Why Fixed Price Accounting Makes Sense


Have you ever received an invoice for services that you had absolutely no idea was coming? As a consumer or a business owner, it’s one of the most frustrating things in the world. Surprise bills like this are impossible to plan for and can be frustrating because they always seem to be over the estimate. Inevitably, there’s a level of mistrust that develops between the service-provider and the client, and the relationship is set on a rocky path that is beset by questions about if hours are being spent wisely and judiciously.

Please hear me- We completely understand why this model can present frustrations for clients. Even if the professional service provider does exceptional work, any time there is a miscommunication between the transaction, it can leave you feeling concerned. That’s why we’re out to fix this and revolutionize the accounting industry.

Recently, there has been an industry trend to move from hours-based services to a fixed pricing model. Many financial planning and wealth management firms are notably shifting to this model, and accounting firms aren’t too far behind. This movement was born out of the desire for investors to know that financial institutions would act in the best interest of their clients, called fiduciary duty. Fixed pricing for this industry means that investors don’t need to be concerned about whether the advisor is simply suggesting a certain plan because it will enrich them more.

As we’ve grown and developed, we’ve been concerned the accounting industry is prone to this problem too. However, instead of a particular investment enriching the firm, the problem for the accounting firm is that there seems to be an incentive to spend more time on projects than necessary so that they can bill more. Where’s the fiduciary responsibility in that? Clients certainly want their accountants to do great work, but they also desire efficiency and value.

Here are several reasons why we think that fixed price accounting is worth our firm exploring.

It Clarifies Costs for Our Clients

Hours-based models are incredibly variable. The fees that are collected are tied to the work a professional service company does for you. There are even costs that will pop up that weren’t disclosed initially, or vary based on the level of service your business requires. The last thing your business needs is to get hit with fees you weren’t included in its budget. Fixed price services allow you to plan the year without the variable costs, and can wind up saving significant money and stress so that clients can allocate dollars properly.

It Fosters Transparency and Trust

We’ve all heard the online meme from Chipotle that “Guac is extra.” As annoying as it might be to pay extra for guacamole, can you imagine if the cashier didn’t let the consumer know about this and simply tacked it on to the receipt? The customer would be rightfully frustrated! Budgets are laid out from the onset of the year. There are no hidden fees, no embedded costs, and no “Oh by the way…” moments. Fixed pricing helps remove potential conflicts of interest between how a firm gets paid and what they recommend. The best thing that a professional services firm can do for a client is to be upfront and transparent with their services and fees. Every industry appreciates transparency and honesty, fostering a level of trust between both parties.  

It Allows Us to Provide Better Services

When you take out the need to upsell a product, add to the bottom line by taking an unnecessary amount of time, or even place a grain of doubt that this could be happening, the professional services firm can be more objective and help clients make the wisest decisions. The provider is no longer a salesman, they’re a trusted guide.

Using the Theory of Constraints, we believe that we have identified our own internal bottleneck in our traditional business practices. Accountants spend tons of time tracking hours and calculating fees, passing this cost to the clients. Apart from the industry trend, we also believe that the key to longevity in our business is the relationships we have with our clients. Serving our clients and building a trust that lasts matters more than the fees we collect. We know that serving you better means that we’ll both benefit each other over the long term, rather than focusing on short term issues like bean-counting hours.

This is an important distinction, and one that will impact both the business and our clients. In the interest of transparency, this is a change that our company is considering, for the reasons above and more. It makes our business more efficient, and provides an added benefit to our valued clients. You will always know our costs up front and never feel pressure to constrict your time with us or compromise on services. More than anything, we believe this will serve our clients better and give businesses more for their money. 

- Jonathan Frost