The hour-based pricing model has ruled the accounting industry for decades, but more and more firms are trending toward a newer, more efficient model: value pricing. While setting an up-front price for each client based on the value of the services rendered is not new territory, there are many aspects of this practice that may come as a surprise.
Value Billing and Fixed Pricing: What Value-Based Pricing Is Not
Although many accounting professionals use these terms interchangeably, value pricing uses a different framework compared to value billing and fixed pricing. While value billing involves calculating services and value received by the customer after the services have been rendered, value pricing requires firms to make these calculations beforehand. This way, the client knows exactly how much he is expected to pay. Value pricing also sets itself apart from fixed pricing, which involves setting a fixed cost for a certain service regardless of variation among clients, which may imply more or less expected labor. Although set upfront, value pricing depends on perceived value, so it can change from one client to the next, even for the same service.
Implementing Value Pricing Takes Work
Value pricing involves measuring the value of a firm and service rather than time spent completing the service, which can get complicated. This means accounting professionals can't always give a straightforward answer when a client asks how much they charge. To avoid problems such as undercharging, professionals have to know their abilities and properly assess each client's needs and situation.
The Benefits Are Worth the Effort
Value pricing may not be as simple as other methods, but the results speak for themselves. The shift of focus from time to value increases the drive for efficiency, both for accounting professionals and the firm as a whole. Plus customers can feel more comfortable coming to the firm with questions because they don't feel as if they're racing against the clock. Compared to value billing, value pricing is also more transparent, as customers always know what they get and how much they pay up front.
Not All Firms Are On Board
The hour-based pricing model has a strong foothold in the accounting industry, so it's no surprise firms of all sizes are reluctant to take on a new pricing model. Not only is hour-based pricing widely accepted and understood by accounting clients, but it is also an easy option for firms when it comes to billing. Despite its many advantages, value pricing requires a great deal of time and work to implement, so the journey toward this best pricing model as an industry standard may be a slow one.
Value pricing may be a relatively new model, but it provides a strong step forward for accounting firms. Its many benefits for clients and businesses alike just might make it the best pricing model for the industry.
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