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As the debate about time-based billing rages on, accountants should acknowledge that not all services are suited to one type of billing method and firms should consider using a variety of pricing models.
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No right answer to the billing method debate
16 March 2017
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QuickFee general manager Michael Kelly told Accountants Daily following his presentation at Walker Wayland's annual conference that the discussion around pricing and billing methods is continuing to be a focal point for many accounting firms.
“Accountants avoid the conversation of getting paid, and it’s a bit of a taboo topic. Now it shouldn't be and it doesn't need to be,” Mr Kelly said.
“There are a few different things that are happening in the market and a lot of it is around different pricing models. There are fixed fee payments and value-based payments that are starting to occur quite regularly in favour of the hourly timesheet type stuff.”
Mr Kelly said it’s important for accounting firms to realise that there are services that lend themselves to be billed based on time, some that are better suited to be billed by value and some that can be packaged into a fixed fee arrangement.
“The fixed fee model works when you have a very defined structure in terms of what's included in the contract and what isn't,” he said.
“When things crop up that aren't included in the scope of work, there needs to be a conversation about how that out-of-scope work should be billed, and generally it’s timesheet-based.”
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However, Mr Kelly said that fixed fee isn’t suitable for all types of work or for all types of clients.
“So fixed fee is good, but I think firms have to adapt pretty quickly in terms of if there's a client who's continuously going out of scope and refuses to pay for the out-of-scope services; they probably have to go back to a timesheet-based or value-based price,” he said.
“With fixed fee, the biggest recommendation is to manage it heavily and make sure that any of the time that's going into the work is measured and recorded, and staff are trained to know which client has a work type of billing model.”
Mr Kelly is an advocate for value-based billing because it is based on what the client gets out of it.
“It’s all based on value, so you have a look at the likes of Xero and those sorts of places. They have the same product for a fixed price, but it's based on the value that the client gets,” he said.
“The more volume you get, the cheaper it becomes to service those clients. The more clients that you get within a particular target market, you get better data, you get better benchmarking, and you can then start to have more specific conversations with those clients that really add value.”
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