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Benchmarking and comparing your firm’s engagements, pricing, and billing is a critical first step in structuring your client fees.
Improving your firm’s pricing, engagements, and billing strategies
16 July 2024
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4 minute read
As inflation and cost of living pressures continue to bite, many advisors in small and mid-size firms are seeking to increase prices. Whether to reward and retain team members, drive profitability, or in some cases simply break even, they’re also acutely aware that their small business clients are facing similar stressors.
Benchmarking yourself against similar firms is an important first step. The Intuit QuickBooks 2024 Practice Pricing and Billing Study provides a comprehensive benchmark for Australian accounting firms in Australia to compare your engagements, pricing, and billing practices against industry standards, offering insights to improve your financial and operational strategies.
Based on extensive data collected from hundreds of Australian accounting firms, the report offers a detailed look at trends and practices so firms can better navigate the complexities of client engagements and enhance their service offerings.
Compiled with insights collected from a quantitative study of accounting professionals conducted throughout May to June 2024 by Agile Market Intelligence, the results are drawn from 443 responses, 74% from boutique firms (1–9 employees), 20% from mid-sized firms (10–49 employees) and 4% from large firms (50+ employees).
Benchmarking pricing and revenue per client, compared to hundreds of accounting firms across Australia
Somewhat unsurprisingly, the responses showed that pricing is largely driven by the complexity of services and firm size, with larger firms pricing their services significantly higher. Cost-plus pricing is used more often than value-based pricing for nearly 3 in 5 (58%) Australian accounting firms.
In determining prices, most firms are clearly prioritising client affordability and cost-plus calculations, rather than positioning themselves as a bespoke or premium offering.
The study found that the median annual revenue per client for accounting firms across Australia is $3,500 and while there is a degree of consistency between the states, South Australian firms report the highest revenue per client ($5,000) and Tasmania the lowest ($750).
Getting paid on time remains a key challenge across the profession
While invoice payment terms of net 7 days are most common, responses showed that only 1 in 3 accounting firms are being paid consistently within payment terms. This pattern of payment behaviour exists regardless of the payment terms firms set, indicating a need for greater control, reminders, and debtor ledger management to avoid cash flow challenges.
The study showed that there is a clear preference for more frequent billing regimes, with the majority (75%) of Australian accounting firms billing quarterly, monthly or utilising project-based invoicing.
Diverse engagement approaches, similar scope creep challenges
The study also found that firms are approaching engagement structures, providing touchpoint experiences, and managing scope creep challenges differently.
While annual engagements with clear deliverables continue to be the primary engagement structure used by 56% of accounting firms, practice owners should consider clarity, honesty, and adaptability when structuring their client engagements.
Quarterly touchpoints are seen as standard among boutique and mid-sized firms, with 44% of accounting firms communicating quarterly with business clients. Larger firms break the trend, engaging with clients more often, either monthly or six-monthly.
The study also found that costs associated with touchpoints are predominately included as part of the engagement, while some firms bill separately.
Scope creep is a critical challenge, with 1 in 3 firms incurring creep on more than 30% of their clients, and larger firms more often. Only half of firms consistently charge their clients when scope creep occurs. Most firms tackle the cost of scope creep by charging their time at an hourly rate to business clients.
For a deeper dive into the findings and practical strategies you can employ in your firm, join us for the ‘Discussing the 2024 Practice Pricing and Billing Study’ webcast on Wednesday, 31 July 2024, 2pm–3pm AEST.
You’ll discover insights on the findings in the report, and leave with a better understanding of accounting practices’ pricing and billing strategies in Australia.
You’ll hear comparisons of pricing and billing strategies based on practice size, location, and client profiles, the factors that dictate pricing, and discover strategies for reviewing pricing.
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