Time-based billing is a crazy way to price. Here's 3 reasons why...

pricing profitability value pricing May 18, 2020

If you're an accountant, do you still bill by the hour?

Now I know in recent years, many accountants have transitioned away thankfully from time-based billing. But there is still many that do, however, have very strong opinions on this.

I believe that time-based billing is a crazy way to price. And in this video, I'll give you my three top reasons as to why I think so.

The first one is that clients hate it. I saw a prospect the other day who it pains to tell me how he gets stressed out when his accountant comes to see him. Because the accountant will make small talk, he'll talk about holidays, he'll talk about the weather which is not a bad thing but all the client is thinking in his head is that I'm actually paying for this so can we please get straight to the point?

You see it gives the client no certainty, they have no idea what they're going to pay and it constantly keeps them on edge and makes them not want to talk to you because they feel they're being charged by the hour. So that's reason number one.

Reason number two and following on from that is that there is a conflict of interest between your objectives and the client's objectives when you're billing by the hour. For the client, they want it done as fast as possible because they want to pay the least amount possible. For you, you will just take as long as required because you know you're getting paid for every minute and hour that you're going to spend on it. Which doesn't make for a fruitful, mutually beneficial client-accountant relationship where your objectives are constantly at loggerheads with each other, so that's reason number two.

And reason number three is that there is no incentive for you to work smarter, to work more efficiently in your client's interest if you're being paid by the hour. What motivation do you have? Does your team have defined ways of working faster, of delivering a greater client experience? If you're being remunerated for every minute you're spending, regardless whether it's productive or not.

So there are 3 reasons why I think time-based billing is a crazy way to price.

What are your thoughts? Connect with me on Linkedin or join my Facebook community and let me know!