Art of Accounting: 8-step review of your client services and pricing

January 3, 2022 10:31 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.
Want unlimited access to top ideas and insights? Subscribe Now

Here are eight steps to review your client services and pricing.

Added services

Review your top 10 clients and determine if you provided any new services to them in the past two years. If not, then get started now. One way is to see what added services you provided to your newest clients. Usually, the new clients moved to you because of things they felt they should get that they weren’t and were “promised” those services when they signed on with you. Then examine the totality of your services and capabilities, and compare them to your clients’ needs. Is what you are doing great or just sufficiently, and what can you do that your clients either need or are getting from someone else that you could do for them?

Services not charged for

Review last year and determine if you provided services you did not charge for. These would include out-of-scope services, added work the client asked your staff to do or requested that you perform, or that were necessitated because of tax law or accounting changes. If you performed services that were not requested, why were they done? Were they necessary due to changing circumstances or under rushed conditions, or were they done to make up for work the client’s staff should have done?

Realization

Staff and client realization are measurable ways to assist in determining the profitability of staff and clients. These are obtained from data captured on timesheets and billing or collection records. If you do not maintain timesheets, or only use them for pricing, then you are missing out on a valuable tool. These amounts indicate profitability of staff people and clients. It can also lead you into assigning the right staff for your clients. There is a lot more to figuring out your profitability on staff and clients, but these metrics are a great first step.

Utilization

Staff utilization is often used in the same context as realization, but this is completely different. I suggest that this is not a number but a method of assessing if you have your best staff on your best clients with a staff development pipeline under them. I would also look to eliminate as much nonclient and nonfirm growth services as possible from their busy schedule, including administrative work and professional services that lower-level or paraprofessional staff could perform. I would also try to shield them from becoming mired with clients that do not offer them growth potential, which would include technical, supervisory, client interaction and project management skills.

Referrals

The best marketing pipeline you could have is referrals from existing clients. Your record of referrals from your client base should be reviewed and analyzed as to why some clients seem to refer you a lot, while others not at all. To me, this is mega data, but you do not need a supercomputer for this, just some effort reviewing the sources of your new clients over the last couple of years.

Organic growth

This is how much your practice has grown from your client base in the past year. It includes fee increases for existing or ongoing work, and added services. Minimally this should grow about 5%, which would cover your increased costs. If you haven’t had at least this much growth, you must be falling behind. Also, if you haven’t performed added services for your clients, you are not only missing an opportunity but are leaving an opening for other firms to get a foothold in your clients. Examine your services and look for ways to help your clients grow better.

Engagement letters

Prepare engagement letters for all clients, but especially your larger clients, individuals, businesses, and not-for-profits, if for no other reason than to make yourself fully clear about what you would be doing, and not doing, for that client and how you would be compensated and then paid. If you cannot state the arrangement clearly in writing sitting in the calm of your office, how would you be able to describe it should a problem arise?

This eight-step review process should not take too much effort, but it does require effort. I suggest closing your office door and turning off your email and phone and spending an hour and half going over these eight steps. They all work, and together they will make you a powerhouse in growing your practice and profits.

Have a happy, healthy, peaceful and successful New Year.

Do not hesitate to contact me at

emendlowitz@withum.com

with your practice management questions or about engagements you might not be able to perform.