While we don’t believe that cost should be a primary motivator when hiring as important an adviser as your accountant, preferring to focus on competence, area expertise, personality and service delivery commitments, at Acumenica, we recognise that this remains a commercial decision and that costs is a factor, especially in these times of financial belt tightening. So, we thought we’d pop the hood and explain a bit about what accountants charge, how they charge, and what factors need to be taken into account.
HOW do accountants charge? (Pricing Methodologies)
In the UK, accountants’ fees are typically charged either on an hourly rate; on a fixed fee; or on a value based method:
Hourly rate
Although it's becoming less popular, many firms still charge by the hour. The fee you pay is entirely dependent on the time spent on the work or project. There is no certainty of pricing using this method, and of course there’s no real reason for the accountant to work quickly or efficiently. Business owners are waking up to this and are increasingly insisting that their advisers use one of the more modern methods of price calculation.
Fixed fee basis or packaged services
More and more accountants offer fixed fee arrangements for specific services. This provides clients with greater certainty about the cost of the service upfront. Fixed fees are common for services such as preparing annual accounts, tax returns, and certain types of consultations. We operate on this basis at Acumenica and find it works well both for clients and us.
Value pricing
In some cases, accountants might use a value-based pricing approach. This involves setting fees based on the perceived value of the services to the client, rather than just the time spent. This method takes into account the impact of the services on the client's business or financial situation.
WHAT do accountants charge?
Sorry, but there’s no simple answer to this. The truth is: it depends. It depends what you want done, it depends what methodology the accountant is using, and it depends how expensive the accountant’s base fee is.
However, as a guideline, here are some of the fees Acumenica charge:
Simple contractor - one man limited company, using FreeAgent, VAT registered, Revenue £100k, single payroll. We provide contractor compliance services (VAT returns, payroll, year end accounts and returns) on a fully packaged service for £99 per month.
Barber shop - limited company, using FeeAgent, no payroll, VAT registered, Revenue £250k. We provide compliance (VAT returns, payroll, year end accounts and returns) as well as quarterly management accounts and other specialist services for £299 per month
Family restaurant - limited company, using Xero, VAT registered, Revenue £1.2m, ten weekly payrolled staff. We provide compliance (VAT returns, payroll, year end accounts and returns) as well as quarterly management accounts and other specialist services for £899 per month.
What factors affect what accountants charge?
As you’ve probably figured out by now, there are many factors that will have an impact on the fee. Although under value pricing and fixed fee packages you are nor paying for someone’s time directly, the fee you pay will be anchored somehow to the amount of time spent by the accountants on your work. This is especially true in fixed fee pricing. The accountant will make assumptions about what you need done and how long this will take them.
Is the accountant specialised in the accounting system you use? If you use an accounting system that your accountant is not familiar with, it may cost you more. At Acumenica, for example, we only work with FreeAgent or Xero businesses. If we were to work with a business using Quickbooks, we would need to charge more. In truth this is because we don’t want to work with any other system as it causes problems with our processes and procedures.
The type of business you are in can also have a huge influence on the fee you are charged. Again, this is anchored in time, but if you operate the kind of business that has many transactions which need to be sample-checked or audited, your fee is likely to be higher than if your business sends a couple of invoices out a month.
If your accountant is providing payroll services, the price can vary dramatically between monthly and weekly payroll. It’s obvious when you think about it - weekly payroll requires 52 interventions each year, whereas monthly requires only 12.
Ultimately, some accountants charge more, some charge less. Whilst we do believe in striking the balance between cost and quality, you may be paying for something you don’t need: if the fee is too high, maybe take something out of the bundled services that you can do yourself (bank reconciliation perhaps, or receipt management), or change the frequency of periodic services such as payroll or management accounts. What you should not do is ask for a discount or a reduction in the fee for exactly the same service. This is unfair on the accounting firm and will ultimately lead to a reduction in service levels. Our services are priced for profit - we’re a business after all - and we shouldn’t be expected to work for cheap, just as you shouldn’t.
If the accountant is firm on what you’ll be charged, and you’re firm on what you want to pay (and these figures aren’t close to one and other), then you need to make a decision: can you take out some of the work, or adapt the package in any way - maybe reduce expected response times for example? If the answer is no, you only really have two options: either accept the fee as it is, or look around for a cheaper alternative. Remember, though, as Sailor Jerry said all those years ago “good work ain’t cheap, and cheap work ain’t good”
If you're interested in finding out how Acumenica’s pricing methodology could affect your business, please get in touch today. Partnering with us will give you confidence and peace of mind that your business finances are in good shape. To start the journey, please book a Discovery Call or complete the form on our Contact Us page.
