Estimated fee ranges

The traditional way for an accountant to set his/her charges is by reference to the amount of time he/she spends on your affairs.

Many clients however would prefer to be told at the outset what the fee will be and for their accountant to limit the fee to this amount regardless of what comes up during the year. And there are a large number of accountants that will do this for their more straightforward clients.

I still remember a conversation I had with an accountant called Peter nearly 20 years ago. He told me that he typically had the following conversation with new clients where he couldn't be sure what the fees would be at the outset. This is what I remember him telling me:

Once I have checked what work is likely to be involved I then offer a free quote within a range. All too often, however, the range is pretty wide. For example, £2,000 to £10,000. I acknowledge with a client that the range is very broad and explain why I cannot be more precise at this stage.

I ask for payments on account, equal to the lowest figure in the range, and I explain that one of three things will happen when I issue my fee note at the end of the year. Let's assume it's for £5,000.

The first possibility is that the client will say to me, Peter, I can't believe it. Only £5,000 for all the work you've done over the year. It's not enough. I think I should pay the full £10,000 that you quoted at the beginning of the year.

Peter told me that that doesn't happen very often, but that it had happened to him, on occasion.

The second possibility, which is the most common apparently, is that the client will say, Peter, that's a fair fee for all the work you've done. I'm very grateful.

The third possibility, which is very rare, said Peter, is that the client will complain that the fee, of say £5,000 is too high. When that happens, Peter told me, he allows the client to explain why he thinks it's too high and they then agree on a fee that the client is happy to pay. And Peter guarantees to the client that he will accept that payment in full settlement. However, it also means that he will not be doing any further work for the client!

I don't know how many accountants operate on this basis, which was first explained to me about 20 years ago. It was very rare then and I doubt it's very common even now. But it is fair.

I suspect that these days few clients would accept an estimated fee range as wide as £2,000 to £10,000. But if that's the sort of arrangement you would like to have then you have nothing to lose and could ask your accountant if he/she will indulge you.