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STP is an entry way into value pricing for accountants

Plenty has been said about the benefits of STP for small business, but what impacts will it have on accountants and how can they make the most of a decreasing workload?

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STP is an entry way into value pricing for accountants

by QuickBooks Australia

Plenty has been said about the benefits of STP for small business, but what impacts will it have on accountants and how can they make the most of a decreasing workload?

The biggest opportunity that STP offers for accountants is a chance to start on the right foot with a brand new client, says Rhondalynn Korolak, the founder of Businest and author of Pricing Value.

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Most accountants have already ensured that their clients are compliant with the new way of reporting tax and super information, so businesses looking for STP aid are likely to be prospective clients.  

This means accountants have a chance to start fresh with a client that has no preconceived notions about their practice or method of billing.

“They can start the relationship on the right foot, based on value and not on the time it takes for them to actually deliver the work,” says Ms Korolak.

STP is a compliance-based task, much like tax returns, BAS or bookkeeping. However, if an accountant starts a client relationship based on value, rather than on time, they have the opportunity to steer their business towards greater results and impact, explains Ms Korolak.

“If a client comes to you with an STP related issue and you do only what they have asked you to do, you are basically just an order-taker at the drive thru at McDonalds. Other than saying ‘do you want fries with that’, there is not a lot of upside potential for you or your client,” cautions Ms Korolak.

Digging deep

She believes that if a client approaches an accountant with an STP related issue this late in the process, the accountant can easily assume that there is a larger problem at play.  

“We need to dig and see what is going on with this business. We need to discover more about this business in terms of what they need to achieve or what is keeping them up at night,” clarifies Ms Korolak.

Digging deep and helping clients achieve transformation should never be priced according to time, Ms Korolak says.

“The concept of value pricing involves a couple of things. It is about the questions you ask upfront to scope out the nature of the engagement and the desired outcome.”

She guarantees that STP alone is not enough to convince clients to pay a premium price.

“We need to understand what keeps these people up at night and more importantly what the cost is of them continuing to ignore these problems actually is. Once we have that, we can value price the entire engagement, which is going to include a lot more than just STP compliance.

“It will comprise the economic value of the solution you are providing, which includes all those things you did that go above and beyond the basic materials and time that went into doing the work,” says Ms Korolak.

Mindset shift

Pricing solely based on time means mispricing you service, she cautions, but admits that pricing value involves a completely different mindset, which can be tough to digest and implement.

“The mindset and the approach of doing hourly or fixed-fee pricing is the polar opposite of what you need in order to implement pricing value.”

Ms Korolak explains that an accountant who uses hourly or fixed pricing will often focus far too much on the service the client has asked for and the cost and time involved to deliver it, which actually leads to price sensitivity.

“They start by adding up the time and materials. Next, they mark them up and price them,” says Ms Korolak.

With pricing value, accountants focus first on determining what the client values most, without regard for the time or margins involved in performing the task.  

“Pricing based on time or internal cost structures is a ludicrous idea because value is solely judged by your client and will never be the same to two individual clients,” warns Ms Korolak.

Both hourly and fixed pricing stem from an old notion that the amount of time you spend on something determines its worth.

Ms Korolak advises accountants to consider the diamond-water paradox that debunked this way of thinking decades ago.

“Value is entirely subjective. If I have a glass of water, someone sitting in their office will pay me much less for it, than someone who has been crawling the desert and hasn’t had a drink for 48 hours.

“The problem is accountants have been pricing that same glass of water at $10 an hour to every client, regardless of their thirst, for decades,” explains Ms Korolak.

Unlearning old ways

But for accountants to embrace pricing value, they must first unlearn old practices.

“All of the mindsets, tools and strategies that we have dragged with us for the last two decades while billing based on time or costs, have become a part of who we are.

“Accountants actually first have to unlearn all of these bad habits before they can switch to pricing value,” says Ms Korolak.

She explains that while value-based pricing has been talked about for two decades, 90 per cent of accountants are still not practicing it.

But what happens when automation reduces the time required to complete a task?

“Right now, we have so much disruption in our industry. AI and machine learning are automating more and more of what accountants do every single day. This means that as things are automated, they take less time to do, and less time equals less money for anyone not pricing based on value,” clarifies Ms Korolak.

She cautions, however, that this should not be viewed as an opportunity to up the number of clients, rather it should be interpreted as a push to fix pricing models today and change the way both the client and the accountant show up in the engagement.

“The most powerful pricing app in the world actually sits between your right and left ear,” concludes Ms Korolak.

 

STP is an entry way into value pricing for accountants
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FROM THE WEB

The ato, tax
changes and
you.everything
you need to know this eofy

A joint Accountants Daily and
My Business Webcast parntered
by Intuit Quickbooks

thursday,20 june
11am aest
duration:60 minutes

A panel of industry experts will reveal in a free, live webcast up-to-date strategy and quick tricks that are helpful and necessary to tackle what is the biggest deadline of the year.

We will also bring you exclusive insights to:

And much, much more!

register free here