The article, “Start Your Own Firm,” ( JofA, May00, page 61) covered many good points. Specializing and the periodic fine-tuning of a practice are things many of us CPAs need to consider. However, I believe one of the most important aspects of maintaining a practice is billing. Learning how to bill separates the practitioners that survive from those who don’t.
Although I do not consider myself an expert, I would like to add some tips, especially for those CPAs who have the luxury of planning to go on their own.
- Learn how to bid work and how to invoice it: If you have the opportunity at your current job, bid work for clients. Learn to write invoices clients will pay. (If your car was repaired, would you sooner pay a bill that says “For mechanical services rendered” or one that details the work done?) When you give a price break, say so. If you saved the client money with your talent, tell them. (“This work saves you about $7,500 in federal income taxes.”) You will make the client feel better about paying you.
- Learn from the best: I once worked in a firm where the partner with the sloppiest work had the best billing record. Clients were happy to pay him. We laughed about it as we picked up our pay checks, but instead of laughing, we should have looked closer.
- Examine your side work: Many of you do tax returns or accounting on the side. I knew a man who prepared 350 tax returns outside of his regular job. His billing rates were significantly lower than the firm’s prices because he had minimal overhead. Unfortunately, his billing rates were so low that, if he ever went on his own, there was no way to raise them to support the overhead. Set your rates now as if they had to support rent, utilities, and insurance and give you a living wage.
- Treat your clients as you would want to be treated: Would you hire a painter to paint your house with no idea of what it would cost? Of course not. Give your clients the same consideration. It is much easier to bill and collect if your clients know up front what your charges will be.
- Strive for complaints: If no one complains, your rates are too low. Lose some work because your prices are too high. Knowing what your peers charge won’t necessarily help—they could be as clueless as you. Get enough price resistance to know you are in the ballpark of the correct rates.
John E. Ahern, CPA, JD
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