"Did I mention my new jobs? Let's Zoom for two hours for free! Can you do my kid's return, too? Whaddya mean it costs more?"
Scope creep is when a client wants work that falls way outside the agreement in the engagement letter. It can easily strain resources and overwork staff — and it usually costs: Unmanaged scope creep costs U.S. tax and accounting professionals an average of some $76,000 a year, said Jennie Moore, partnership manager at professional services client engagement and commerce platform Ignition, and founder of Moore Details Inc., during
Preparer problems include articulating value, keeping a profit margin while appearing to be solvers of all problems, and a sharp aversion for the "awkward conversations," according to Moore.
A poll during the webinar also revealed that almost half (43%) of practitioners evaluate scope creep only after the engagement "and hope [they] get paid."
Morris Armstrong, an Enrolled Agent and registered investment advisor at Armstrong Financial Strategies in Cheshire, Connecticut, learned about "engagement creep" from an engineer friend who often had clients wanting services outside the engagement letter.
"Our engagement letter states that tax prep ends at that, and if there are representation issues that they're separate. Of course, invariably a long-time client, or even a great new client, gets a piece of correspondence which takes 10 minutes to review and resolve," Armstrong said. "I can't charge for that, yet many of my professional friends tell me I should.
"There are also instances where we have given a quote and it's hard to live up to," he added. "The person who says that they have no trades and yet there's a three-page document from Schwab listing everything, and who balks at a fee change can be hard to deal with. I am improving by quoting higher prices and ranges, but wish that in the prep side I could be more hard-assed."
"If there's a problem, I find it's usually a matter of communication and differing expectations," said Phyllis Jo Kubey, an Enrolled Agent in New York. "Getting that conversion out in the open usually resolves the issues. I often lead with something like, 'I sense you're unhappy, and I'm not meeting your needs. Can we talk and make sure we're on the same page?'"
A good sign?
During the webinar — in which Moore mentioned, "Tax service is not an all-inclusive buffet" — she brought up that:
- More than nine out of 10 tax and accounting professionals are chasing clients for payments.
- The gig economy is driving scope creep in that clients' second jobs often create unexpected filing needs; engagement letters have to address these new metrics.
- Scope creep can actually be a sign of growth, in that clients obviously want more services.
Automation of communication and standardization of pricing are two good ways to prevent creep, the webinar discussion said, adding that deposits are strongly recommended for clients prone to scope creep.
"I'm constantly defining or redefining the engagement scope. It's the only way I know how to manage expectations," said EA John Dundon, president of Taxpayer Advocacy Services in Englewood, Colorado, who added that key engagement terms include review, sign, e-file, due diligence and others.
"I have no problem with clients demanding more work without additional compensation. I bill hourly, and my clients are used to that," added Kubey, whose engagement letter spells out that she bills "based on the time and complexity of the return" and that she doesn't have no-charge consultations, even for prospective clients.
"If you are concerned primarily with the cheapest cost and are looking for someone who will slap your numbers on a tax return with little thought or interest, I am not the preparer for you," Kubey's letter adds.
"Experienced qualified practitioners offer value-added services. The ultimate value test is that the customer ends up with more in their pocket even after paying higher fees," Kubey said.
"First, I tell the clients through my fee letter that, based on higher preparation costs, I have to raise fees this year," said Brian Stoner, a CPA in Burbank, California. "If the fees are a lot higher this year, I also email or text the new fee and explain why it's higher. My engagement letter discusses the fee I quoted in one of these ways, so when [clients] sign it they acknowledge they know about the fee increase.
In the fee section of its
"Our estimated fee for the services previously described will be $[insert amount] plus out-of-pocket expenses. We will submit our bill monthly as services are performed, and it will be due and payable upon receipt. If an extension of our services is requested, we will discuss our fee arrangements at that time. Plan implementation as well as plan monitoring and updating, if needed, are separate engagements. If you choose one of these additional services, a separate engagement letter will be provided. These services will be billed separately."
'More agreeable elsewhere'
"If a client becomes stubborn and wants a cheaper fee, I'll propose I increase this year's fee by half this year and then the other half plus 2% the year after," Stoner said. "Then wait for their decision on still using me."
"When a client is overreaching, we respond with a continuum of options that may or may not be acceptable, including, when appropriate, a referral to one of my proteges," Dundon said. "Stubborn clients are invited … to respectfully move on to another practitioner more suited to their needs without a referral, using terms like 'more fruitful elsewhere,' or 'more agreeable elsewhere.'"
