FIRM OF THE FUTURE

Scope Doesn’t Have to be Creepy

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01When it comes to fixed fees, here’s how to take scope creep from inevitable to non-existent.

The industry is shifting. The trend towards fixed price billing is in full swing and you are already offering fixed/agreed fees on 75-95% of your services. Your practice has started to scale and your clients are happy with the service levels you’re providing.

Or perhaps you are not there yet, but you have started to think about pricing your services like products or using value based pricing and its all making sense. You are ready to be rid of time/cost billing forever so you’ve run the numbers through our handy pricing matrix and things are looking promising. Congratulations on taking the leap!

There is still one thing that you may not have figured out when it comes to agreeing to a fixed price with your clients; how to manage scope creep.

Scope Creep Scares me!Scope Creep. The two words that have the potential to suck the profitability from your practice like a thirsty leech.

Yes, it most certainly is a concern. Yes, practices have been getting it wrong and are paying the price. To many, scope creep is a symptom of fixed fees in a service-based world. The perceived inevitability of scope creep is causing many accounting professionals to shy away from transitioning to a fixed-fee structure, and therefore sticking with time/cost billing.

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However there are three problems with this mindset:

1. Fixed fee practices never have to worry about calculating billable hours and manually adjusting invoices on completion of work.The scalability due to efficiencies that fixed pricing affords, will ensure those forward-thinking practices will skyrocket their profitability, increase their market share, and therefore, leave their hourly-charging colleagues in their jetstream.

2. Time/cost billing doesn’t serve your client so well. In the era of e-commerce and readily available information, clients are significantly more savvy to what they should be paying. Potential clients expect to know what they are paying upfront, and if they aren’t told, they will shop around until they do know.

3. Scope creep inevitability simply does not have to be true.

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01So What do I do?So how do you handle scope creep? Many people will tell you that it is as simple as being clear with your client and ensuring they know that anything outside of the scope of your agreement is subject to additional fees. This advice on it’s own is not enough. The conversation of additional fees is never an easy pill to swallow for your clients, and I’m sure many of you are shivering at the thought of having to make that phone call with your most difficult clients.

The good news is, there is an easier way. Getting there won’t happen overnight, but if you are serious about owning the client relationship , it’s worth taking steps to remove scope creep from the equation altogether.

So how do you ensure scope creep becomes non-existent? here’s how:

1. Define your on-boarding process. Implement. and repeat:

Your on-boarding process is critical. This is where you lay the foundation for a lasting, healthy client relationship. Creating a series of steps that you will always do when on-boarding a new client will allow you to fully understand your clients’ needs and provide them with the correct services.

The “Discovery” meeting is the number one priority here. This meeting is where you are going to find out:

Understand their business: key decision makers, core business function, communication style, and overall goals

What services are they looking for, what services do you think they need, and what are the deliverables of those services?

Where do they want their business to be in 6

months? In 1 year? In 2 years? What services will they need if they hit those growth targets? This is your opportunity to flag potential service add-ons or scope creep areas.

Whatever you do, do this for every single client, so that you are consistent and have measurable data to improve your practice. Ensure you record this information so that you have actionable points that can provide you with insights at your next re-engagement period.

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2. Yes you should be clear about what is included...:

It’s very important to ensure your service descriptions are SMART. Yes the old goal-setting acronym can be just as effective here:

Specific: a description of the

exact services you will be providing

Measurable: Is there a performance-

based outcome that can be measured? If so,

explain what the outcome is and how you will

measure it.

Achievable: The most important piece

of information here is how. How will the services

be completed. Do you have the resources and

the capacity to complete the work on time, on

budget and to the clients expectations?

Realistic: This one is two-fold. First,

are you setting the bar too high/too low in terms of

outcomes? Ensure that your proposals are setting the

right expectations. Second, are these the most relevant services for this client? This can be answered by asking the right questions in the

discovery meeting.

Timely: Be very specific about when deliverables will be executed,

and of course, when the engagement ends.

S M A R T

3. ...But sometimes less is more:

Given all of the above, It is important to strike a balance between being very specific, and causing information overload. If you put too much into your engagement letters, your clients will not be reading it. Too little, and their expectations may differ wildly from yours. This balance is what can make or break scope creep. It’s all about setting solid expectations.The fact is, it is impossible to list out everything related to scope, so make it clear from the start that your engagement letters are succinct for a reason; clarity.

4. Take advantage of technologies that help you manage additional services:

So you have done a fantastic job of on-boarding your clients. You set expectations clearly, and your clients are thrilled with their choice. Now they want to add more services. awesome! You’ve now turned scope creep into value-adds.

At this point you need to make this process as painless as possible by leveraging technology. That’s where we come in. Having the ability to edit an existing proposal means that all of those expectations you set in the first agreement will be reinforced when additional services are added. The process of signing off and making a payment will be simple for the client.

For you, the integrations to your internal accounting software and practice management solutions mean that everything ties back to the engagement, your future invoices and jobs will be automatically updated. Easy!

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5. Be pro-active in your customer service:

Ultimately the best way to manage scope creep is to anticipate it. Imagine being able to understand the type of clients who have added on services (or scope crept) in the past, and heading it off with those similar clients before they even ask. Practice ignition can help you do this through the proposal filters.

For example: Lets say you have 100 bookkeeping clients. You started to notice a trend that a significant number of those clients have then added on a specific advisory package that you offer. For some reason, many of these clients all thought that the advisory services where part of the bookkeeping package that they bought. In Practice Ignition, you can take advantage of the proposal filters to find out who else has the same bookkeeping package, and export the results to a spreadsheet, at the click of a button.

Easily drill down into your data to find opportunities like never before.

There you have it. You now have a lead list that you can then call and offer the advisory services that your other bookkeeping clients have. These phone calls are far easier than the incoming calls that catch you on the back foot. Your clients will love you for your pro-active approach, and your profitability will reach new heights!

At the end of the day, the goal here is to create lasting relationships with your clients, built on a foundation of trust, communication, and expectation setting. Scope creep has the potential to be debilitating, but think of it as an opportunity. As long as you follow the steps above, your ability to provide value-added services will be unprecedented and those uncomfortable scope conversations will disappear forever.

By Guy Pearsonpracticeignition.com

FIRM OF THE FUTURE

QuickBooksAU

@QuickBooksAU

Intuit

For more information call 1800 618 521 or visit intuitglobal.com/au/firm-of-the-future/