Small accounting practices ‘underselling themselves’ with pricing
Recent research around the pricing of accounting services reveals opportunities for firms to revise their approach to pricing, according to practice consultants.
A study into practice pricing and billing has revealed that the median amount charged by accounting firms per business client each year is currently $3,500.
The Quickbooks 2024 Practice Pricing and Billing Study also highlighted the wide range of prices being charged for different clients with the minimum amount at only $1,200 per client per year and the maximum amount at $18,000.
Accounting practice consultant Amanda Gascoigne said while the amounts being charged on average by firms didn't surprise her, Gascoigne said accounting practices should be charging more for the value their provide for clients.
"If you think about a small business, even if its a micro type business and you're doing business activity statements, tax planning at the year end, you may also be providing fringe benefits tax services and [compliance for] ASIC, then its really easy to get to $5,000," said Gascoigne, speaking in a recent webcast on the study.
"I would love to see practices actually increase that minimum fee to around $5,000."
Gascoigne explained that a firm increasing its prices from $3,500 to $5,000 per client would only need to service 90 client groups instead of the 128 client groups in order to make the roughy the same revenue.
"If you then think about the number of phones and emails and getting through all the deadlines for each of those clients, that gives you the opportunity of changing so many things for that practice," she said.
Gascoigne said the minimum amount of $1,200 being charged for clients was particularly low and that the findings from the study are an opportunity for all firms to revise their pricing.
Practice Connections consultant Alan FitzGerald said the importance of analysing pricing across all clients of a firm has been demonstrated in some of the projects he has done with larger firms.
"A project that I did earlier this year was to analyse all the billings for reasonably large firms with between 80 to 100 staff. The old Pareto principle really came to the fore," said FitzGerald.
"Around 75 per cent of their revenue was coming from 25 per cent of their clients. However, when we got below the neck and we analysed the other 75 per cent, the average invoice was around only $1,000."
Gascoigne said she sees many small or solo accounting practice owners in particular selling themselves short.
"They may have been working for themselves for quite some time and have lost touch of what they would be worth on the open market," she said.
"In order to calculate their pricing, they may want to look at some remuneration studies and have a look at what they'd be worth and add that to their overhead."
"It's something they've probably done many times with clients but they don't necessarily do it for themselves."
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