In the accountancy profession, there can be a tendency towards arrogance when approaching clients with fees.
A little care when communicating can pay massive dividends, both in terms of higher fees in the long run and great time savings.
In particular, the assumption that because your accounting system says that a client owes £13,975, you can send them a fee note for £14,000 (or even £15,000) without any prior notice or consultation is rarely accepted at the other end.
A number of different approaches to communicating fees to clients are common in practice.
In an increasing number of cases, fees are agreed in writing with clients before the start of the project. Ideally, this should be part of the engagement process and may be enshrined in the formal engagement letter.
Alternatively, a basis for charging is likely to have been agreed at the engagement stage, possibly an hourly charge out rate or a menu of charges for different services.
Sometimes, fees are agreed for work from month to month or quarter to quarter in arrears. Finally, there are projects where it is necessary to do the work and agree the fee afterwards.
Too frequently, accountants just don’t bother to do anything in advance and therefore try to agree the fee after the event. Where the outcome for the client has been very successful – for example, a massive tax repayment or saving – this might not be a problem. If things have gone wrong or there is a big overrun it will almost certainly be the start of a long-running battle.
Engagement letter or agreement before commencement
As stated above, if a fixed fee is agreed by all parties in a signed engagement letter then it is unlikely that clients will try to dispute this at the end of the project. However, it does not necessarily help you if the work does not go to plan and there are additional costs.
Many clients are happy to work on the basis of regular monthly or quarterly payments and as long as there are no unexpected spikes, this methodology can operate smoothly.
There seems to be a general relief that little and often is more acceptable than big one-off hits. Strangely, this relies on odd psychology so that charging a client £100 a month for twelve months is likely to meet with little opposition, where charging £1,000 at the end of the year might.
Irregular or project-based fees
This is where trouble can be brewing without your knowledge. Sending out a large one-off fee without getting in touch with the client first is likely to lead to pushback.
Think of it from your own perspective. If you have an initial meeting with a builder who says that he can decorate your home and will charge you on a time basis for doing so, you would probably not accept the proposition.
If you did, your actual assumption might be that he would charge the same as he did for your friends who made the recommendation. When you get a final bill for twice the amount that they paid, you will go up the (newly painted) wall. The fact that your house is twice the size of their flat will be irrelevant, as will the difficulties that you have caused by failing to meet your side of the bargain and clearing rooms in advance.
Therefore, if you wish to maximise the fee amount and longevity of the client relationship, it is vital to take great care in preparing the ground before sending a fee.
The most popular method today is probably to send out a bland e-mail informing the client of the amount that you propose to charge then sending a fee note the following day even if there has been no response.
A better approach would be to send an e-mail giving a relatively detailed breakdown, perhaps by person or going a step further by hours per person and awaiting approval.
My favourite approach is to make this a lot more personal. Telephone the client, talk them through the work and agree a fee with them. Far fewer clients seem able to dispute fees on the phone where they would happily send back an aggressive email, although some will.
For the most significant clients, the best approach of all may be to arrange a face-to-face meeting to discuss the work and fees and agree the position. This is almost foolproof, although I did once have a client who agreed a fee in a meeting with others present and then denied that he had done so, prior to becoming an ex-client much to the relief of all concerned at my firm.
Whichever of these methods used, forethought and preparation should be factored into the process, since if you are prepared the final results almost certainly be significantly better than winging it.