Raising Fees?

[S T]

Matt, where have you been

Matt, also glad to hear from you. Reveiw the board, and then you can practice and reply to any post, current or old.

You have some catching up to do!

Sandy

[Jiggers]

Fee Increase, Definitely!

My tax return fee schedule for 1040's and 1040A's is based on the schedule, form, or item on the return. Though I haven't set my new fee schedule for next year, I go through my schedule and pick items that I can increase by a small amount. For instance, the record keeping for EIC is getting more risky for us preparers, my fee for the 8867 will go up $5 from $30 to $35. Also, our need for accurate reporting of social security numbers and names requires me to increase my fee for each exemption of new clients from $5 to $6. For depreciation schedules, I charge a basic fee of $30 plus $0.50 per carryover asset ( you have to maintain them until sold), and $3 for new assets, other than cattle, and $1.50 for each new cow/bull added to the depreciation schedule. I will probably increase each item by $0.25. Since the 2nd extension is eliminated this year, I will increase my fee for the 4868 from $25 to $30. I also add a $5 fee as a PITA fee for clients who just won't make an appointment. This will increase to $6 this year. An on and on and on!

Overall, my clients will probably see some fee increase. Any complaints, I point out that their W-2 increased, their Social Security increased, their insurance increased, their property taxes increased, their gasoline costs increased, etc. And, where clients returns become more complicated from one year to the next, and they complain about the increase, I compare their return to buying one sack of groceries at the local supermarket for $30 and then going back to buy 2 sacks. They surely don't expect to pay $30 for both now, do they? Always stops them dead!

My fees for 1120's, 1065's, 1120S's, and 1041's is based on hourly rates due to the complexity. They will also increase.

My monthly bookkeeping fees will probably increase 15 to 20% this year because of the new computer just purchased that was needed because the software won't run on the old Windows 98 that I had!

I wish I had the time to do a short CPE seminar or write a book on fees, you would all be impressed and make more money on my ideas. It has worked for me.

[Black Bart]

The jig's up for those resisting price increases.

I wish I had the time to do a short CPE seminar or write a book on fees, you would all be impressed and make more money on my ideas. It has worked for me.

Gosh, Jiggs; I'm already impressed. And clients think my tax prices "go up" too much too often.

Hmmm, maybe I'll try it---although your schedule's a bit complex for my taste (what about just adding a flat $50 to all comers?). I herewith vow to bill all hands and the cook--taxpayers, kids, cats & dogs, their shadows, and slap a charge on everything that isn't nailed down or non-existent. Then maybe (like that TN boy--dmj4 wasn't it?) I'll get to spend the '06 post-season lull in Florida.

If it's not bein' too nosy, would you mind tellin' what state you're operatin' in (just in case I'm forced to hastily relocate)?

[bobohio]

Best to raise a little each year

Hi new guy here. Just found this site. I've had my practice for 18 and the first couple of years I raised my fees each year. Once I was comfortable with my fee schedule I stuck with it for a few years. Then I raised it to make up for a few years of no increases. Got a lot of negative comments and lost a few. Now I raise them each year 4 to 5 % and no problem. My conclusion is to raise fees each year and if you decide to not raise for a year don't try to make it up he next.

[Black Bart]

Hi bob,

Nice to have you. Come on in here anytime.

Like you and most of the others, I have been raising my stuff a little bit every year, or sometimes every other year, but it just seems like everything's gone up so much this past year that the little-bitty increases just aren't cutting it for me, so that's why I was askin' and thinkin' about a bigger raise this time. I'm tryin' to decide where to draw the line (I'm in Arkansas--a "cheap rate" state).

There's another Ohio guy on here under....umm...the "rate charts" (or something like that) thread, I think; just in case you get lonesome. Anyhow, newbies are welcome.

Regards, BB

[jainen]

a great idea

>>I wish I had the time to do a short CPE seminar or write a book on fees, you would all be impressed and make more money on my ideas.<<

What a great idea, let's all get together and decide what to charge! Just like the oil companies, and they make a ton of money.

[Jiggers]

Price Fixing

>>I wish I had the time to do a short CPE seminar or write a book on fees, you would all be impressed and make more money on my ideas.<<

What a great idea, let's all get together and decide what to charge! Just like the oil companies, and they make a ton of money.

NO, NO, NO.
That is price fixing.

What I meant was to present ideas on how to charge for items that you may not be charging for. How to present your fees to your clients, and how to logically raise them.

[Snaggletooth]

The Ohio Connection

Speaking of Ohio, we need to reach out and grab that bastion of research, answers, and unabashed longevity, Burton Koss of Columbus.

Maybe when tax season gets big-time pumped up, Burton will join this board. Some of the people on this board are so smart that they lighten up the room just by walking into it. Burton is one of them.

Say Black Bart, sounds like a redneck Southern wedding set to music:

"Here comes the Groom....Lighting up the room...."

Anyway, Yankees like Burton are really OK in their own element.....

[Black Bart]

Say, jainen... (Hmmm, I'm runnin' out of names not to call

>>I wish I had the time to do a short CPE seminar or write a book on fees, you would all be impressed and make more money on my ideas.<<

What a great idea, let's all get together and decide what to charge! Just like the oil companies, and they make a ton of money.

you). Listen; let that boy alone. He's makin' (or tryin') to make money for us. He cayn't be all bad, even if he doesn't want us to know whar he's frum. Go join that Ralph Nader's website--they just love statements like that.

[Jiggers]

Where does Jiggers live?

The United States of Texas!

[Armando Beaujolais]

Just my two cents on the fees deal.

I see a lot of talk about coupons and discounts, etc., to bring in business. I don't think that's a good idea for firms that want to establish a loyal client base. It will work if you're trying to go after the discount coupon crowd, but it will backfire if you're trying to get people to return year after year.

The firm where I do taxes has a policy. You can do as many returns as you want for free, but you are not allowed to discount. You can do some family and friends, no problem, but you can't cater to the crowd whose primary goal is to think they're saving a couple of bucks. Way back when this firm tried discounts for a very short time. They got nothing but headaches, the discount-seekers still argued about price, and very few remained loyal customers.

Look at all the conversation about having to be so very delicate in the way you raise prices to keep up with inflation. If you gave a new client a 20% discount last year, and you're raising your prices 5% this year, all of a sudden that new client you spent all that effort landing is going to have a whopping 25% increase in their fees the second year. Is that how you're going to foster loyalty? Goodbye client. Not good, unless you don't care about returning clients.

How about the client who's been loyal and supporting your business for the last 10 years. He sees your ad showing that you're going to charge someone 20% less sight unseen. He feels punished because he's been loyal to you, and has probably sent you a bunch of referrals over the years. Why not give your loyal clients a break? It's going to look a lot like greed at that point. I've seen companies I do business with put out coupons for new customers only, and it really tees me off.

Everyone deals with the general public not having a clue about what's involved in preparing a tax return. Most people think you pour their receipts into a hopper and a completed return pops out. It's a constant struggle to educate people about the real value of your services. What do you do when you discount? You not only discount the price, you discount your own value. You also discount the value of everybody else in the profession. How often do you see reputable doctors or lawyers advertising 20% off?

That's why the policy of unlimited free returns, but no discounts is so smart. If you have a client come in who's destitute and has four kids and a dog and not two nickles to rub together, you can do their return free. That won't discount your value. The person knows it's worth something. If you give a discount, however, that becomes the perceived value of your work.

It depends on the type of clients you're looking for. Just don't expect discounts to help you build a long-term loyal customer base.

JMO

[Black Bart]

&quot;the value of your work&quot; above

Armando, that was a great post. Your stuff has depth, wisdom, and solid impact.

I've got to go to a different thread. Your stuff is just too humbling. After you post, there's not much left to say, even for the court jester.

[JG EA]

Agree - No discounts for tax prep.

If you gave a new client a 20% discount last year, and you're raising your prices 5% this year, all of a sudden that new client you spent all that effort landing is going to have a whopping 25% increase in their fees the second year. Is that how you're going to foster loyalty? Goodbye client. Not good, unless you don't care about returning clients.

Which means you would have to go up by 31.25%

One company I worked for years ago (not taxes) had several customer discounts. In figuring out the pricing, they took our cost plus our mark up = the amount to charge. Then they took that charge and divided by 100 minus the discount.

So, the company always got the amount they wanted and the customer always got the discount they wanted.

(eg Cost plus mark up=$120 / 80 [100 - customer's 20% discount] = $150. Customer charge $150 x 20% discount = $120!)

Everyone was happy.

[Black Bart]

Excuse me, Armando, but

So, the company always got the amount they wanted and the customer always got the discount they wanted.
Everyone was happy.

there is somethin' left to say.

Beg pardon, JG, but I just have to say that there appears to be a certain something...oh, I don't know...lacking in that "New Math" practiced by your employer. While I suppose it's true that "everybody was happy(clams are happy)," it also seems to me that we'd have to measure the worth of that transaction by a somewhat more objective standard. Like, for instance, did the customer save money by getting the discount? Well...we don't have to linger too long on that point...do we?

That deal puts me in mind of the business practices of my second cousin, "No Problems" Halfacre. I saw him sell something for two dollars--asked, what's his markup--two percent, he said--how arrived, I ask--said, it cost one dollar--one and one's two, ain't it?

Later on he sold used cars for a dealer and beat the socks off a customer. Asked if he "felt bad" about deal--said no. Why not? "I made money, the company made money, an' 2 outta 3 ain't bad."

[Bees Knees]

This reminds me of the reason why I took the H&R Block training school to learn how to do taxes. My mother-in-law owned a floral shop and I owned my own carpet cleaning business. She would tell my wife and I that we could deduct the discount on our taxes. For example, if my normal charge was $29.95 to clean the living room, dining room, and hall and I offered a coupon to do it for $26.95, then I could deduct the $3.00 discount from the $26.95 and only pay tax on the $23.95 difference. My wife, of course, took her mother’s side, and I wisely didn’t argue. I had to wait until I was officially trained to do taxes to set that issue straight.

That’s not much different than all of our cash basis clients that want to take a bad debt deduction for not getting paid by a customer.