New practice - basis of charging

Northamer said:

Hello all. I am new to this forum, but am looking forward to participating in what seems to be an excellent forum.

I am after a bit of advice regarding the basis of charging clients, as I am looking to set up a practice from home, offering accountancy and tax advice. I am a chartered accountant, being a member of the ICAEW.

My query is aimed both at practitioners and those who use accountants. My initial inclination had been to offer services based on a competitive hourly rate, and to market my services on this basis. However, is it generally the case that clients will be more receptive to services being on a fixed fee basis (or perhaps a capped fee)?

Does this latter option not leave the practitioner exposed to a very poor rate of recovery if the task becomes significantly more involved than might initially have been envisaged?

Having been out of practice for a few years, I am a little unused to dealing with issues like this, but I would expect it to be a key consideration for a potential client.

Thanks in advance for any thoughts / advice.

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As regards the basis of charging there are pros and cons for each which you seem to be aware of .. so it is a question of risk, method of operation and collating info before you give a fixed fee quote.

Good luck with it - a lot to set up initially but worth it in the end IMO.

As a punter I would want a fixed (and reasonable) fee, though I wouldn't mind being told what I must do, eg present information in good order, to qualify for that.

I face the same dilemma in charging for professional services in a different field. The danger is always there that fixed fee work can run out of control, to which the only answer is to manage that risk and the clients to prevent it.

The golden rule is never charge retrospectively for additional work, unless you want to lose that client.

It is human nature to want a fixed-fee up front. Hourly rates muddy the waters, since an efficient fast worker with a high hourly rate could well end up costing less than a disorganised distracted rival whose hourly rate was low.

I used to work for a software house that quoted for modifications. We always quoted fixed fees, and we found that when we quoted a simple final cost for the work we were less likely to get arguments and shilly-shallying from potential clients than when we quoted days1 x rate1 + days2 x rate2 etc = cost. So internally we'd be working on a time-cost basis but we'd just quote the clients the answer, and we could actually get away with higher quotes if we supplied *less* detail to argue about.

Inevitably with a fixed fee you'll get some clients who end up making a loss for you, and within reason you just have to take that on the chin and set it off against the well-behaved clients who get everything to you on time and end up costing less than the average to process. We have this issue with supporting our product. A tiny percentage of our clients attract a very large percentage of our support effort (cost), but we'd be silly to begrudge this when so many clients hardly ever need any help at all.