Source: Accounting Web

Accounting Web interviewed Ron Baker, author of The Professional’s Guide to Value Pricing.

CPAs bill by the hour because it seems risky to do otherwise. So, it becomes the client’s risk. Clients therefore force write-downs. Value pricing seeks to determine the value of the services delivered. Higher prices should flow from that.

Baker believes that 7 to 10 percent of CPA firms use value pricing. Although a study by Bay Street Group (www.baystreetgroup.com) says that 27 percent of firms use value pricing, Baker says many of them are merely adjusting their hourly rates after an engagement to reflect value. Baker says value pricing is a predetermined price, like the price of a meal in a restaurant.

Baker uses the phrase “key predictive indicators,” (KPI) to identify what clients value. It might include quick turnaround, the expected time for a returned call, the client’s preference for the telephone v. email, having contact with partners v. associates, etc. From this the firm can construct a matrix to guide it in serving individual clients. It is also used to determine ways to add more value to clients.

KPI focuses on the firm’s effectiveness rather than its efficiency. KPI will be detailed in Baker’s next book, Measure What Matters to Customers, in presentations this summer at six conferences for the California Society of CPAs, and at “Boot Camp” training for Sage Software on August 2-3.

From Accounting Web, March 21, 2006, www.accountingweb.com. For the complete article, click on the following link: http://www.accountingweb.com/cgi-bin/item.cgi?id=102137&;d=815&h=817&f=816&dateformat=%B%20%e,%20%Y. (To view this article, you must be a subscriber. Subscription information is available at the site.)