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• # 108646
• Thu 07 May 2015 11:28 AM

I'm currently doing my research before I start offering fixed fee pricing to all new clients. I know that it's something that I need to do because I'm feeling the heat from my competitors via my prospects. That's in Xero-land. I'm not sure what it's like for the others using MYOB, Reckon, QBO et al. I'm facing a few challenges that need solving as follows.

1. My current contracts for my staff (independent contractors) are inadequate with respect to fixed fee pricing because my staff are currently being paid a percentage of the average billable hourly rate of the work that they do. I don't think that they should wear the losses and gain associated with this change, as they are too small (as individuals) to wear these fluctuations. The bigger a business is, the more easily that they can handle these over- and under-charging situations. My lawyer is in the process of amending my independent contractor agreement right now so that this aspect is covered.
    
2. My curerent contract for my clients is also inadequate for this purpose. I have until now been using a Letter of Engagement, which is a combination of paragraphs/clauses that I have gathered from ICB and Vija Platacis, (thanks Vija!) It doesn't address fixed fee arrangements or a fixed term contract. I imagine that I am going to need something more formal than the Letter of Engagement that I have been working with until now. It was suggested to me by Mel Power, (Head of Bookkeepers, Xero), that I write into the contract that the client has a 3-month probationary period, to give them the peace of mind to back out if we're not delivering what we promised. After that, a fixed term contract would give me a more secure revenue stream, which I think would be extremely valuable. Does anyone already have such a contract that they would be willing to share? Would any of you be willing to share the cost in having one drawn up?
    
3. The final challenge is how to structure the fixed fees. My thoughts so far include a fixed fee package for a given number of bank feed lines, invoices, bill and employees, with the option of clients purchasing additional blocks of transactions, but I have no idea what these fees should be, and whether they would be industry specifc, or dependent on inventory, complexity of payroll etc. There are so many variables. There would also need to be some fail-safe in place for us for messy data files that need rescuing, or clients that get out of hand, (like a fraud situation that one of our client was and is still facing). Proponents of fixed free pricing say that it is more value based and provides better margins. I'm all for that.

I'm happy to hear from anyone on these three questions or on fixed fee pricing in general. Given that the industry is moving in this direction, I think that it is wise to begin an intelligent discussion and evaluation process of the shift taking place in our industry, and prepare a strategy to survive and thrive in this new environment.

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• # 108677
• Mon 11 May 2015 02:04 AM

Thankyou Carmen for opening this discussion.

This has been swimming in back of brain for long time.  I also note your comment that it might be easier to implement in a larger practices where it might be easier to absorb losses against gains.  I have often wondered if this is the case.

C:

Two clients with quite similar business profiles can be largely different in terms of the time required to complete their work.  As you mention, there are so many variables.  Some may be easier - like how many bank accounts/credit cards (and think if there's a lot of action on directors loans, should be treated as bank accounts for pricing) these could incur an extra fee per account.  

In my mind, one of the biggest challenges is how organised the client is.  Can they be relied on to provide all material in a timely manner?  The same fixed fee package for an organised client could return a nice margin.  On the other hand that same fixed package for a similar business profile where you have to chase for everything, stop-start the job etc could lead to lots of unbillable hours.  How then do you advertise a fixed fee for packaged services but justify a different fee for some that require extra time?  Or do you spend lots of time (your admin time) billing for variations?

I'm dealing with builders about getting a house built.  They have a "Continguency fee" if job cant start on time  Has crossed my mind that would be a nice one to apply to bookkeeping.  Provide a checklist of what to be provided, date to be provided by and if not done add the "Contingency Fee"?

I have a few existing could easily put on fixed fee. They have been predictable over a long period; same thing each month/quarter and possibly more importantly they want as little as possible input.  I control the workflow and can use whatever at my disposal to get through those jobs.

Brings me to another challenge from the online world - where the client shares some of the bookkeeping.  I have a tough time trying to convince some - the less they do the less I could charge.  Some cases I charge differently.  For future looking at implementing significantly different rates for these kinds of jobs.

Looking forward to others taking up this discussion.

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