I get to work with and interact with hundreds of accountancy firms around the world (including our own) and I’m always humbled by their generosity. The ones I meet, genuinely want to serve their clients to the best of their ability and give the most value they possibly can.
But in doing this, they can fall into the trap of being less profitable than they should be and this can lead into a dangerous downward spiral.
The Downward Spiral
So what happens is… you end up NOT charging the client for all of the value you provide, so you and your team have to start working harder to deliver the value you promised. This starts to impact the level of service you’re able to provide, which frustrates the client so they start giving you it in the neck, wanting to pay even less and may even leave. And this leaves you feeling overwhelmed, undervalued and incredibly frustrated.
But this is not why you set up your accountancy firm in the first place. You set it up to deliver value, impact your clients and build a business which gives you the life that you wanted.
But….. and I’m saying this with love…… you caused this. And as harsh as this may appear, by accepting responsibility for its cause, you are also accepting responsibility for reversing it. But you need to know what those traps are first, so you can avoid them.
The 9 Profit Traps
So these are the 9 profit traps you can get hit by if you’re not careful, which are the root cause of most of your problems…
#1 You Don’t Charge For Everything
Are you charging your clients for EVERYTHING you provide them with? And I mean EVERYTHING!!! I don’t mean with a surprise bill at the end of the year. I mean by outlining what they need and agreeing on it up front? If you don’t have a clear menu of your services with different options and a solid pricing methodology behind them, then probably not.
#2 You Offer Discounts
Do you let certain clients have a discount? Or in other words, are you devaluing your service for certain clients through fear that if you don’t, they’ll leave. Or perhaps you just haven’t been shown how to handle the “discount question”. Think about the last client you offered a discount to and I bet they became a huge pain in the @%$£.
#3 You Don’t Charge Transactionally
Do you still charge based on time? Because if you’re charging you’re bookkeeping services based on time, then it’s no longer in your interest to improve your efficiencies. Charging based on the number of transactions you have to reconcile or invoices you have to raise for them is a far fairer (and more profitable) method of charging.
#4 You Don’t Carry Out Fee Review Every 90 Days
How often do you carry out fee reviews with your clients? In our firm, we carry them out every 90 days. Because our clients will hopefully be having more transactions going through their books or have more staff we’re running payroll for and we need to be paid for handling those (see point #1.)
#5 You Allow Annual Payments
If you’re still allowing your clients to pay annually, then you can’t do point #4 AND you end up working for 2 years before you get paid. Let me explain. You complete their year’s work (12 months), but this takes longer than you’d hoped to complete and so it will be another 6 months before you get paid. BUT… you’ve also completed 6 months of their following year’s work too = 24 months. So the more clients you get, the LESS profitable you become.
#6 You Don’t Have A “Down Tools” Plan
What happens when a client fails to pay you for a month? Do you carrying on working for them? If so, for how long? You need a “down tools” plan in place which says that after 30 days they get a warning. After 60 days, you down tools on everything other than the compliance work. After 90 days you down tools on everything. And to pick those tools up again, there’s an additional fee.
#7 Your Price Is Not Consistent Across All Clients
Do you have consistency across what all your clients pay? Of course, there are variances for their revenue, the number of transactions they have, number of staff, selected services, level of service etc.. But for the same type of client with the same level of service, do they pay the same? Because if not, one of them isn’t paying you enough (go back to points #1 and #2.)
#8 Your Price Is Not Consistent Across All Staff
Do all of your staff work to the same pricing model? Or is it cheaper for clients to work under certain staff in certain teams or with certain partners? If that’s the case, as above, some of those clients aren’t paying you enough. This needs to be consistent and everyone needs to learn from the staff/teams/partners who are charging more.
#9 You Don’t Employ Mid-Year Catchups
When you sign a new client midway through their year, there are certain services which need completing for the full 12 months. So do you have a method for clearly showing the client what those missed costs are and give them a method to pay for them? This could be via a one-off fee or the ability to spread those missed payments throughout the rest of their year. Either way, you can’t leave money on the table.
How To Avoid Those Traps
The reason I know about these traps and the problems they cause is that we kept hitting them in our firm.
And the reason I know how to avoid them is that we put a system, a methodology and a philosophy in place that ensured we NEVER fell into them again.
As other firms started to see what we were doing, they wanted to know how we were doing it. So we took our pricing methodology, the philosophy behind it and the technology we’d developed to ensure consistency EVERY time, with EVERY client for EVERY staff and we created GoProposal.
If you want to avoid these traps (shameless plug alert) sign up for www.GoProposal.com and we will give you the tools, the mindset, the training and the support you need to remove these traps, once and for all, within 30 days.
Traps avoided. Overwhelm reduced. Profits increased.