Transforming Client Accounting Blog
Pricing Outsourced Accounting Services as a Value-Based Fixed Retainer Fee Model
NEW YORK (Sept. 7, 2012) –Many firms are taking advantage of the advancements in cloud technology to transform their client accounting service practices and offer higher value, outsourced CFO services to their clients. However, one of the biggest struggles we see for firms is pricing. Their natural instinct is to take the traditional model of rate times hour and try to apply it in this new environment. The problem is that model just doesn’t work here. As you gain efficiencies with web technologies, you’ll actually spend less time on transactional processing. More of your time will go towards true business advisory services and in an hourly billing model; you’ll likely find yourself losing money.
Value should be determined by the client, not by the hours invested in the project. Firms need to step outside their comfort zone and force themselves to think more like entrepreneurs. What would it cost the client to hire employees to perform these services internally? What value will the client recognize from leveraging the firm’s technology platform and existing processes? Thinking this way is not easy for CPA’s. That is why many firms have hired someone with value creation skills to be responsible for pricing. This person should also be placed in conversations with clients prior to delivery of services to carefully define scope and terms of the engagement. Getting all this out in the open up front helps you maintain leverage. In the old model, you give up all your leverage by naming your price after you’ve done all the work.
Change orders should also be an important part of pricing strategy. When the engagement goes beyond what was outlined in the initial scope, change orders offer both protection and opportunities for additional work. Finding these additional opportunities requires conversations with the client and discussing their dangers, opportunities and strengths. This involves a different skillset than many accountants have depended on to do the transactional bookkeeping work in the past. Many firms are finding that they need a business analyst to fill this role. Transitioning client accounting services to the cloud is a huge opportunity for firms across the country with countless benefits. The common mistake though is to jump right to the technology decision when the change management and business process issues are the challenges that need to be addressed up front. Pricing is definitely one of these major issues and I hope you’ll join Jennifer Katrulya and me at the Digital CPA Conference (December 5-7, 2012) in Washington DC for our session on “Pricing Outsourced Accounting Services as a Value-Based Fixed Retainer Fee Model” to learn more.