Do you face problems finding the right price for your accounting services? In that case, you have come to the right place. The price you charge for the service should not be arbitrary. Choosing a price that makes sense should be purposeful and strategic. You can make a difference between scraping by and growing by pricing your service effectively.
It is a proven fact that customers will often gladly pay more than they have to for products and services offered by successful businesses. It may be necessary to study the psychology of pricing in order to discover how to set prices that are suitable for your accounting firm.
Why is pricing accounting services difficult?
Accountants have always worked on a billable hour basis as a pricing strategy for as long as anyone can remember.
It is exceptionally easy to calculate your return on investment using this method, which made sense to most certified public accountants. As you watch the clock run, you'll be able to see what your margin will be for each hour you work.
Now, this method comes with a few disadvantages (which we will not discuss here), many of which are leading to many accounting firms reevaluating their pricing strategies.
In today's market, small business clients are increasingly seeking certainty upfront in their service cost before receiving it. Unfortunately, this can be challenging for accountants to price. There have been many examples of accounting firms having bad experiences when trying to adopt fixed pricing (fixed fee)and value pricing.
The reason is probably that the approach is so different. This requires a little more thought and strategy than just billing clients by the hour, as well as some knowledge of price theory. Not all hours are equal in the bookkeeping and accounting world. With the integration of basic bookkeeping services, CFO guidance, financial reports, technology implementation, tax return preparation, and strategic advisory, you have a variety of services that can change your business model.
Accounting firms' common pricing strategies
If you are evaluating what pricing strategy will work best for your accounting firm, you might want to consider some of the common pricing structures used by other accounting firms. we have outlined five common strategies which you must know about that.
Cost-plus pricing
Pricing accounting services using a cost-plus strategy is one of the most basic pricing strategies. A percentage of what it costs to offer your service will be added to that amount in order to determine how much you should charge customers. In spite of the many benefits that cost-plus pricing can provide to your business, it can often leave you with a lot of money on the table for businesses that provide services rather than products.
A flat-fee-based pricing model
A flat-fee pricing arrangement is what it sounds like: you charge a set amount for your accounting services. Generally, your client will know exactly how much they can expect when you start working for them. Flat fees are different from cost-plus pricing because they do not fluctuate with your expenses; they remain the same regardless of how much time or resources you commit to a project. Simple tax preparation is a good example of a repetitive or basic service that can benefit from this pricing approach. Complex projects do not benefit as much from this pricing strategy.
Competition-based pricing
In addition to competition-based pricing, you can undergo the process of pricing accounting services by comparing what you have to offer to what your competitors have. Where does your competition differ, and how can you do the same? If you want to stand out from the crowd, you can choose between three modes of competition:
- As a result of your price difference, you are able to offer your patients an equivalent product at a lower price.
- The service or experience you provide is better or at least equal to what your competitors offer.
- Service offering: Offering truly exceptional accounting service or experience can allow your practice to charge more than the competition.
To at least know where you fall on this spectrum, you ought to know how your competitors are pricing their services. To improve your chances, look at how other accountants charge for their services. You should keep an open mind and be ready to change your strategy when it will benefit your business.
Time-based pricing
Often, accounting firm(s) use the time-based pricing method as their default approach to pricing. Accounting firms track every minute they spend working on a project using this traditional method of billing. You then present a list of accounting services you provided along with the hourly rate for your client.
Valued-based pricing accounting services
A value-based pricing approach is when you price your accounting services according to what your clients are willing to pay, or what their perception of the value is. The concept of value-based pricing doesn't just mean charging the most, it means setting prices depending on your knowledge of your customers.
Identifying your business's differences begins by understanding what type of clients are interested in your accounting services and knowing what your competitors are charging for similar accounting services. The objective of value-based pricing is to place a dollar value on that differentiation.
Conclusion:
Do you know how to price accounting services for your firm? If not, this article offers a perfect read for you. I hope this article helped you undergo the process of pricing accounting services.
Any Questions? Request a callback from our Tax Experts.
