Value Pricing versus Billable Hour Pricing
Making the Work Worthwhile.
Currently tax professionals and accounting firms bill for their time by an hour of time spent on the project. So, the process is called billable hours. So, you get what you pay for. This process of billable hours has a long history or tradition in the industry. Unfortunately, many accounting firms are stuck in a billing routine charging their clients on the same basis that they always have.
But that’s now changing. The tax profession and accounting industry is going through a major shift in how they bill their clients. New ideas, new practices, and new technologies are making new ways of billing more attractive. We will look at how value pricing can revolutionize the way to engage with business clients. This value price process increases the value that advisors bring to clients.
Different Ways of Billing There are several ways of charging for accountancy services. The main ones are listed here.
• Hourly based billing. The firm charges a set rate per hour for services. This is the traditional billing method for many accounting firms.
• Cost plus pricing. The firm charges the cost of performing a service, plus a markup or profit margin.
• Fixed pricing. The firm charges a fixed cost for a specific service.
• Value billing. The firm charges for its perceived value of the service, after the work has been completed.
• Value pricing. The firm charges for the customer’s perceived value of a service, with the price being set before work begins.
What’s wrong with Hourly Billing?
Hourly based billing is still the most common form of billing used by accounting firms. But this is changing. Technology and new business practices are making hourly billing less attractive for tasks performed that are tracked by hours. Where is the value?
What Is Value-Based Pricing?
Value pricing means grouping services into bundles for a set amount. The price is fixed upfront. This means your clients know what they will be paying. This is critical with the strategic plan, especially the budgeting process for a business.
The trusted advisor will have a lengthy discussion with each business owner to explain the concept and the benefits to the organization. We call this program client management expectations gathering and assessment process. This step is essential to build confidence and trust with the business owner. It’s not enough for the people at the top to embrace change. Our entire team will act as an advisor to the business owner to continually work together and create the building blocks of accomplishment for your organization.
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