Value Billing is a Realistic Opportunity

Source: Accounting Today

Ron Baker, founder of Verasage Institute, wonders why wimpy partners are allowed to price their services. They hamper the firm’s profitability. A McKinsey study asserts that a 12 percent increase in the bottom line can be achieved by a one percent increase in prices.

A 100-person firm in New Zealand, and a 24-person firm in Australia recently developed chief value officer positions. Their firms will no longer quote engagements based on hours. Both firms will soon abandon time sheets as will about 300 other firms around the globe.

Hours do not reflect the value created for the client. When we purchase a product, we don’t value it on the basis of the time it took to manufacture it.

The absence of time sheets will create a recruiting advantage. And since finding talent is a major problem in accounting firms, the elimination of time sheets will give them a competitive edge.

These value billing firms are pioneers and may be the subject of ridicule and scorn, but Baker says, “so be it.” Their higher profits and competitive advantages are excellent trade-offs.

From Accounting Today, May 2, 2005. Click on the following link for the complete article:

http://www.webcpa.com/article.cfm?articleid=12797&;pg=acctoday