Accountants are not an expense, they create value

Do your clients see you as an expense? In fact, do you see yourself as an expense to your clients?

This shift requires a fundamental change in how accountants perceive their own value. Traditionally, accountants have focused on tracking hours and completing tasks. However, to truly thrive in today’s market, they need to see themselves as strategic advisors and value creators.

This change in perspective is crucial. It’s not just about changing how services are billed, but about embracing a new role where the focus is on delivering tangible benefits and driving client success.

For decades, the accounting industry has relied on the hourly billing model, a system that values time spent over the quality of outcomes. However, with advancements in technology and evolving client expectations, this traditional approach is losing its relevance.

The hourly billing model, introduced over a century ago, has become a staple in accounting. It’s a straightforward system: track the hours worked and bill accordingly. Yet, this model inherently overlooks the actual value delivered to clients.

In an era where automation and artificial intelligence can handle routine tasks more efficiently than ever, simply billing for time spent seems increasingly outdated. Clients now seek strategic insights and personalised advice, expecting more than just number-crunching.

This expectation shift necessitates re-evaluating how accounting services are priced and delivered.

Xerocon, held in London on June 12-13, 2024, industry experts emphasised the need for accountants to redefine their roles. No longer confined to the tedious task of logging hours, accountants are now seen as key advisors who drive business success.

This evolution in perception calls for a new pricing strategy that reflects the true value accountants provide. Moving beyond the limitations of hourly billing, firms must adopt models that align with the strategic, value-driven services clients now demand.

But where to start?

Understanding the need to change

The shift away from hourly billing has been a response to the fundamental changes in the accounting landscape. Historically, the hourly billing model was straightforward and easy to implement, making it the go-to method for many firms.

However, its simplicity is also its greatest flaw. It fails to account for the quality and impact of the work provided, focusing instead on the quantity of time spent.

“The change we saw in 2008-2010 when cloud accounting started coming out was an inflection point in the industry which enabled pricing and packaging to be done differently,” says Kate Hayward, UK country manager for Xero

Clients today expect more than just basic accounting services. They seek advisors who can provide strategic insights, help navigate complex financial landscapes, and contribute to their overall business success. This change in client expectations is driven by several factors:

1. Technological Advancements

With the rise of cloud accounting, artificial intelligence, and automation, many routine accounting tasks can be performed more efficiently and accurately by machines. This technological shift reduces the time required for traditional bookkeeping and compliance work, rendering the hourly billing model less relevant. Instead, the value now lies in the insights and strategic advice that accountants can offer, leveraging these technologies.

2. Evolving Client Expectations

Modern clients are more informed and have higher expectations than ever before. They no longer see accountants as mere number-crunchers but as essential business partners who can provide valuable insights and guidance.

This evolution demands that accountants move beyond transactional services to offer more consultative, value-driven engagements. In 2023, Deloitte’s consulting revenue grew by 19.1% in local currency, which was the fastest growth among its service lines.

Similarly, PwC reported that their advisory services generated $22.6 billion in 2023, marking a 13% increase from the previous year. This growth was fueled by clients’ need for digital transformation and strategic business model changes​.

Accountancy Age’s 50+50 rankings for 2023, showed the average fee income generated from consultancy services was £74.6 million.

3. Competitive Advantage

Firms that embrace value-based pricing can differentiate themselves in a crowded market. By clearly articulating the value they provide and aligning their pricing with client outcomes, these firms can attract and retain more clients.

This approach not only enhances client satisfaction but also positions firms as forward-thinking and client-centric.

Implementing value-based pricing

Transitioning from hourly billing to value-based pricing requires a strategic approach. It’s not just about changing how you bill clients but fundamentally rethinking how you deliver and communicate value.

“If you stand still you will fall behind,” says Colin Timmis, Xero’s South Africa country manager.

“If you price and package in a way that you’re doing things, in the way that you’ve always done them, you will fall further behind. Pricing and packaging for that value is really important.”

The first step in adopting value-based pricing is to deeply understand what your clients value. This involves direct communication, surveys, and feedback mechanisms to determine their specific needs and preferences.

By segmenting clients based on their value preferences, accountants can tailor their services and pricing models accordingly. Understanding what clients truly value—whether it’s strategic advice, compliance accuracy, or timely responses—enables firms to align their services with these expectations.

New packages might be needed

Developing service packages that bundle various advisory and compliance services is crucial. These packages should clearly articulate the benefits and outcomes clients can expect, emphasizing the value rather than the time spent.

This approach simplifies billing, enhances client satisfaction, and ensures that clients perceive the full value of the services provided. By offering tiered packages, firms can cater to different client segments and provide options that match varying levels of need and budget.

But what about technology?

Technology plays a pivotal role in the transition to value-based pricing. Cloud accounting, artificial intelligence, and automation can handle routine tasks more efficiently, freeing up accountants to focus on higher-value advisory services.

This shift not only improves efficiency but also allows firms to offer more competitive pricing while maintaining profitability. By integrating these technologies, firms can deliver more value in less time, making the case for value-based pricing even stronger.

Communicating and Selling Value

Transitioning to a value-based pricing model is only effective if clients understand and appreciate the value they are receiving. Clear, consistent communication is key to ensuring clients see the benefits of this new approach.

Engagement letters serve as the foundation for this communication. These documents should go beyond legal formalities and become marketing tools that clearly articulate the services offered and their benefits.

Use straightforward language and visual aids to highlight the value provided, ensuring clients understand exactly what they are paying for and why it’s worth the investment. Visual summaries, such as flowcharts or infographics, can be particularly effective in illustrating the scope of services and the value they deliver.

Building strong client relationships is crucial. Regular updates and open communication help maintain trust and transparency. Sharing success stories and case studies where similar clients have benefited from your services can provide concrete examples of the value you deliver.

This not only reinforces the benefits of the services provided but also helps clients see the tangible impact on their business.

Confidence in your value proposition is essential. Accountants must be able to clearly and convincingly communicate the benefits of their services. This involves training staff to understand and articulate the value of the firm’s offerings. A confident team can better convey the benefits to clients, addressing any concerns and highlighting how the services contribute to their success.

Feedback mechanisms are also important. Regularly soliciting client feedback helps ensure that the services provided align with client expectations and allows for continuous improvement. This dynamic feedback loop not only improves service delivery but also reinforces the value-based approach, showing clients that their input is valued and acted upon.

Finally, it’s important to regularly review and adjust pricing strategies. As the market and client needs evolve, so too should the pricing model. This flexibility ensures that the pricing remains competitive and aligned with the value provided, maintaining client satisfaction and loyalty.

Time to be seen as value, not an expense

The shift from hourly billing to value-based pricing is not just a financial adjustment but a fundamental change in how accounting firms operate and deliver services.

By focusing on understanding client needs, leveraging technology, and clearly communicating value, firms can successfully navigate this transition.

This approach not only enhances client relationships and satisfaction but also positions firms as forward-thinking leaders in the accounting industry.

“Confidence in the value being provided is essential for both pricing and client retention,” says Timmis. “Regular communication with clients about the impact of your services, sharing success stories, and demonstrating return on investment can build trust and justify premium pricing.”