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Canada and the end of the billable hour

Josh Zweig, principal of online accounting firm LiveCAGuest Post by Josh Zweig, principal of LiveCACanada’s first online accounting firm that enables mobile entrepreneurs to connect directly to a Chartered Accountant wherever, whenever.

“Surprise!”

It’s not really what you want to hear from your accountant at the end of the year. Unfortunately, many business owners live in fear of such a response every billing season.

The billable hour has long been the holy grail of the accounting industry – put your head down, do the work, then punch the clock and send the invoice. How the work is done is irrelevant; the client is simply charged for the hours it takes to get the work done.

But as business owners around the world become more conscious of just what it is they’re paying for, the focus is moving to the ‘how you get the work done’ part of the equation. In Australia, for example, a number of CPA firms offer pricing that’s based on the value of the work rather than the time spent on it — fixed fees, monthly plans and even transparent prices on their website. Currently, Canadian business owners would be hard pressed to get an accurate estimate from their accountant, let alone fixed fees.

So why haven’t Canadian firms jumped on the value pricing bandwagon? Perhaps it’s because they’re simply not aware of the alternative. Changing to a value pricing model means changing the way your firm does business. It means the possibility of underpricing and losing money, or overpricing and losing clients. In short, it’s a risk – and we all know how accountants feel about risk.

However, in countries where value pricing is more prevalent, some accounting firms are switching pricing models as a means of staying competitive. As the practice of value pricing in CPA/CA firms in Canada is relatively new, competition is virtually non-existent. If there are no competitors in the space, firms reason, why go to the trouble of switching models?

The fact is there is competition in Canada – although many accountants will only be reminded of it come billing season when the all too familiar question is asked: “Why was my bill so high this year?” A range of low-cost accounting options has forced a number of accountants to compete on costs, often resulting in an embittered business owner and a frustrated accountant who feels underappreciated and undervalued.

By using the value pricing model, the accountant can be motivated to improve the client’s system year-over-year, as better metrics on a timely basis mean higher returns. This translates into happier clients and an accountant who can add major value to a business. Suddenly, the accountant is not competing solely on price anymore, but in the amount of value he or she can add to the client’s business.

It sounds great in theory. The challenge is to develop attractive prices and service options for both the accountant and the client. The model certainly isn’t perfect, but hopefully Canadian accountants can learn a thing or two from their counterparts downunder and begin to implement value billing practices, particularly as business owners start to realise that what they want to pay for are results, not hours worked.

All of which means business owners should never have to hear the word “Surprise” again.

 

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3 comments

Karl Meyer
13 June 2013 #

The concept of billable hours for professional services always seems bizarre. Rather like the psychiatrist it’s in the professional’s interest to spend as long as possible on the task.

When I hire a gardener to clear my garden he gave a price for the job – I didn’t care how many days he took it was up to him to do it effectively. Likewise a removal company doesn’t charge by the hour but for the removal.

Why should I pay more for a slow accountant than an efficient one?

Allan
15 June 2013 #

I couldn’t agree more. Glad to see another Canadian partner on the same page. Cheers!

Earl Rudolfo
18 June 2013 #

One way to avoid the “surprise” factor and move to a value pricing model in Canada is for accounting professionals here to be more transparent about a fixed fee based pricing structure and be able to display prices on their websites. Not sure this will happen anytime soon. There are still far too many traditional, non-techie (old school) accountants who say (with their heads in the sand) “If it ain’t broke, don’t fix it ” -:)

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