How to Set Fees

Source: Journal of Accountancy Use the following best practices in setting fees:

• Determine a targeted net profit on each client using net revenue less direct costs and allocated overhead, and compare to actual.
• Compare fees to those charged by other firms. If time charges are higher than the “right fee,” examine your internal processes and evaluate your efficiency.
• Decide on a billing method, e.g., tax returns on fixed fees, first-time audits on time charges, merger assistance on a minimum retainer plus a value-added bonus for success.
• View value from the client’s perspective. Some services are more valuable than others.
• Avoid additional services for clients who can’t afford them. Ascertain whether clients will benefit from the service. Then be sure they understand the value.
• Send bills as soon as the work is done. The value fades in the client’s mind after time.
• Get retainers where possible.
• When a client’s payment pattern slows, it may be because of dissatisfaction. Find out the problem.
• Explain fee increases. A small increase may reflect higher costs. A large increase may be for added services. Be candid with clients.
• Increasing fees may cause loss of clients, but fewer clients paying higher fees may be better for the firm as it helps them provide better service.
• Spend time analyzing your billing processes, realization percentages, value of services to each client, and opportunities for additional services.

For the complete article, click here and see "Checklist: Fee Management Tips."  Copyright 2008 American Institute of Certified Public Accountants.  All Rights Reserved. Reprinted with permission.  All inquiries to [email protected]

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