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Full Description
Pricing your services and billing for them is one of the most important skills of the successful accountant. Unfortunately, formal education and training courses seldom discuss pricing or billing and firms rarely discuss pricing in an organized manner, making it all too easy to adopt bad habits and policies that impede profitability. David Cottle s Bill What You re Worth walks you through the most common pricing methods and methodologies, teaches you how to discuss pricing with clients, and offers advice on how to motivate employees to bill what they re worth. This edition includes a new discussion on gauging client satisfaction and the key performance indicators to monitor to ensure you are offering top-notch client service. Earn what you re really worth! Learn how to demonstrate your true value to clients. By following the advice in this book you will be able to: * Use tools to implement specific value pricing scenarios * Charge more for those engagements that justify a higher price * Avoid price disputes and handle misunderstandings in an agreeable manner * Upgrade your marginal clients profitability * Raise your standard chargeout rates if needed
Contents
Introduction 1 Once Upon a Time in Ukraine 2 Why Some Accountants Earn Much More Than Others 4 Three Top Reasons Accountants Do Not Earn Enough 5 A Word About Terminology 5 Chapter 1: Pricing Methods in the CPA Profession 7 Types of CPA Firm Services 8 Specialist/Niche Services 8 Extension and Advisory Services 9 Compliance Services 9 Expert 9 Adviser 10 Cost-Driven Prices Versus Value-Driven Prices 10 Pricing and Risk 11 Using Chargeout Rates as a Benchmark 12 Investment Versus Value 13 Chapter 2: How Much Do You Really Earn? 17 The Problem with Partnership GAAP 22 The Ratio of Employees to Owners 22 The Salaries of Owners 23 Interest on Owners Capital 23 Pricing Philosophy 24 The Financial Analyst s Dilemma: GAAP Versus Economics 24 Step 1: Convert Owner s Salaries to Fair Market Value 24 Step 2: Convert Owner s Capital to Financial Equivalents 29 Step 3: Convert Net Sales to Standard Revenue 30 Analyze the Profile Firm 31 Analyze Firm Overhead 33 Analyze Firm Write-Downs 33 The Key to Improving Profitability 34 When is the Top Line Not the Top Line? 36 Unavailable Time 37 Time Not Recorded or Not Delivered to the Firm 38 Sales Variances, or Planned Write-Downs 40 Chapter 3: The Pricing Myths 41 Chapter 4: How to Be Worth More to Clients 49 What Do Your Clients Really Need? 49 A Clients 50 B Clients 50 C Clients 50 D Clients 50 X Clients 50 How and With Whom Do You Spend Your Time? 51 The Potential of Client Meetings Going from Effect to Cause 51 The Iceberg Value Principle 52 What s Missing? The Future!53 The Rearview Mirror Perspective 54 Our View as Accountants54 Look Out the Windshield 55 Iceberg Value Strategy 55 But My Clients Won t Pay for the Extra Service The Rule of Price Flexibility 56 Creating a High-Impact Relationship 56 The Meeting Plan Campaign 57 Lessons from a Mime Transition Your Client From Compliance to Advisory Services 58 How Not to Do It 58 A Better Approach 59 A Realistic Meeting Schedule 61 Chapter 5: Client-Care Key Performance Indicators 63 Client Surveys 63 Other Ways to Measure Client-Care 65 Time to Complete the Engagement 65 Three Other KPIs 65 Chapter 6: Pricing Strategies in a Troubled Market 67 The Problem With Price Estimates 71 How to Avoid Professional Panic 71 Ask for a Deposit, but Don t Expect It 72 How to Handle Price Complaints 73 Current Client Complaints 73 Listen Really Listen 73 Price Objections from Prospects 74 Another Firm Will Do It Cheaper 77 Chapter 7: How to Set Prices 79 Chargeable Time or Billable Time? 80 Five Factors That Affect Your Prices 81 When to Use Value Pricing 82 The Value Gap 82 Factors Affecting Value 84 Arranging Payment With the Client 87 When to Use Results Pricing 88 When to Use Fixed-Price Agreements 89 Packaging Your Services 90 How to Adjust Prices Upward 94 How to Make Balanced Changes 95 But My Fellow Owners Will Never Go Along With That Large a Rate Increase 96 Unleash the Power of Unconditional Service Guarantees 96 Chapter 8: How to Discuss Prices With Clients 99 Train Clients to Pay You Well and Promptly 100 What How Much Is This Going to Cost? Really Means 101 Turn a $438 Sale Into a $238 Sale Without Really Trying 103 Don t Make It Look Too Easy 105 Your Pricing Communicates Your Value 106 How to Use Cottle s Law and Cottle s Corollary 107 The Problem With Price Estimates 109 How to Avoid Professional Panic 109 Ask for a Deposit 111 Be Flexible 111 The Preferred Client Approach 111 Five Important Tools in Negotiating Prices 112 How to Handle Price Objections 117 How to Handle Procrastinators 118 How to Handle Price Complaints 118 Chapter 9: Build a Better Firm With Better Clients 121 Why Are You in Business Anyway? 121 How to Recognize a Good Client 123 Evaluate Clients Realistically 125 Pick Your Five Worst Clients and Fire Them or Upgrade Them 127 Fire the Least Profitable Clients 139 Increase Your Minimum Individual Income Tax Price 140 Raise Prices on Aggravating Clients to $300 Above Standard 140 Give Your Widows and Orphans to Another Accountant 140 Chapter 10: Avoid the Seven Causes of Unplanned Write-Downs 143 What Are Write-Downs, Really? 143 Cause 1: Estimating the Engagement Incorrectly 144 Cause 2: Not Specifying What Is Included in the Price Estimate and What is Not 152 Client Planning Conference 152 Team Planning Conference 154 Cause 3: Inefficiency (Sometimes Laid at the Feet of the Employee s Supervisor 155 Cause 4: Bad Scheduling 156 Assign the Right Person to the Job 156 Avoid Wall-to-Wall Scheduling 156 Cause 5: Bad Supervision 157 Plan 158 Budget 158 Monitor 158 Cause 6: Inadequate Skill in Managing the Client Relationship 159 Cause 7: Unwillingness to Confront the Client 159 Chapter 11: How to Set the Right Standard Chargeout Rates 161 Why the Two-Percent Rule is Dead 163 Three-Step Formula for Setting Standard Chargeout Rates 165 Chapter 12: Motivating Your People to Bill What They Are Worth 169 Define Chargeable and Nonchargeable Time 170 Use the 50-Minute Hour 177 Adopt Daily Time Reporting 182 Round Up, Not Down 183 Use Peer Pressure 184 Require Second-Owner Approval on Substandard Invoices 184 Invoice Promptly to Avoid Toxic Lockup 185 Invoice Progressively 187 Let Employees Draft Invoices 188 Do Not Compromise on Prices 188 Chapter 13: Get It in Writing 191 Engagement Letters 191 Include Realistic Payment Terms in the Engagement Letter 198 Allow for Value Pricing in Your Engagement Letters 199 Change Orders 200 Use the Invoice to Increase Client Satisfaction 201 Appearance of the Invoice 201 Language of Invoices 201 Details of Invoices 202 How to Handle a Higher- Than-Expected Invoice 205 Client Termination Letter 205 Glossary 207
