Accountants should increase the frequency with which they are billing their business clients, which would provide cash flow benefits to both parties, a business leader has said.
Responding to the news that more than 5,000 Australian accountants owe money to the ATO — either personally or within their own firm — a My Business reader suggested that accountants could help their own cash flow situation, and simultaneously that of their clients, by issuing invoices more regularly.
“One thing I have noticed about quite a few accountants (including my own) is that they often just send one bill for the year, even if they see the client multiple times (sometimes quarterly for BAS work and lodgement),” they said.
“Perhaps smaller bills more often would help everyone.”
The reader also suggested that accountants take a more proactive approach to advising their clients on potential revenue hits, noting “a client who is making money will pay their bills”.
However, increased frequency of invoicing is not the same as time-based billing. Indeed, a NAB survey earlier in 2018 found that time-based billing is on the nose with most SMEs, who instead prefer fixed-fee pricing by their accountant.
Accountants may be overlooking customer service
Accountants by their very nature tend to be focused on compliance, but this can cause them to overlook the fact that they are businesses themselves and therefore should be considering their service and value offering for their clients, according to Tony Greco of the Institute of Public Accountants (IPA).
“[Virtually] every practice is a small business in itself and they vary in how they do things. There’s no award — it’s just business acumen, why they’re doing what they’re doing. A lot of it falls back to management style,” Mr Greco told My Business.
“Generally, you would think they do what their clients prefer — so if their clients prefer a monthly billing, then that’s what they should do.
“[But] you’ve got some of the older practices that have always done things one way and they haven’t revisited it or gone back to their clients to say ‘what works for you?’. Sometimes they’re not the best business managers themselves, even though they’re advisers.”
Mr Greco said that “it might sound a bit strange that they’re providing advisory services but that they don’t look at their own billing arrangements with their clients”. But any business in any industry can fall into the trap of being overly focused on their product or service and missing opportunities to improve their customer or client experience.
According to Mr Greco, there is considerable variation among accountants on how they invoice their clients.
“I think there’s about 30,000-odd practices [nationally] and a lot of them are one- or two-[person] operations, so it’s hard to gather the data — we don’t have the data on their business models about how they go about billing their clients,” Mr Greco said.
“But having said that, there would be a lot of variations between practices.”
Bring it to their attention
Mr Greco suggested that clients having concerns about the frequency with which they are being invoiced by their accountant is a symptom of poor communication, which can be easily fixed by simply having a conversation.
He urged accountants to bring new clients into their practice with an engagement letter that sets out the client’s preference around billing, and to be proactive in touching base with clients periodically to determine whether these preferences remain the same.
“Engagement letters are always good practice, to spell out in your engagement ‘these are the services I will provide you, and you tell me what works for you as far as billing’. That’s what engagement letters are all about, to nut all that out. And maybe a lot of practices are not doing their basic 101 business management to make sure that their billing works for the client,” Mr Greco said.
“It wouldn’t surprise me that they’re not looking after their clients’ interests in that regard, because I think most of their services are doing lots of compliance and specific tasks and then they just may not get around to that aspect of their own business.”
But he also encouraged business leaders to speak with their accountant if billing is causing problems.
“Bring it to their attention,” Mr Greco said.
He added that invoicing could be negotiated in more detail than simply monthly, quarterly or yearly frequency.
“If the client has a different profile of when money is coming in and going out, the ideal situation might be seasonal,” he said.
“[So] you take into account the seasonality of the client’s business so it all sort of fits in nicely with the client’s needs and wants.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.