Discover how your firm's pricing compares with Ignition's 2024 Tax and compliance pricing benchmark. Get insights on current fees and planned increases for common tax and compliance services. Stay informed and confidently adjust your firm’s pricing to boost revenue in 2024.
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Thank you! Please find the link to download the report below. You will also receive it in your inbox shortly.
2024 Tax and compliance pricing benchmark report
How to communicate a price increase to your clients (without feeling awkward)
Influential accounting thought leaders Ben Walker, Natalie Lennon, and Rebecca Mihalic dive into the benchmark data and share invaluable insights to help you effectively increase prices and maximise your firm's revenue and profitability.
If you've been thinking about raising your prices, you are most certainly not alone. The current economic climate globally has many businesses – including accounting firms – grappling with the rising cost of products and services, and considering increasing their rates.
In Australia, the inflation rate rose to 3.6% in the 12 months to April 2024, with the Reserve Bank of Australia forecasting it will take until late 2025 for inflation to fall to within the target range of 2-3%.
If you can relate to these statistics, then you understand the increasing importance of planning to raise your prices, rather than simply considering it.
That said, the thought of increasing your rates may induce a bit of anxiety, particularly because many firms don’t want to risk losing clients. Figuring out how to raise your prices is already a challenging task. But also having to communicate that to your clients? That’s even tougher.
So, to help you navigate through the process of increasing your prices, we’ve put together a practical guide.
Ready to dive in? Let’s get started.
Most accountants and bookkeepers do an outstanding job helping their clients stay on top of their books, maximise their margins and implement financial best practices, but they often neglect those same practices when operating their own business.
These days, however, you can no longer forgo tasks like reviewing your pricing and profitability. Margins have been squeezed over the past few years, driven by multiple factors including higher costs of living. As such, you need to constantly stay on top of your costs and be prepared to raise your rates accordingly.
If this task has you worried about losing clients, it’s worth noting that you can’t deliver quality service if you’re not charging enough. If you continue to operate with less-than-optimal profit margins, the quality of work delivered by your business may suffer and you’re likely to end up losing clients anyway.
Here’s how to ensure that your prices support a healthy bottom line.
The first thing is to assess the market dynamics, so you can determine how competitive your pricing and value proposition is in the current market.
In Ignition’s 2024 Tax and compliance pricing benchmark report, you’ll find essential insights on the fees firms are currently charging nationally, in capital cities, and regional areas for the most common tax and compliance services – and also what they’re planning to charge.
You can use the report to:
Next, sanity check your own business to understand your breakeven position and determine true profitability.
This can be done by analysing the costs associated with your services. Factor in the cost of:
Having a good understanding of your business in general is essential to any re-pricing initiative.
If you want to take a more granular approach, consider analysing the profitability of each service line. This way you can understand exactly how much profit (or loss) is being generated by each service that you provide your clients.
After all, the time and costs associated with preparing a client’s taxes may be completely different compared to the costs of generating a profit and loss report. They have different time inputs and require team members with different skill levels to prepare and finalise.
Once you understand the costs involved in providing your services, you will be able to track how these have changed over time and will continue to.
You could find that a small job that used to cost you $100 to produce might now cost $200 (100% increase), but another job that previously cost $3,000 might now only cost $3,600 (20% increase).
Those percentage increases may vary depending on the type of service. The insights you glean at this stage will give you a better idea of how profitable each service is, in turn helping you decide the amount and manner in which to raise your rates.
It can also help you determine which services you may wish to focus on growing, and those you may wish to stop offering if they are not profitable enough.
Once you know your numbers, it’s time to decide what type of increase you’ll implement. You generally have two options:
The first option is pretty straightforward: you set a percentage by which to increase your prices and apply it across the board. This is ideal if there isn’t a lot of variation between the margins of different services or if your end goal is to just cover the general rising costs of doing business.
For example, if you have a lot of SMB clients and see that there isn’t a lot of variation between the costs of doing tasks such as preparing profit and loss reports, doing their bookkeeping, and so on, then you can decide on a set percentage increase and apply it to all these service lines.
In Ignition, you can use the Price Increase feature to quickly and easily apply a percentage increase to your proposal – saving you from pulling out the calculator.
However, if you find that certain services cost a lot more to deliver than others, then a service-level increase is more appropriate.
Let’s say you discover that you spend a lot more resources preparing taxes for your corporate clients versus sole proprietors. In this instance, it may make more sense to apply a larger increase to your corporate tax preparation fees, since they cost significantly more to deliver.
The right path forward is a completely internal decision, and it depends on your current profitability, your forecasts, and your business objectives.
As for how often you should increase your rates, a good rule of thumb is to do it at least annually. Another approach is to evaluate your pricing before the end of each client engagement.
If your engagement letter covers one year, then you could use that renewal period as an opportunity to re-price your services.
Accountants often just renew their engagements straightaway, without reevaluating their prices. So, in your firm, it pays (literally) to take a moment before a client’s renewal period to rethink and re-price your offerings.
If you’re using Ignition, you’ll be prompted to review your pricing when renewing your annual engagements and can quickly apply a price increase. The platform will even suggest a percentage increase based on an average from other accountants using Ignition.
“Price reviews routinely get forgotten. So it’s brilliant that Ignition will prompt me to put up our fees in line with our new pricing policy. No more leaving money on the table.”
David Thomson, Partner, Certus Group Accountants
Now, let’s talk about how to relay your price change notice to clients. Understandably, this task can feel a bit awkward, so you want to be as well-prepared as possible. Follow the tips below to plan your approach.
Sixty to 90 days before raising your prices, send an email or a one-to-many communication to inform your whole client base about the change. This is an ideal time frame because it gives clients enough time to prepare for your new rates.
When you do it too close to the date of your price increase (say just a month before), some clients may feel that they’ve been caught off guard and thus react negatively.
On the other hand, if you give them ample notice, you are less likely to experience pushback from clients, because your actions display courtesy and respect.
To help with this step, here are email templates that can give you a starting point for crafting your personalised communications.
If you engage your clients on a yearly basis, they should already expect a new proposal will be sent to them, and the pricing increase will be reflected in this. On the other hand, if you have ongoing engagement with your clients, it would be worth pointing out to them that they’ll receive a new proposal that includes the changes in pricing.
Hi [FIRST NAME] —
This is to let you know that there will be an increase of [INSERT AMOUNT] in our [INSERT SERVICE LINE] pricing. This will take effect when our current engagement ends, which means that if you decide to renew our engagement, the new agreement will reflect this pricing.
We’ve made every effort to delay and minimise our price increase. But as you may know, businesses across the country are experiencing ever-increasing costs, and our accounting firm is no exception.
This change in our pricing will enable us to continue delivering high-quality services and help ensure that your business is well taken care of.
We truly appreciate your support and we look forward to continuing to work with you.
Sincerely,
[SENDER NAME]
Hi [FIRST NAME] —
After carefully reviewing our costs and services (which we also encourage you to do), we have made the decision to increase our monthly engagement pricing. Beginning [INSERT DATE], your engagement will cost [INSERT AMOUNT] per month.
Please know that we have made every effort to minimise and delay this price increase. But as you know, costs have been steadily increasing since last year. This change in our pricing will help ensure that our team has all the resources needed to serve you.
We thank you for being a valued client and we hope to continue working with you in the years to come.
Best regards,
[SENDER NAME]
Hi [FIRST NAME] —
We wanted to let you know about changes to our hourly rates. Beginning [INSERT DATE], our new prices will be [INSERT AMOUNT].
Please know that we have done our very best to hold off on raising our rates. That said, businesses across the country have seen major increases in costs, and our firm is no exception.
This new hourly rate will allow us to continue delivering our services with the quality and care you’ve come to expect from us.
We appreciate your business and look forward to supporting you and [INSERT BUSINESS NAME] going forward.
Best regards,
[SENDER NAME]
Sending out a message like the ones above removes some of the communication burden, helping you be more efficient with relaying your pricing information.
Just bear in mind that a one-to-many message can feel impersonal, so try to take steps to personalise your message. Use a client communication platform or mail merge solution that enables you to add each client’s name and company into your messages. Include a list of their existing services that will be impacted by the change. That way, your message won’t read like an email blast.
One step you could take in addition to a one-to-many message (or perhaps in lieu of it) is to have one-on-one conversations (or emails) with your clients. Prioritise the clients who you have long standing business relationships with, for example, and those who would push back on your pricing the most – and then take the time to explain your pricing.
One-on-one pricing conversations may be the most awkward part of raising your rates, so here are some pointers to help you navigate these situations.
When going into these conversations, bear in mind that your purpose is to explain and discuss your new pricing. As such, you don’t necessarily have to go for the hard sell. Instead, focus on answering the client’s questions and discuss how the engagement will work in the future.
With Ignition, you can subtly and unobtrusively cross-sell your services to help grow revenue. Using the proposal add-ons feature, you can suggest complementary services to clients as part of the proposal options you present to them. See how it works.
Don’t be afraid to toot your own horn. In what ways have you served your clients? What have you helped them achieve? Use the answers to these questions to communicate your value to customers.
Here are some ideas:
Use these conversations as opportunities to explain, in great detail, the tasks you do for your clients. As an accounting and tax professional, you handle a myriad of jobs, including generating reports and maintaining the client's books.
Take, for example, preparing a balance sheet. While the final deliverable comes in the form of a document or spreadsheet, there’s actually a lot of work involved in creating the document. There’s the collection of information, the reconciliation of accounts, the verification of information, and making adjustments for legislation.
As the service provider, it’s essential that you allow clients to see all the work that goes into these tasks. Doing so will help convey your value and aid your re-pricing initiatives.
Any conversation becomes awkward when you’re at a loss for what to say. Fortunately, you can avoid these situations by preparing for each client encounter.
Anticipate any objections the client may raise during your call. Have a think about their top issues and concerns, then prepare your answers in advance. If you’re nervous, practice what you’ll say ahead of time or list out your talking points.
If there’s major pushback, it may be helpful to present your clients with alternative offerings. Providing your client with options when you do re-pricing, gives them some agency in the process.
You could say something along the lines of:
“Our monthly accounting price is increasing from $800 to $1,200. These are the services included in that scope. If you want to stay at $800, we can do that, but it's going to have a lesser scope.”
Doing so demonstrates flexibility and helps to give your clients wiggle room to work with you.
If clients do go out of scope, there’s no need to worry. Features such as Service Edits and Instant Bill in Ignition, make it simple to get paid for these requests.
Service Edits enables you to make changes to the price, quantity and billing of existing services even after a client has accepted your proposal.
Instant Bill complements this by enabling you to easily bill clients and automatically collect payment for ad hoc services, protecting your cash flow and boosting profitability.
In Ignition, you also have the flexibility to present clients with a range of choices, offering up to three different package options in your proposal. Whether it's a basic service package or a premium one, the platform simplifies the process, making it effortless for you to steer clients toward the ideal option that aligns perfectly with their requirements.
If you’re implementing customer success initiatives (and you totally should), then having a conversation about pricing becomes a whole lot easier, says Joshua.
For instance, if you’re already in the habit of checking in with your clients and staying in touch on a regular basis, then the topic of pricing is much easier to bring up.
“I think the whole re-pricing conversation is one part of the client success or customer success process you do. If you start to build on this kind of customer success process in your firm, then these conversations aren't as awkward,” he continues.
If you find yourself having some difficulties in bringing up pricing, it will be beneficial (both for you and your clients) to make customer success a bigger focus in your firm. You can, for example, start having regular check-ins with your clients on how you can better help them succeed.
That way, when you do decide to raise your rates, the process (and the conversation) becomes easier.
If you’re implementing customer success initiatives (and you totally should), then having a conversation about pricing becomes a whole lot easier.
For instance, if you’re already in the habit of checking in with your clients and staying in touch on a regular basis, then the topic of pricing is much easier to bring up.
The whole re-pricing conversation is one part of the client success or customer success process you do. If you start to build on this kind of customer success process in your firm, then these conversations aren't as awkward.
If you find yourself having some difficulties in bringing up pricing, it will be beneficial (both for you and your clients) to make customer success a bigger focus in your firm. You can, for example, start having regular check-ins with your clients on how you can better help them succeed.
That way, when you do decide to raise your rates, the process (and the conversation) becomes easier.
When your new pricing takes effect, be sure to update all the places where your rates are listed. This includes your website, engagement documents, contracts, price lists, and so on.
A revenue generation platform such as Ignition, that optimises and automates proposals, billing and payment collection, can help you do this quickly. Your services library comes pre-loaded with services tailored to your industry and ready to use right away. You can also instantly import your existing services from QuickBooks Online or Xero for rapid setup. And you can quickly craft professional service descriptions using AI. See how it works.
From here, you can create a brand new proposal and the platform will automatically list your new prices in your engagement letters and agreements, ensuring you bill your clients accurately.
Once you get your clients on board the new pricing, have them sign the updated engagement agreement before the new prices take effect. You want to do this sooner rather than later to ensure you’re able to enforce your new pricing.
And when it comes time to renew your engagements, take advantage of the prompts and automatically apply a recommended price increase to your agreement. Easy.
The right solution can make re-pricing your services a whole lot easier. Ignition’s revenue generation platform comes with features to streamline the process of implementing your new pricing. Want to see Ignition in action? Watch an on-the-spot demo.
Increasing your prices? Read this practical blog to navigate the process effectively. Includes FREE email templates.
Find out how to price, sell and cross-sell your services using the steps in this easy-to-follow, downloadable ebook.
Ready to implement a price increase? Use this checklist by Rebecca Mihalic, Ignition’s Head of Accounting (APAC) and Director at businessDEPOT.
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