The hourly billing model is familiar to most accounting professionals: time spent on a particular project or client is logged, and then an invoice is sent out to them on a regular basis. But while this is a model used by many, it isn’t necessarily the most efficient or effective one.

Nowadays, technological advances have made such models as value-based pricing, a lot more feasible, and when coupled with other relatively new time-saving services such as outsourcing tax preparation to India, can help clients get a better understanding of what they’re paying for.

That said, switching to a new model for pricing is a big step, so it’s essential that you know how to set the strategy up for your success.

What are the benefits of value-based pricing?

How your target market perceives the value of the services you offer (when compared to those of your competitors), dictates how much you charge for those services in value-based pricing. This means that whether you send an invoice to your client at the beginning of the work they’ve asked you to carry out, or at the end, you’ll still be paid whatever amount the client is willing to pay you.

Here are some other benefits:

  • Predictable cash flow

Your paycheck is no longer dependent on the hours you’ve worked with this pricing model, means your client gets less surprises when they’re billed.

  • Rewards for efficiency

With staff members not being paid hourly, they will never be tempted to take longer on a project than is actually needed, and can instead be rewarded for their efficiency. any new tech that boosts your efficiency can also be reflected in your value-based pricing model.

  • Less time tracking

Tracking how much time you’ve spent on each client can be a hassle most busy CPAs can do without, but value-based pricing eliminates this and makes invoicing easier at the end of the month.  

  • Making all clients profitable

When you first implement your value-based pricing model, your prices will inevitably rise, and while this might be a worrying prospect initially, over time, your client list will improve in quality, and you can start doing more, for less clients.

What should you evaluate when implementing value-based pricing?

As you might expect, it’s imperative that you have a sound understanding of your firms’ costs, including both the true cost of your overheads, and of each project itself. Here are some things to include when calculating the cost of any service you provide:

  • Administrative employee time
  • Requirement of speciality resources/time
  • Office supplies
  • Communication tools
  • Computer software

It’s also important that you gather information about the market value of the services you currently offer to your clients, which you could do by carrying out some new research into your competitors, or conducting a survey of your client base as it stands currently. It may be that, based upon the results, you need to re-asses your cire strategy before beginning to set up a pricing model based on value.

Determining whether value-based pricing is right for your CPA firm, will mean accounting for all of the things mentioned above in detail, along with factoring in any outsourcing CPA work that you might have set up. Without accurate, up-to-date information related to all costs your firm incurs, and knowing the true market value of the services you’re offering, you’ll struggle to set a price that your clients will be willing to pay.