The ultimate pricing strategy guide for accountants and bookkeepers

Navigating conversations about pricing with your clients can often feel awkward, especially when you’re trying to convey the true value of your services. 

But when you understand your numbers, profitability and your position compared to your competitors, you can more confidently stand behind your pricing when talking to your clients. You will know with certainty what pricing you can and cannot budge on.

Ignition has produced the 2024 Tax and compliance pricing benchmark report, so you have the information you need to make informed decisions about your pricing strategy. It includes valuable insights about the fees Australian accounting firms are charging, and planning to charge, for the most common tax and compliance services. 

Together with the benchmark report, this blog gives you an overview of how to price your services effectively and competitively. 

When you’re ready to put learnings into action, download the how-to guide to Transform your firm’s pricing and profitability in 10 strategic steps and my Pricing professional services checklist. You’ll have all the resources you need to confidently approach pricing, backed by data and proven strategies.

Before you can start pricing services effectively, you need to understand the different pricing models that accounting and bookkeeping firms can use and how they apply to your clients. 

The simplest and one of the most common models firms use is the hourly pricing model. All you need to do is determine hourly rates for your employees to bill to clients and then just take the total hours worked and multiply that times the hourly rate and you have your price. 

While that might be easy from the firm’s perspective, it’s not as client-friendly. They generally don’t know what the price is until after the fact, and the bill they receive isn’t aligned with the services performed. 

Another model that has gained popularity and relevance is the fixed-fee pricing model. This pricing model sets a fixed price for each service based on a narrowly defined scope. 

Calculating a fixed price for each client can be complicated, based on the services being performed, because there can be multiple variables to consider. But when you standardise your services, it allows for a better way to come up with the fixed price necessary for each service. 

A less common model that’s being used by accounting and bookkeeping firms is the value-based pricing model. Value pricing determines the price based on the value of the work performed to the client. 

This pricing model requires having a good understanding of the client and the work to be performed in order to determine the price for the client. The price given can be billed all at once or done on a monthly recurring basis. 

While hourly pricing has been the standard for firms for years, that doesn’t mean it’s the right pricing model for your firm.  

The fixed fee pricing model is ideal when: 

• Performing tax returns or compliance based work. 
• Scalable services. 
• Well defined scoped projects.

The value pricing model is ideal when: 

• Performing advisory services. 
• Niched within an industry. 
• Slower sales process. 

Hourly pricing model is ideal for: 

• Undefined scope of services. 
• Time-intensive service work. 
• Ambiguous project work. 

As shown above, hourly pricing is not ideal when performing compliance or advisory services. Your firm is better off when it can provide clients with a price upfront for most of the work that you do.  

Do you practise time-billing within your firm? 

If so, this method means that you’re tracking time with hourly rates to come up with a work-in-progress (WIP) figure. Correct? 

Now, if you’re like so many other accounting firms out there, you’re probably familiar with write-offs: when you accrue WIP that’s never going to be billed. 

This can happen for a variety of reasons. Perhaps the WIP figure was inflated; there were technical issues with the work; someone was training on the job, or the work was out of scope. 

So, because you’re not going to bill this WIP, you write it off. When this happens, you’re effectively using a fixed fee – it just hasn’t yet been communicated to your clients. When you have a WIP balance of $4,000 and you know the client will be expecting to pay $3,000, so that’s what you end up billing, it’s the same concept as fixed-fee arrangements. 

A good engagement letter will also contain a clause and a method for you to adjust the fees if you ever find that you have underquoted. And if you use a leading revenue generation platform like Ignition, you can simply use the Service Edits feature to make changes to the price, quantity and billing of existing services even after a client has accepted your proposal. 

 Ignition also has a Instant Bill feature that allows you to quickly bill and automatically collect payment for one-off services, without the need to create and send a proposal – and all within the one platform. 

 This means that if you properly scope work and quickly contact clients if you find something unexpected, there should be no fear in pricing your services upfront. 

By taking payment details once you send out your engagement letter, you will reduce your debtors, firm up on your own payment terms, eliminate bad payers, and take control over your own cash flow.  

Imagine getting paid on time, every time, for all of the great work that you do for your clients. 

By transitioning towards adopting a fixed-fee billing structure, you can link payments with engagements and take complete control over your billing process going forward.  

Once you’ve set a fee for a service and both you and your client have signed off on the engagement, taking payment upfront is the next logical step. Why? Well, you already have their agreement on the price, so why not also ask to be paid on time? 

If you’re working off the basis of monthly recurring fees, taking payment details in advance and being in control of the payments is the only way this really works. 

For clients that you bill on completion, you still have the ability to raise an invoice and advise the client that you will be taking payment on the due date, they then have your terms period to query the invoice if there are any concerns with the service. 

When it’s time to take the plunge, do away with hourly pricing in arrears, and embrace the upfront fixed-fee billing mode – you might be asking what you should be charging.  

Whether you decide to do this using bill on completion, monthly recurring, upfront payments, or any combination of these methods, the first thing you need to know is what other firms are currently charging. 

With an understanding of what other firms are charging, and having worked out your pricing strategy, and how upfront payment works, the transition over to recurring revenue isn’t difficult. 

The biggest, and maybe only inhibitor to this move is the uncertainty around existing work-in-progress (WIP) or unbilled work – so how do you deal with this and ensure that you’re fully protected going forward? 

You want to move your clients to fixed fees from the beginning of the new financial year, but there’s a problem. You’ll be busy completing their tax return and/or other time-consuming work early on in your engagement. 

Fixed fees essentially mean a smoothing over of fees throughout a 12-month period. So, what if the client leaves halfway through the year, and you’ve already spent a significant amount of time on work that they haven’t yet paid for? 

There are two possible solutions for you to pick from, so let’s explore both of them in a little more detail.  

Take your pick, but communicate with clarity  

Whichever pricing strategy you choose to adopt, make sure that you do one thing: communicate with clarity. Clients hate confusion, especially when it comes to money matters. 

 Make sure you outline all the key details regarding your billing and payment process, and ensure that you’ll always be on hand to answer any queries that they might have. If you’re changing your pricing model, read this blog about how to communicate change (with samples). 

You’re an expert in your field and the boss of an established business, not just a skilled contract for hire. Owning that fact and adopting that mindset changes everything, most importantly how you reflect your value and how your clients perceive your value. 

If clients easily grasp your worth, they’ll have no problem paying for it.  

Talking about prices will be a nonissue – no longer a hoop to jump through or hurdle to overcome. You’ll find it’s easy to ask the price that’s best for your business – and never feel awkward about discussing it again. 

Set clear prices upfront and stop chasing payments. With Ignition, you can collect payment details upfront in proposals and automate payment collection once your clients sign. When you connect Xero or QuickBooks Online, the platform can also automate invoicing and reconciliation. 

Easily create, send and sign your proposal, automate your engagements and get automatically paid in one place, with Ignition, the leading revenue generation platform.