TIME TO BID FAREWELL TO HOURLY RATES WITH VALUE PRICING
Selling hours for Rands is the inverse of a good business model. If you’re billing by the hour, you can only bill for eight hours a day, so your income is capped, yet it’s a pricing model so many of us default to – from accountants and doctors to designers, dog groomers and gym instructors. Instead, we should be striving for a value pricing model, where fees are based on value to the client rather than the number of hours worked.
This is according to Lauren du Plooy, Managing Partner of accounting software specialist firm, Rae & Associates, who – as a certified QuickBooks partner – took part in inspiring and educating others in the industry at the recent Get Connected events held in Johannesburg and Cape Town.
Du Plooy highlights that harnessing tech advances such as online accounting tools make financial planning, monitoring and reporting more reliable and time efficient. “This has, in turn, opened the door for other exciting changes like the move from hourly billing, to value pricing – an empowering new concept for accountants and small businesses alike.”
“By more quickly and efficiently managing our clients’ data and our firm’s tasks, we save a lot of time, which we can spend adding value to our clients.”
“It is this kind of innovation which is distancing accountants and bookkeepers from their traditional role of number crunching, instead giving us the opportunity to take an advisory role and empower our clients to grow and make better business decisions,” she says.
One such informed business decision, says du Plooy, is to base fees on knowledge, experience and value rather than the outdated method of billing by the hour.
Du Plooy highlights that, over the past 20 years, hourly billing has been the standard method used by many small businesses and accounting firms. However, she notes that the model has presented numerous challenges for firms looking to grow. “This includes the income limitations of being restricted to an eight hour work day, the tedious associated administrative requirements of tracking hours and filling in time sheets, as well as not being able to bill for the time spent travelling to and from client offices.”
“Now that online accounting software like QuickBooks takes care of timely administrative functions, naturally fewer hours are billed. However, the hours which are billed are spent adding far greater value and can therefore not be priced at the same rate as tasks like manual data capturing have been in the past,” she explains.
With this in mind, du Plooy suggests that the alternative model of value pricing simply makes more sense.
“Value pricing means billing clients based on what you have to offer, not how long you work. We are not just selling our time, but our knowledge, experience, innovation and customer service – these are the factors our pricing models should reflect.”
“We implemented value pricing more than four years ago and have experienced notable growth since. Our existing clients are now on retainer and set their own budgets based on the services they require from us on a monthly basis. This means that both parties have clear and defined expectations from the start,” she explains.
Du Plooy adds that other advantages of adopting value pricing include steady cash flow, easier budgeting and increased staff productivity as timesheets are no longer required.
“It also benefits our clients that we can advise them on the latest technology. QuickBooks, for example, has transformed the way we work and can easily be implemented in our clients’ operations. Cloud accounting is here to stay and many of the companies we work with want to make the move from desktop software. Our knowledge and experience in the industry means that we are well placed to assist them with this.”
“With the accessibility of this kind of innovation, we need to keep in mind that our roles as accounting professionals will continue to evolve and so will the processes we use to conduct business and, of course, how we charge for our services – the fall of hourly billing is testament to this,” concludes du Plooy.
For more information, visit https://www.quickbooks.co.za.
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QuickBooks is the world’s leading online accounting software provider with 35 years’ experience and over 3 million online customers across the globe. QuickBooks Online offers a range of products, tailored to suit all kinds of businesses from start-ups, to medium-sized and growing organisations.
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