Ok so you’ve been to see two different accountants for a quote. You need:
- Year end accounts
- HMRC compliance
- Companies House compliance
- Proactive tax planning
- Strategic business advice
- Forecasting and finance modelling
- Enterprise value building
- Exceptional customer service
- Feeling valued
Then the quotes come back:
- £2000
- £5000
…they both very friendly, and each said they would meet your needs?
And now you’re somehow supposed to work out which one represents value??
Here’s the problem – you can’t see the services – you have to experience them before you buy them. Buying a car? – can test drive it. A house? have it surveyed.
But accountancy?
Let’s simplify this:
What’s the difference between a £5 bottle of wine and one that costs £10?
The bottle, label, duty, vat, transport and retailer mark-up are all broadly the similar – the basics. The difference is inside the bottle.
A £5 bottle of contains less than £1’s worth of wine. But if you’re prepared to pay double, you’ve now made room in the budget for:
- Better vineyard sites
- Superior grapes
- Lower yields
- Time in barrel and bottle
…its better in every way
Accountancy works in exactly the same way.
But here’s what you don’t understand – accountants are terrible at explaining their value. They hate justifying themselves, and generally fall to pieces when they’re asked to explain their fees.
They’re people pleasers, so when they get questions around fees, they see them as potential disagreements, and hide behind pleasantries.
I’ll break this down for you so you understand exactly what you are paying for.
You still need:
- Year end accounts
- HMRC compliance
- Companies House compliance
…that’s the £5 bottle.
and - Proactive tax planning
- Strategic business advice
- Forecasting and finance modelling
- Enterprise value building
- Exceptional customer service
- Feeling valued
…that’s the £10 bottle
The wine is the level of investment the accountant makes in:
-
- Training
- Systems
- Diligence
- Expertise
- Technology
But most importantly
- TIME to your affairs
Let me share our figures with you. Every £1 an accountant earns is broken down into 3 elements:
- 1/3rd for staff wages
- 1/3rd for office costs
- 1/3rd partner salary
Most people agree they want their accountant to be experienced and properly qualified. Let’s say that means the partner earns around £100,000 per year. Using the three way split above means £300,000 in annual fees.
Now here’s the bit most business owners don’t think about, and the accountant doesn’t want to talk about – they have to spend enormous amounts of time on:
- Admin
- Marketing
- Training
- Compliance
- Running the practice
And on the surface, that adds zip in value to you!
After those commitments, that leaves them with roughly 1000 hours of chargeable time per year, and therefore a charge of rate of £300 an hour to you.
(have you ever thought to yourself “£300 an hour?!! I wish I earnt that?!!” – now you can see why)
So let’s take the cheapest fee of £2,000 with £667 (1/3rd) to advise you – a couple of hours a year?
That’s just not enough time to add any value unless your accountant does one of three things:
- Cut their own salary
- Charges you above the agreed quote, or
- Fail to deliver
They can’t accept the first, you won’t accept the second, so it’s always the service that suffers.
So what do you really get for your £2000? …an annual meeting!
- One hour preparation
- One hour presentation
- Discuss last year
- Agree the tax liabilities
- Move onto the next client.
And this is where the most common complaint comes from – “I see my accountant once a year when the accounts need reviewing. Apart from that, there’s no proactive service”.
This is sausage factory accounting, and it’s rife in the profession because accountants won’t have the difficult conversation with their clients about how they are personally rewarded and the amount of time the fee will give them on your affairs.
So now you’re left feeling undervalued and unhappy, and so are they, because all you do is complain about them, and resent their fees.
But it’s not a bad service. It’s just the simple economics of cheap accountancy fees. The accountant wasn’t straight with you during the proposal, accepts he’ll struggle to do much more than the absolute minimum, and hopes you don’t complain when he does. If you do complain, well at least he got a year’s fee out of you before you move on to the next firm who will probably promise you a better service for the same fee – it doesn’t work.
As with almost everything in life, price is a statement of value.
That’s not to say there’s anything wrong with a £2,000 fee if you were looking for a budget service. For some businesses who want the absolute bare minimum, they’re a perfect fit.
But you also wanted
- Proactive tax planning
- Strategic business advice
- Forecasting and finance modelling
- Enterprise value building
- Exceptional customer service
- Feeling valued
So why didn’t the accountant tell you all of that at the proposal meeting?
Because they aren’t trained to sell. They’re trained to prepare accounts and calculate tax. The thought of selling is horrifying.
The person sitting opposite you is always the partner who’ll look after your affairs. They’re not salespeople, they’re an accountant. They genuinely want to help you, so when you ask, “Will I get proactive advice?” the answer will always be, “of course.”
Most accountants hate talking about fees with clients because they struggle to explain the value they add to your business. Instead they’ll base their fees on what similar firms are charging, or what a similar client is already paying them, who are also underpriced. They avoid difficult conversations because they fear losing the work, and they convince themselves they’ll somehow make it up later.
Here’s the harsh truth…
This outright dishonesty – it’s poor pricing, poor sales training and, above all, wishful thinking on the accountant’s behalf.
The accountant convinces themselves they’ll somehow find the time. You convince yourself you’ve found a bargain. Neither of you has the difficult conversation about what the fee will realistically buy.
Twelve months later, you’re disappointed because the proactive advice never arrived, and they’re frustrated because they worked harder than they’d been paid for.
Nobody wins.
So next time you compare two accountants, don’t just compare the fee. Understand exactly how each part of the service will be delivered throughout the year. Who will do it? When will it happen? How often will you meet? How is it systemised within their processes? What happens if something unexpected comes up?
Question. Question. Question.
A £2,000 accountant can be exceptional if all you want is a £2,000 service.
But if you’re expecting a £5,000 relationship…
…don’t buy the £2,000 accountant.