Fixed fees

I was recently discussing fixed fees with a forward thinking accountancy firm.

I asked them how 'fixed' were the fixed fees that they advertise? They confirmed that once they give a fixed fee quote that they will never seek to bill more than that.

All of which is what I was hoping they would say. But I then asked the crunch question. What happens if the fee is insufficient to cover all of the time charges that are recorded on your time sheets? They admitted that some partners are better at accepting a 'write-off' than others. They recognise there is an internal training issue ere, and they are trying hard to deal with it.

The point is this: most (if not all) larger firms of accountants require all of their staff, managers and partners to record on time sheets how much time they spend on each client.

The time spent on each client's affairs is then converted into a figure of 'work in progress' (WIP), using different hourly rates for each member of staff, managers and partners.

If the aggregate WIP is greater than the fee that can be billed, someone normally wants to know why, and often tries to ensure that a bigger bill is sent to the client. This is particularly true when fees have not been agreed in advance

Where the excess WIP is written off and not billed to the client, the consequences for client service are not positive. The firm may effectively discourage anybody working for that client to spend less time looking after them in the future than they have done in the past. The objective being to have a lower 'write-off' of WIP next time round.

Thus the level of client service falls and the level of the client's satisfaction with the accountant's service also falls. Within a short period of time the client is bad mouthing the accountant and looking to move elsewhere. Shame!