With the growth of cloud accounting showing no signs of slowing down, more accounting firms are moving over from hourly rates to monthly billing plans.
It’s simple, it’s predictable, and it fits perfectly alongside the monthly subscriptions to cloud accounting packages like Xero.
But for firms with lots of clients, getting started can look tricky.
We’ve put together a few tips to guide you through the early stages of the process – from convincing your clients and analysing your data, to setting your prices and preparing for the unexpected.
Know how to sell it to them
If you want the switch to monthly billing to go smoothly, you’ll need to get your clients (and your own team) on your side.
And the first step you’ll need to take is to convince everyone involved that the switch is a smart move.
Here are some of the most important benefits of changing to monthly billing – make sure you have a list like this at the ready when it’s time to start discussing the change with your clients and staff.
1. There’ll be no surprises
On an hourly billing plan, your clients don’t really know how much they’re spending until it’s done.
Your firm gives its best estimates based on previous work. But tasks can become time-sinks, and a complicated project can easily start getting out of hand.
Even worse, some clients might suspect firms like yours of stretching out their projects to increase their fees, with no effort to get things done quickly or efficiently.
But with a monthly billing plan, your clients know exactly what they’re getting – and exactly how much it will cost them – before any of the work begins.
Your client pays a fixed fee for fixed results. And it’s up to your accounting firm to produce those results in the fastest and most efficient way. No stretching out projects, and no inflated fees.
Similarly, there won’t be any nasty surprises for your accounting firm, either. You’ll have a steady flow of predictable income each month, making it much easier for you to forecast, budget, and stay on top of your cash flow.
2. Growth becomes simple
As your client’s business expands, the accounting you do for them becomes more complicated.
These more complicated jobs take up more time. And if the number of jobs increases as well, the fees your client has to pay on an hourly basis can climb exponentially.
With a monthly billing plan – and especially if your firm offers several different levels and packages – these costs can be easily managed and upgraded as your client grows.
In the same way, your own monthly revenue streams can be easily tracked and predicted as your accounting firm grows and takes on new clients, giving you a simple way to measure your overall revenue growth.
3. It’s low risk
When clients buy from you on a per-project basis, they need to make a decision every time. They need to analyse the goals of the project, assess your estimated fee, and compare the value of your work against the cost of going ahead with the project.
It’s time-consuming, and it’s exhausting.
But with a fixed monthly fee, your clients can avoid all of that hassle and risk. And that’s attractive to any business.
Of course, your own firm gets to see the benefits of this low-risk option, too.
With a manageable, recurring monthly fee, there’s no particular start or end to any project – and that means there are no particular decision-points where your client needs to decide whether to keep using your firm.
Just like with a recurring newspaper or Netflix subscription, they’re more likely to preserve the status quo than make any big changes – so you’re more likely to keep solid clients on your books for longer.
Set the right price with care
Every client is different.
They have different sizes, and they have different needs. And that means you need to find a monthly billing plan that gives them everything they need, while still covering your firm’s time and expenses.
For your existing clients, you should already have enough historic data to make a reasonable estimate. It could be as simple as taking an average of the fees they’ve paid over the last 6 months, and turning that into an attractive monthly figure.
But for new clients, you’ll need to dig a little deeper.
The best place to start is by comparing a new client to your existing ones. In particular, you can compare a new client to other ones that have a similar:
- Industry or sector
- Number of employees, locations and customers
- Type and complexity of accounts receivable
- Need for third-party reporting or data gathering
- Level of involvement – the number and frequency of meetings, consultations or emergency extras.
Make sure you’re covered
Things rarely go to plan.
Your clients could go through the odd month with an exceptionally high number of transactions, or they could need a few emergency meetings or customised reports beyond the scope of the monthly fee you’ve set out.
The solution? Factor in a safe buffer to your monthly billing plan before you present it to them.
No firm wants to have an awkward conversation about extra fees. And no client wants to feel ripped off with unexpected add-ons tacked on for one-off services.
By setting your monthly fees slightly higher than your analysis suggests, you’re adding an extra level of safety for those emergency extras. Your firm won’t have to eat the costs, and your clients won’t feel like you’re counting the pennies.
And the best part? You can list these additional services as they happen in your monthly breakdowns, and then write off the cost as a discount or a freebie. Your clients will feel valued and appreciate the courtesy, but you’ll know your extra expenses have already been covered in the months when things ran smoothly.
So what’s the next step?
You’ve got the basics of how to switch your accounting clients to monthly billing. Now it’s time to start analysing your data and sketching out a formal plan.
But before you get started, remember to:
- Understand why moving to monthly billing is a good idea – be ready to convince both your clients and your staff of the benefits
- Use historic data to find the right pricing model – take an average of your client’s previous fees, or find relevant comparisons with other similar clients