Fixed Fee Pricing versus Hourly Billing
At Luft & Company, P.C. we prefer to quote our engagements on a fixed fee basis, versus the more historical accounting firm billing of hourly services. There are a few times when the services we will be performing are not easily defined and predictable, and in those cases, we have no choice but to quote our services on an hourly basis.
When we quote a fee, it becomes our budget and more importantly; a budget and known cost for our client. Occasionally, the engagement may take an unexpected turn and we need to update the agreement. But that is the exception and usually our client knows this long before we do and understands there was a significant change in the scope of work.
Now the thing about a budget is our firm will be highly motivated to get the job done quickly, completely, and above all, correct the first time. And isn’t that what the client wants from us?
Historically, accounting and other professional firms bill their engagements based on the hours worked.
Notwithstanding the fact the client doesn’t know what the engagement will cost, the motivations of the professional are different from the client. On an hourly billing basis, the professional gets rewarded with higher revenue if the job is done slowly and inefficiently. And if there are penalty notices or other follow up required there is even more revenue.
We believe Fixed Fee billing puts our interests squarely in line with you – our client.
In recent years, we have noticed one more reason hourly billing is less appropriate. Our work environment has become increasingly fragmented with constant interruptions. Today, we have cell phones, emails, texts, alerts, and other distractions. It takes significant discipline to avoid the multi-tasking distractions we all face, leaving it more difficult to identify completely dedicated time for hourly billing in this digital environment.
Finally, it is a matter of firm culture. Our focus is helping you – our client. When you have a question, we want you to call us and get an answer. We’d rather invest a little time in advance to avoid a problem down the road. We consider ourselves to be on your team and we want our relationship to be about teammates, not unexpected accounting bills.