Now, you have an idea about the pricing psychology. So, let’s discover the top steps to raise accounting fees during the season.
Steps to raising accounting fees:
– Set policies and keep aims high:
If you have been running your accounting firm or CPA practice for a while you know what works for you. Here’s what you can do to make sure the price increase does not feed sudden
– Maintain a yearly increase percentage rate in your prices
– Lay the terms clearly in the contract
– Reiterate before renewal of contract
– Offer referral benefits
– Keep your clients aware of the need to increase prices, like inflation
Recommended reading: Cash flow management reporting tips and ideas for CPAs
– Review relationships with clients:
This does not mean you take a partial approach toward determining if you should increase prices. The questions you need to focus on are:
– Has the workload of the client increased in the past year?
– Does the client still fit the service model that they were onboarded in?
– Has the number of resources for the client increased?
– What is the value your firm has been able to add to the client?
Answering questions like these helps emphasize how your accounting firm has been addressing the client’s pain points and how you solve them.
– Get rid of the hourly pricing model:
The problem with this model is that it is quantitative rather than qualitative. The best part of doing away with this accounting pricing model is that your clients will be more than happy to agree. Often, they do not know the total bill unless they have been charged.
How to build a better alternative?
– Build a accounting pricing model that suits advisory and compliance services too
– You can try the fixed-fee pricing model, which helps set a fixed price based on the services you offer
– Standardize services to make sure the prices are consistent
– Lay clear guidelines on how you deliver services, do not forget to make room for flexibility.
– Do not forget a revised engagement letter, if this is something you are starting at a later point in your professional relationship
– Redefine the scope of work if needed
– Determine your pricing:
If you have decided to move away from the hourly billing system, congratulations! You have taken the first step in making changes that your accounting firm or CPA practice needs. Now you might think what next? Understanding the current rate in the market while factoring in inflation is not the only thing. There’s more:
– List the services: In case there are any addition or removal of services, abide by that. In case you continue with the current list of services, put them on paper.
– Calculate per service: If you have used software to list the services, this step gets easier. Sort the services by category and use the details from your ledger to get the individual services.
– Set base fees: When you know your fees per person, you can also filter the data to see your current and maximum accounting fees. This will help you set the minimum fees for your services.
– Choose tiered pricing: It is essential to give a structure to your pricing and create a detailed pricing matrix. Consider factors that can help you determine what pricing plan your clients would want and how it can help them. You can also use this as a accounting pricing model to categorize your clients.
Recommend reading: Learn about the accounting outsourcing services pricing in India!
Methods of increasing accounting pricing: Endnote
Increasing prices at a stable frequency is essential for all businesses, including accounting firms. This helps firms balance annual factors like the cost of resources, inflation and so much more. For leaders, it is essential to tap into the minds and psychology of the customers and understand what is it they are paying for.
Leveraging scarcity and urgency, utilizing dynamic pricing models, and optimizing pricing strategy helps the firms remain competitive in an ever-evolving market. Increasing the pricing using the right tactics helps enhance customer satisfaction and loyalty. Take charge of your pricing strategy today and ensure your businesses thrive in the seasons to come.
Also, don’t forget to check out:
India entry consulting services
Accounts receivable outsourcing services
Outsourced financial controller services
Maanoj is Co-founder & Director of Growth Strategy & Alliance at Finsmart Accounting. He is an Outsourcing Expert, a People Champion, and a Dynamic Leader with strong Business Strategy and Scaling-up experience. He has incubated businesses, sold & exited ventures; helped build strong enterprises in very diversified verticals like Fintech, HR & Consulting spaces in various CXO capacities over the last 20 years.
