Accounting firms should adopt a value-based pricing model in response to the new era of accounting, where technology is driving greater efficiencies in compliance work, says Xero’s head of accounting, James Solomons.
Speaking at the Xero Roadshow in Sydney recently, Mr Solomons, who is also director of Sydney-firm Aptus Accounting and Advisory, told attendees that time savings achieved through the use of modern technology shouldn’t equate to lower pricing.
Rather, according to Mr Solomons, accountants should charge based on the value they provide.
“Just because you do the work quicker doesn’t mean you have to charge less,” he said.
Mr Solomons told attendees that there’s a belief among many accountants that if they do work faster they need to pass on those savings to clients, but he thinks that belief is wrong.
“You don’t have to charge them for four hours if it only took you two but you should be value pricing; just because you find efficiencies doesn’t mean you should pass it on,” he said.
Practitioners, according to Mr Solomons, shouldn’t be charging less for doing the same work more efficiently, but should instead be taking advantage of the time savings to provide their clients a more complete service.
“What you should be doing is reinvesting that time back into your business – and having more conversations … so certainly if you are getting more efficient in your own business, don’t charge less that’s crazy.”
Mr Solomons said it’s important accountants reinvest some of their time in educating themselves to enable them to successfully provide additional services, such as business advisory services.
“Many accountants out there, including myself, have come through tax and compliance for 15 years, that’s what we know really, really well, running businesses, but really in-depth business advisory is a bit of a challenge.
“You’ve probably got to be educating yourself on that side of it so that when you’re sitting in front of your client you don’t look like a fool… invest in education,” Mr Solomons said.