Can frugal accountants bill enough ???

We all know tax prep fees are all over the place and I think it has very little to do with geographic region or big firm vs small firm. It comes down to the individual biller. I have read the Ron Baker books and have encouraged all the accountants in the firm to as well.

But we have two CPA's in the firm who just can not find it in themself to bill what their worth. The one thing in common they both have is they are both very frugal. I feel that when it comes to billing, they think all of their clients think like them. The discrepancies inside the same firm are wide.

You could take the same return and CPA 1 would bill $775 for the return, Frugal CPA #2 might bill $400 and the Most Frugal CPA #3 would bill $350. Mind you this is not CPA 1 billing above average it is just #2 & #3 under pricing. When you add it up you are talking tens of thousands in lost fees. I am not a frugal person at all and would rather earn money than spend, I cringe listening to the Clark Howard show although I follow a lot of what he says about some things like driving a car till it dies, etc

I'd like to hear how a frugal person thinks when it comes to billing because I have had no luck changing the other two.

Are compensation to these two individuals tied to the amount they bill?

Just thinking of motivating factors...

I've also seen firms remove the billing responsibility from those unable/unwilling to bill in a manner consistent with their work.
It's no easy task, but you're absolutely correct in the magnitude of the problem.

We also instituted a larger minimum fee this year.

Let's be honest. In an open society the market will bear prices based on supply and demand. I have taken over clients that were paying a CPA firm $800+ because they had a rental on top of your usual Sch A stuff. They were talking to friends and family and soon realized that they were paying too much for a service they needed once a year.

A CPA can think that his work is worth more than the next fellow and try to bill what he wants but soon the forces of demand and supply will determine what the taxpayer is willing to pay for that service.

One of the CPA's is not a shareholders and is responsible for billing few corporate clients and maybe 50-75 1040's. Most of the new 1040 clients get sent his way. He is ok with going up 3% to 5% each year on the 1040 clients as we talk about how we have to go up each year to cover raises, health insurance, etc. But his pay is not tied to billing as it represents a small %. I worry about him down the road though because he admits he has a hard time pricing.

We do have a sort of unwritten compensation plan in place but the CPA who is an owner has a ton of clients and and works a ton of hours. 50 hours per week non tax season, 80-100 during tax season. Where at one time he might have brought in 60% of the revenue 15 years ago, now he brings in less than 50% even though he works more and has way more clients. Lets say out of 900 1040 clients he bills 550, I bill 275 and the other bills 75.

The CPA that works all the time really does not care about $$$. He is making a decent amount and by most standards is well off but I see the amount of discounted work that goes out and think it could be an extra $150k for the firm with no additional work.
He now makes slightly less than me even though he works harder. He does not complain but I would think it has to bother him. But he really hates the billing side but he does not want me or anyone else to take over billing his clients.

I do not think supply and demand has any impact on pricing for professional services. Most people are willing to pay for what they consider value. Even just reading these forums. I think we all realize that there are different levels of expertise. You can be a good tax preparer or a good CPA but we all know there is someone better than us out there. The best are not all at the Big 4 CPA firms. My partner I mention above is a top CPA but he just has trouble billing. There are people way less qualified billing more.

If you are that good, perhaps you should go on your own and then you don't have to deal with these issues. How do you know that you provide better value than the other fellow? One way may be that you start acquiring more business at your higher billing rate rather than losing business!

If you need a doctor you hire a licensed doctor, If you need a lawyer you hire a licensed lawyer, dentist, nurse, hair stylist, etc. But when you hire an accountant you have choices, CPA, tax attorney, EA, tax preparer, wanna be accountant.

Its preposterous to not be compelled to hire only licensed professionals only!

If I were not a CPA and needed an accountant I would only hire a licensed CPA.

Finally if this was the case many more students would choose the accounting profession as it would be more in line with the earnins potential of all the other professions.

Tax attorneys, EAs and tax preparers are not necessarily accountants (some are). So the public may want a tax preparer and not an accountant.

As my Dad used to say you need the right tool for the right job! You don't need a licensed CPA to prepare a run of the mill 1040 return

As my Dad used to say you need the right tool for the right job! You don't need a licensed CPA to prepare a run of the mill 1040 return

...and if all you're looking for is someone to fill out a form, you're likely correct.
Most of my clients seek me out because they want someone of whom they can ask questions and receive educated answers.
I recently gained a new client who I will charge $800. His prior CPA charged him less than $400.
I'm not competing on price and neither should you unless you want to set yourself up for failure.
There will always be a lower priced option.

I have no desire to be on my own and be a one man shop. I also do not think it worth splitting up the firm. I am also not saying I provide better value because obviously my partner would charge less for essentially the same work although I do not feel the need to rush as much as my partner because he has a heavier workload. His mindset is more quick and dirty where I am thinking how can I maximize billing.

I am working at max capacity now, our firm is no longer taking new clients unless they are referred by an existing client. We have not advertised or marketed with the intention of getting new clients in years. We are not losing business. Clients rarely if ever complain about the fees. We are also not making a concerted effort to get bigger and have to expand staff. I just know we could pocket an extra $150k with a flick of the pencil and a different mindset when it comes to billing.

I know many licensed CPA's who are awful and just not that bright. I also go to a seminar where they guy giving it is an EA and everyone in the seminar is a CPA and the EA charges more than all of them and is much smarter. So I do not put much stock in the licensing

Average billing rates from one of the articles in Journal of Accountancy.

CPA Hourly Rate: $28.65
Accountant (non-CPA) hourly rate: $20.01

So if you are billing at a higher rate for answering tax questions you are already ahead of the game!

Just curious.... who is BerkshireCPA vs BerkshireTemp?

A CPA can think that his work is worth more than the next fellow and try to bill what he wants but soon the forces of demand and supply will determine what the taxpayer is willing to pay for that service.

Yes, but there will always be another firm or tax preparer that will undercut others out of desperation or because they just do not perceive the value. I am not the least expensive, I am not the most expensive. I have lost or fired clients over fees, but overall, my clients are content with what they get in return for their money, just as I am content with what I get from them for the services I provide.

Most of my clients engage me throughout the year, so it is value-added vs. just preparing a tax return once a year. I help them plan. I help them manage. When you are simply doing a tax return, and the client can equate it to a tax return that could be prepared at H&R, Liberty, or TurboTax, they will not understand the value--and I also do not want them as clients.

I usually post at work (BerkshireCPA) but years ago I had a question on some tax issue that started at the office but I needed to follow up at home. I could not log in under BerkshireCPA from the family home computer so I just set up a separate account(BerkshireTemp) to keep it going. I've occasionally tried to login under CPA from home but no luck so I just let it default to Temp. Same person.

The original thread was not to start an argument about billing but maybe hear from someone who considers themselves frugal but finds a way to bill at fair rates. I have a lawyer client who told me he always had a hard time justifying his hourly rate but says his trick was to remember how much time his work kept him from his family. He used that as inspiration.

I have seen the same issue for many clients as well. It does not matter if it is a manufacturer, contractor or landscaper. Some can bill effectively some can not.

I have a lawyer client who told me he always had a hard time justifying his hourly rate but says his trick was to remember how much time his work kept him from his family.

I am not paying a service provider based on how much he thinks it is worth because of his time away from his family!

I am willing to pay the market rate for the job to be done properly.

Some people have an inflated opinion of the value they bring to the table without knowing that you are not the only one providing that value. Value is in the eye of the customer and eventually market forces will determine what you can charge and get away with.

I think underbilling is primarily fear-based. Fear of losing a client, or even just making the existing client unhappy. Or fear of how a lost client would look to the (other) partners in the firm. Or fear of how an unhappy client would spread in the referral networks. Or fear of impostor syndrome.

But his pay is not tied to billing as it represents a small %. I worry about him down the road though because he admits he has a hard time pricing.

How can you expect him to act like a business owner if you're not willing to treat him as a business owner? If he's in charge of some billing surely his compensation/bonus should rely in some part based on it, no? Otherwise, what is his incentive to bill $500 for a $500 tax return instead of $400?

But he really hates the billing side but he does not want me or anyone else to take over billing his clients.

You need to hit him with a stick or something. He hates billing but doesn't want to give it up? He needs to put on his big boy pants and delegate. I'm assuming the non-owner CPA that also does billing is younger than you and the crazy one, and that he could potentially be an owner in the future? If so, delegate billing to the non-owner, under your mentorship. It will take some time for there to be parity in the pricing among the firm, but the experience will be invaluable for the non-owner.

Absolutely, compensation of CPAs and a lot of other staff within a firm should be tied to billings AND collections. Mine always were when I was a non-owner employee.

Agree, fear is ultimately what drives CPAs to charge less than market rates. It is not underestimating their value. I think original poster commented he didn't want this getting into a debate over billing practices, but it really has nothing to do with frugality. It is a business. You have to charge what is reasonable based on the market and your level of experience. If you are not, it is only your fault for allowing fear to take over. As long as you are in line with other firms, and/or provide greater level of services, you will not have a mass exodus of clients by increasing fees to market or to match level of service.

Also, maybe I missed it but as an employee in a CPA firm, I cannot imagine a partner/owner not reviewing and adjusting the billing, first. I would NEVER allow an employee to bill a client directly--it would have to run through me or someone I oversee. That is standard practice among all firms I closely monitor.