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Why value billing doesn't work in accounting

Five ways to build sustainable value for your practice

We’ve all heard a lot of buzz about value billing. It sounds like a great way to boost a firm’s bottom line, but have you tried it? Chances are you haven’t.

First of all, although value billing is a great concept in theory, it’s too complex to use. Second, there's no easy way to apply it to core services like tax, accounting, audit and payroll, which make up more than 80% of most CPA firms’ work. These are either compliance services, or services that are considered commodity services. Therefore, these services are obviously not the right candidates for value pricing. Finally, the fees that you and your peers have traditionally been charging for these services have already set a precedent for the “right” fee for these services in the minds of your clients. That’s very hard to change.

So if the answer to growth isn’t value billing, what's the alternative?

There are simple techniques that virtually every CPA firm—large or small—can use to make their practices more profitable. We have to draw from parallels in other industries.  

Take the examples of Amazon Web Services, the largest Web hosting platform in the world, or Google Maps. These services are inexpensive or even free, and yet drive significant profitability for Amazon and Google—because those companies found ways to innovatively use the cloud to create exceptional value.

Accountants can do the same thing—build value for their practices by innovatively using the cloud.

The right cloud solutions can assist accounting firms in converting commodity accounting and payroll services into higher profits. Accounting is marred by numerous problems and inefficiencies because it is not led by accountants, but rather by a “DIY” program sold directly to small businesses. The solution: cloud-based professional systems that put accountants back in the driver’s seat. Using Accountant-Centric systems such as Accounting Power, CPA firms have turned Client Accounting Services into a highly profitable and sought-after service. And solutions with automated bank feeds can transform write-up from a low-margin, highly manual service to a reliable source of profits with up to 80% reduction in staff time.

And the same principle applies to payroll as well. Cloud-based payroll systems have made payroll processing highly profitable for accountants by giving them capabilities that only payroll service bureaus could previously afford—namely, high levels of automation.

OK, so if value billing can't be used effectively in accounting practices, are hourly fees a better answer for growth?

Absolutely not. Hourly billing is totally irrational for accounting practices in the digital age. If you use cloud technology to perform accounting and payroll more efficiently, hourly billing punishes you financially for your innovation and efficiency. Instead, accountants should charge clients a fixed monthly fee for most services.

And it’s easy to transition from hourly fees to a fixed fee, because given the choice, clients invariably prefer the greater certainty of a flat fee. Moving to a flat monthly fee model can help them better budget their monthly expenses and manage their cash flow. While their total yearly expenses would remain pretty much the same as before, switching to a fixed fee model is another way you provide extra convenience to them.

What is AccountantsWorld doing to help firms build sustainable value?

We built Accounting Power —the first cloud-based professional accounting system that puts accountants back in the driver’s seat. It includes everything you need for your professional work, along with a comprehensive general ledger system.  Now your staff can do everything that your clients’ staff currently does—only much faster, easier, and more accurately, all right from your office. That means you can offer highly profitable Client Accounting Services. 

We also developed Payroll Relief, our award-winning payroll processing system. Payroll Relief automates most compliance tasks, minimizes data entry, and is affordable for firms of all sizes. The result: a high-margin, perpetual revenue stream.


AccountantsWorld Value Building webinar


AccountantsWorld Endorsed by Maryland Association of CPAs as Preferred Software Provider

AccountantsWorld is proud to announce a strategic endorsement from the Maryland Association of CPAs (MACPA). AccountantsWorld is the newest preferred provider of accounting practice management and software for the MACPA.


The MACPA is committed to helping CPAs adapt to an ever-changing business climate, and has aligned with a partner in AccountantsWorld who shares the goal of empowering accountants for the future.

Tom Hood, MACPA


"Our members rely on us to keep them updated on the latest technological improvements and issues facing the accounting industry," said Tom Hood, CEO and executive director of MACPA. "AccountantsWorld is a client accounting platform that should be on their radar. With this partnership, we hope to advance and educate more than 9,000 CPAs across the state about this new solution."


 For more than 17 years, AccountantsWorld has transformed the accounting profession with its cloud-based solutions designed exclusively for CPAs and accountants. The company's flagship solutions for accounting and payroll help CPAs grow their practices and foster closer collaboration with their clients. AccountantsWorld puts professional accountants first by never selling its products or services directly to their clients.

"Our mission is to help them take back control of client accounting," said Chandra Bhansali, co-founder and CEO of AccountantsWorld. "We're excited to serve members of MACPA as a preferred provider and trusted advisor for their accounting software needs."

AccountantsWorld continues to receive recognition for its cloud-based offerings for professional accountants. AccountantsWorld's full-service client accounting solution, Accounting Power, has consistently received five-star ratings by CPA Practice Advisor. Additionally, the company recently partnered with TAG Resources and Transamerica Retirement Solutions to add retirement capabilities to their signature product, Payroll Relief.


Click here to learn how Accounting Power is helping accountants regain control over client accounting.


AccountantsWorld presents the 2017 Expert Webinar Series

AccountantsWorld is proud to announce the launch of the 2017 Expert Webinar Series.

As part of our continued focus on finding innovative ways to help accountants thrive, the company has gathered 12 industry experts -- eight of whom were named among the "Top 100 Most Influential People in Accounting" by Accounting Today -- to present in this year's Expert Webinar Series.

Each thought leader will host a one-hour webinar in which they will provide actionable insights for accountants and CPAs to grow their practices and add more value to their clients' businesses. This year's series marks the first time in accounting history that so many experts are sharing a common platform to help accounting professionals in this manner. In addition, each webinar will award 1 CPE for participation.

The first webinar to kick off the series, titled "Forget Value Billing, Focus on Value Building", will feature Dr. Chandra Bhansali, AccountantsWorld CEO and co-founder, on Wednesday, May 3rd. In this session, Dr. Bhansali will dispel the myth that accountants can't build value for their practices from commodity services like accounting and payroll. If you have been looking for ways to build sustainable value for your practice and your clients, this webinar is a can't-miss. 


Other expert webinars in the series include: 

May 17: "Succession Planning: Perspectives from the Seller and the Successor Firm", by Joel Sinkin, President, Transition Advisors, LLC. If you are considering growing by merging/acquiring a firm, or you are closing in on reducing your time commitment to your firm within the next 6 years or less, this session is for you.


June 7: "2017 Tech Update" by Randy Johnston, MCS and executive vice president at K2 Enterprises. Topics covered will include how technology impacts accounting firms and insights on strategic choices and technology tactics for CPAs to maximize ROI.



June 21: "Three Ways to Become a More Engaged Accountant... and Leader", by Chester Elton, managing partner at The Culture Works. This session will present three strategies to unlock accounting employee engagement and potential, and provide managers and individuals with specific tips and tools to align their work with his or her engagement drivers.


July 21: "The Anticipatory CPA: How to Get Ahead and Stay Ahead" by Tom Hood, CPA and CEO of Maryland Association of CPAs. The session will focus on how CPAs can thrive in today's competitive age by accurately anticipating client needs. Attendees will also learn the five steps to be future ready and ride these ‘big waves of change’.

August 9: "CPA Firm Technology Trends 2017", by Brian Tankersley, Director at K2 Enterprises. The fourth annual Accounting Firm Operations and Technology Survey was published in the second quarter of 2017. This session will present the major findings from this research, in the areas of practice management, technology management, computer hardware, application software, file management, remote access, and technology spending.


August 23: "Professionalization of Client Accounting Advisory Services", by Erik Asgeirsson, President at As more firms are formalizing virtual CFO and controllership practices, client awareness and expectations are growing. To meet expectations, firms need to focus on service, training and best practices. This session will demonstrate how firms are raising the bar for exceptional advisory services.


September 20: "The Accountaneur Difference: 8 Uncommon Success Practices of Entrepreneurial Accountants", by Hitendra Patil, author and director of practice development at AccountantsWorld. This webinar will review specific tips on how accountants can leverage human behavioral insights to achieve a competitive advantage.


October 4: "100 Ways to Make 2018 Your Best Busy Season Ever", by Rick Telberg, Publisher of CPA Trendlines. Rick will deliver a rapid-fire range of proven best practices, leading-edge innovative strategies, and the newest trending ideas to make more money, deliver amazing client service, and have more fun.


October 18: "Transformation: Mindsets, Skillsets and Toolsets", by Gary Boomer, CPA and founder of Boomer Consulting. The cloud has provided great tools, yet many firms and their clients have not yet transformed. Could it mean their skillsets and mindsets are obsolete? This session will present how accountants can manage change and update their firm's processes to fully leverage today's new technology.

November 8: "30 Marketing Tips for Your Practice in 50 Minutes", by Div Bhansali, vice president of marketing at AccountantsWorld. This session will present quick, actionable marketing tips and stratgies for your firm. Whether you're interested in attracting new prospects or increasing the ROI of the marketing you already do, you'll learn ways to lift the impact of your marketing in 2017 and beyond.


December 13: "Pricing on Purpose: Creating and Capturing Value", by Ron Baker, Founder of VeraSage Institute. Understanding how people make buying decisions is a key component to any successful pricing strategy. By grasping the concepts of how humans are influenced you can be better equipped to price successfully and increase your profitability.


Accountants and CPAs interested in attending the Expert Webinars can register for the complete series here.


Forget value billing. Think value building.

Dr. Chandra Bhansali, CEO of AccountantsWorldI recently attended a seminar on value pricing. The presenter started with a seven-minute video on “the backward bike.” This bike turns left when the rider turns the handle bar to the right, and vice versa.  Of the dozens of people who tried it in the video, no one could ride that bike. The presenter was trying to demonstrate how hard it is to break a habit.

Then the presenter explained what value-based pricing is. And then he tried to demonstrate how to apply the value pricing concept to get higher fees for services rendered.

At the end of the presentation he asked if there were any questions. More than half the attendees raised their hands. It seemed attendees were more confused after the presentation than before.

And then it struck me that value-based pricing truly was as complex as riding a backward bike.  

So I asked myself: if value pricing is so complex, does it have much value in the accounting profession?

My assessment is that while a small percentage of firms with specialized practices could benefit from value pricing, most accounting firms (based on tax, accounting, audit and payroll services) will at best derive marginal benefit from value pricing on the consulting services they offer.

So why are we trying to solve a complex problem that has limited practical value?

In this post, you'll learn:

-        The real facts of the current environment for accounting and other core client services.

-        Why core services, including accounting and payroll, have become low-margin commodity services.

-        Tangible steps you can take today to break away from traditional commoditization and make these services highly profitable.


Let’s start with some basic facts.

Fact 1: A vast majority of CPA and accounting firms generate more than 80% of their revenue from the following services:

  • Audit & review
  • Tax
  • Accounting, including write-up, bookkeeping, trial balance, and preparing compiled or SAARS 21 compliant financial statements
  • Payroll

Fact 2: These services are either compliance services or commodity services.

The primary function of tax, audit and review is to meet regulatory requirements which most clients perceive as a nuisance. Most clients consider money spent on these services as an expense. How do you create value in an expense? There is only one way - by reducing the expense. That means reducing your fee, which I’m pretty sure you don’t want to do.

Meanwhile, accounting and payroll are important business functions. Offering these services usually doesn’t require highly specialized knowledge. Virtually every accountant has the knowledge required to offer these services, so they have become commodity services.

Fact 3: You have already created a perception of your value in your clients’ minds.

The accounting profession has historically charged clients for services by hourly fees. This created a perception in clients’ minds about how they view your compensation for services. In their view, you are paid for the perceived effort (i.e. hours) and skills required to perform a service, NOT for the value you bring.

Another problem is that the perceived value of your skill set is weakly correlated to your skill set. It is all based on perception. If you’re a sole practitioner and charge $150 per hour, then that is the value of your skill set in your clients’ mind. If your friend, who is no smarter than you, is a partner in a Big 4 firm, then her clients have a higher perceived value based on historical norms, and might gladly pay her $450 per hour.

You established the value of your and your staff’s time in the minds of your clients. You also establish how much time of different staff members is needed to perform a service. Based on this perception clients expect a certain fee to be a reasonable compensation for different services you offer. It is etched in their minds, and it’s very hard to change that perception of your compensation.

It is very likely that, assuming you have great client relationships and offer excellent service, if you were to increase your fee by 10-15%, most clients would still stay with you. That’s thanks to your personal relationship and quality of service. But if you try to do it using the concepts of value pricing, you’re actually likely to have less success.

It isn’t necessarily impossible to raise your bottom line in core services using value pricing. But in this case, I must commend the honesty of Greg Chambers, a proponent of value pricing. He wrote an article for Accounting Today entitled:

“The Impossible Journey: Transitioning to Value-Based Pricing.”

Thanks Greg, for proving my point!

So you must be wondering, is there any way to make more money from core accounting services?

YES. Even though accounting services have become a commodity, you can add 20%, 30% or even 50% more to your bottom line from accounting services. 

To learn how that's possible, we need to first understand some suprising realities of the digital age in which we live.

The common notion is that the price anyone pays for a product or service is the value of that product or service in buyers mind. That’s why sellers of a product or service work hard to create a perception of high value for their product and services, so they can charge higher prices. That’s the basic premise of value billing.

But today, that's simply not true. Here's why...


 Ready to learn more about how to break the commoditization of your core services and boost your profitability?

Download our free whitepaper, "Forget Value Billing. Think Value Building."


Jay Abraham interviews Subir Chowdhury (VIDEO)

Here's a video with marketing guru Jay Abraham interviewing award-winning quality leadership consultant Subir Chowdury.
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