We asked 150 advisors for their advice on how to overcome one of the silent killers of profitability: scope creep.
In a survey with over 150 advisors, one in five advisors reported losing money because of scope creep – what happens when a project grows beyond the original agreement, without any impact on fees.
If you’re using value-based pricing (one in two advisors are) or fixed-fee, additional tasks can easily creep into your original client agreement. Before you know it, the one-off work becomes a trend and you may be undercharging months, or even years down the line.
With so many advisors offering services for free in recent months, we asked advisors for their strategies on how to manage scope creep.
1. If a client requests additional work, agree the price on the phone then follow up with an email and invoice.
For fixed fee services, it’s important to specify what’s included in each service, as well as what’s not. Generally, we don’t mind a client phoning to discuss something, but if any action is needed from us post-call.
We agree the price for that on the phone and confirm with a follow up email and invoice. We then use an Analytics tool to determine client activities, linked to different packages. When the average activity exceeds certain thresholds, this triggers a package upgrade discussion.
Johan Potgieter, Cloud Accounting Manager, Outstanding CFO (Pty) Ltd
2. Package your services into ‘modules’ and set clear boundaries between them.
Our engagements are modular – i.e. add the Payroll Package Level A, add the Bookkeeping Package Level B etc. This gives us the control to make it easier to say ‘That’s a Level A request, and you are Level B so we need to discuss the options’. I didn’t do this for years. It’s important to set those boundaries.
Paul Burns, Owner, Woodennickel Solutions Inc
3. Clearly communicate additional fees to clients beforehand, and automate a fee conversion in a spreadsheet.
We use a spreadsheet model developed in-house to ensure we get the fees that are fair for the services we offer. The fees are attached to specific service offerings which are made clear to clients – anything extra triggers a fee conversion naturally.
Mobeen Ismail, Director, Reed Dawson Ltd
4. Make sure your client knows what’s not included, and ensure additional work is approved by a manager first.
We put what’s not included in our engagements so that the client understands what they have to pay for in addition to their monthly fee. Internally, we manage the work via workflow processes. These allow our staff to do only what’s in the workflow. Any items not included in the workflow need to get approved by a manager.
Katryna Coltess, Owner, Plus Associates Bookkeeping Inc
5. Build awareness in your team so they know when a project has outgrown its scope.
GoProposal is great for initial pricing but relies on human intervention and recognition of scope creep to prevent creep. Ultimately, regardless of tools, it’s down to team awareness of the boundaries for each client’s work and implementing processes and discussions when creep is highlighted.
Johann Goree, Director, JGBC
6. Review pricing regularly to protect against legacy pricing.
We use Go Proposal for Fixed Price Agreements and review them quarterly to check if the pricing is still correct. This allows us to know what work we’re doing for the client, so anything outside of the agreement will be charged separately.
Kristy Selby, Office Manager, M.A.D. Accountants
7. Avoid fixed fees wherever possible, and record any tasks that are outside of the agreement. Review these at the end of the month.
As a sole practitioner, I don’t find [the popular tools] cost or scale effective. I work with clients year round, so work with fewer than a sole practitioner just focused on compliance.
I avoid fixed fees except in very limited circumstances. I give fee estimates based on scope of X and Y. Clients who are charged daily rates are given a list of tasks that that rate covers, and made aware that for more specialised work, higher rates apply.
The most effective thing I do is time recording and detailing any tasks outside the normal. I review these at the end of each month and raise additional fees as necessary. If I decide not to charge an additional fee for any reason, I make the client aware, and tell them if it occurs again there will be an additional fee.
Paula Mcmonagle, Owner, Atholi Accountancy
8. Beware of the three words, ‘Could you just…’
We also use Practice Ignition to set the original parameters. COVID-19 has given us some additional challenges starting with the multiple conversations from concerned clients asking what the latest government announcement actually meant for them.
Then we had to decide whether we were going to charge for the claims for furlough pay. We have done this for just one client as it was worth in the region of £50k a month to them and took a while to put together. They were more than happy to pay for a few extra hours. With smaller clients some of them expected it to be done by us – we soon pointed out that, while we would not charge for small companies, this was over and above the scope of our standard service.
We took this approach hoping that when the dust settles, companies remember who helped through difficult times. If they are fickle enough to chop and change subsequently on price, then I am less disappointed to see them go as they are often the most demanding and less willing to work along with us to help them.
Beware of the three words, “Could you just…” Too many freebies and clients lose sight of the true value of what we do. We are often tempted to take on the extra work to show willingness and because we want to be helpful, yet it is often counterproductive.
Tim Rennie, Director, Tim Rennie Associates Ltd
9. Create a checklist of tasks and communicate this with your client.
Have a checklist of tasks to be completed as part of your fees and make it really clear what is included. Review annually to ensure the scale of fees is still adequate for clients needs.
Wendy Tate, Accountant, Bean Counters
10. Use your engagement letter to clearly define expectations, and update this regularly.
I think the key is clearly defined engagement letters updated regularly. Also, new clients I charge hourly until regular workload is ascertained, and quote upfront for any additional work.
Dana Cuch, Owner at Dana Cuch Bookkeeping (Adelaide)