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client pay

Get the Upper Hand on Client Pay Negotiations

Jan 18th 2018
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Physicians and CPAs are professionals. Qualifying to practice involves years of study, professional certification, continuing education and oversight.

Few people would tell a surgeon, “We need to get the cost of my heart transplant down.” They will try to negotiate down the fees paid for accounting services. So, how would you address this problem?

When a large corporation buys auditing services, they often put out a Request for Proposals (RFP). Accounting firms compete for the business. It’s pretty straightforward. You are a neighborhood accountant, doing taxes for individuals and local businesses. Their situation is too complex for them to use a mass market tax preparation service or to file online, yet they want that lower level of pricing.

Your client probably doesn’t know everything you do for them. You deliver a service, yet they see it as a transactional arrangement. You want to defend your pricing without antagonizing the client. Here are six strategies to put to your advantage:

  1. Client takes on more compliance paperwork. You are providing auditing services for their business. They shoulder the task of getting the compliance paperwork done before you step into the picture. They are assuming the time expense. The problem can be the quality of their work. Is it done right? They develop a greater appreciation for the value you deliver.
  2. Delegating to a lower cost level. In larger firms, managers bill at a lower level than partners. This can reduce the client’s expense without compromising your pricing schedule. They may feel you bring more expertise to the table. It’s another way of showing your value.
  3. Be more proactive. The client feels the relationship is transactional because they submit paperwork and you file periodic business and annual personal tax returns. They don’t realize you are acting on their behalf behind the scenes, work where you aren’t always submitting bills. Call them more often. Let them know what you are doing.
  4. Transfer the preparation burden to the client. You prepare personal tax returns for your client. They think their job is done when they send you their paperwork in whatever disorganized form they choose. Did they use the annual tax organizer you sent out? No. Are all the relevant statements and reporting documents included? Maybe. Is their handwriting legible? Probably not. You are billing time to get their paperwork into a usable form. If they do a better job beforehand, that time wouldn’t be an expense.
  5. “Have you got a second?questions. Some clients call with questions all the time. They can never get their family doctor or surgeon on the phone, yet they assume you should be available 24/7. It’s unlikely you charge for these calls unless it’s a complicated topic requiring lengthy explanation or research. Their attorney would charge them.
  6. On table, off table. When clients don’t understand what you do for them, it’s easy for them to take a transactional mindset. In the late 1990s I met a NYC financial advisor with an excellent strategy. He would explain how he does business, outlining everything he does for a client. Next, he explained his pricing. Some prospects would counter with a lower quotation. He would say “Fine” and then list the different services he would be providing. “Which services would you like to take off the table?”

As a professional, you don’t want to compromise on fees unless you are consciously entering into a competitive situation in the RFP process. Cutting fees can become a vicious cycle because the floor becomes the ceiling in future negotiations. Clients want to add additional downward pressure. Word spreads. They have determined your new pricing model for you.

Getting the client to accept more of the responsibility of preparation and raising their awareness of what you do in the background on their behalf are two ways of justifying your pricing.

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