The other day, a client expressed that he's "uncomfortable" paying for accounting services upfront as in the past, our billing was often done on a progressive basis or at end of the job.
I felt like countering his argument with:
So why the reluctance for some services?
Edit: Thai and some other massages require upfront payment as well
And?
yes
Phone plans didn't used to be upfront. Some activities people do while travelling are paid after the services is delivered. And even Martin Scorsese didn't used to pay for movie tickets as a kid, he'd sneak in halfway through the movie.
Phone plans didn't used to be upfront
You always paid the monthly service/rental in advance, but usage was always after the fact.
It's likely because of the change, people don't like change. You said you used to bill progressively or at the end, now suddenly you want to bill upfront. As far as the client is concerned they haven't done anything to warrant the change. Instead of trying to counter, explain why you've changed. They'll either accept or go elsewhere.
Same reason as to why a business would want to be paid upfront (risk and cash flow). Not very complicated.
Mobile service is not a great argument as it's typically lower value and there is the option for post-paid as well. Utilities are still postpaid (gas/electricity/water).
Billing on a progressive basis seems the most reasonable and accepted method for businesses.
Every phone plan I've ever had, I've always paid "a month in advanced" when I have signed up.
I have noticed some companies (Vodafone) don't acknowledge this fact when you leave tho.
paying for accounting services upfront
You're putting the 'risk' onto the client rather than the supplier. Of course the client/customer would be less comfortable with that change, if they are use to being charged after seeing actual output/deliverables for their $.
I'd personally be cautious of an accounting service whose cashflow is such that they require upfront payment.
What's the risk though if it's a fixed fee anyway?
Upfront payment is more for ease of administration and not waste time chasing debts at the end
The 'risk' is (in the clients perspective), what if you don't deliver, deliver poor work, or there's other issues. All of which are now harder to dispute with you holding the $.
Similar reasons you'd want to bill upfront, because you don't want to have to chase $ after delivering or dealing with potentially petty disputes as to why ban customer won't pay.
Like I said, it's putting the 'risk' weighting to the client instead of the supplier, and a such, puts the 'weighting' on the client needing to trust the supplier rather than the other way around
Plus with accounting services etc… isn’t it usually based on how many hours are provided?
Sometimes it is a case of knowing the work is going to be a fair bit. Our firm when we are doing clients that have 3+ years charge in advance as that's usually about $400-500 of the bat. Add in complications such as rental props,CGT or even worse a shoebox sole trader and it can rapidly get very expensive.
When clients then get a tax bill of hundreds if not thousands we want to be paid first.
Accountants cannot be paid before service is rendered anyway. Any money you receive before service is rendered is a prepayment and should be kept in a trust account.
I would not want to hold up my funds unless its due.
Your comparisons arent equal.
Despite appearances, airline tickets, movies etc are a known quantity and quality of service and, generally speaking, are backed by a range of guarantees and insurances. Movie stuffs up, you get a refund. Plane doesn't fly, they rebook, credit or refund.
Taxation, however, despite the choice of a fixed fee model, places the risk on the client (thats the disclaimer shoved under people's noses) and provides little to no guarantee of no ATO action. Its paperwork completion nowadays, that's it.
And I say that because if it weren't, it wouldn't be a fixed rate. My accountant (former ATO tax specialist of some 20+ years) wouldn't dream of charging a fixed rate. Because there never is an end point in tax. And perhaps that's what the client struggles with.
If it's an issue with your business model, then frame it as a first appointment fee or something.
An accountant that wants to charge me before services just screams "I am lazy, I don't give a shit about your situation, just give me money, trust me bro"
Plenty of others to chose from! You will find some people might pay once like that, but they are never coming back for repeat service ;)
👆
As a non accountant professional, having people deposit money into trust upfront screams ‘I don’t want to spend 35% of my time chasing late paying clients and having my overdraft increasing because they are dragging out payment for months and months’.
If OP is saying ‘payment’ is before the work is done, that’s an issue. Depositing the money before the work is done shouldn’t be an issue
The reality is once you pay somone, all incentive is gone. There is no motivation to provide a good service as the money is already pocketed.
This.
Even my accountant doesn't require me to pay the whole thing upfront. I pay 50% deposit and the remaining when the work is complete and I think that's fair.
Id be finding a new accountant in a flash if they asked for 100% upfront payment
You don't have any bargaining power as an accountant where there are a million options versus an airline, hoyts/village, large telco etc.
If my accountant started asking for upfront payment I would assume that his cocaine addiction is getting out of control.
his cocaine addiction
or gambling, could be both.
- But you pay for your mobile plan upfront
- You pay your airfares or activities upfront when travelling
- You buy a movie ticket before you see the movie
Those three are fairly clear, as the capital investment is upfront. Mobile network is built, the airplane is likely to fly (well, that might be a big assumption, given Qantas and their record of delayed flights) and the movie has already been created. However if someone is unhappy with their mobile service they can easily cancel future payments, and airfare you're generally shit out of luck and if you don't like the movie that's not the cinemas problem.
However, the work with accounting you're paying for a completed item that hasn't really been done yet. The completed tax return doesn't exist, the completed set of accounts doesn't exist. You haven't actually done any work yet and there's no product to pay for, it's purely a downpayment on something that hasn't happened. Whereas securing a seat on a flight should (again, airlines might screw you on this) be the reason for the prepayment. Unless you're such an in demand accountant that securing your time to complete the accounts is necessary, there should be no need to prepay.
our billing was often done on a progressive basis or at end of the job
I worked in big 4 and boutique for a long while, that was the norm. Because we wouldn't file their taxes or release their accounts until payment. Doing otherwise suggests you have cash flow problems. Not a good look for an accounting firm. WTF are you doing?
For upfront payment it's often 50% upfront and 50% at end, but even some client baulk at that. It's all because all became too hard to chase debts at the end.
Take your mobile example about infrastructure, that can be said for accountants too with all the software there.
If you’re equating the value you provide to the software you bought, you’re probably not a very good accountant
The Grinch is an accountant during the rest of the year?
This is turning in to one of those posts where OP asks a question, then multiple posters disagree with the proposition and OP disregards all the input provided as it doesn’t fit with their pre-conceived point of view
Yeah and watch, OP will then just delete this thread for the icing on the cake lmao
FWIW, my accountant invoices me after the work. Has always been this way.
Mine too, like other posters said, if he wanted payment upfront I’d be put off using him
Not at all. Was just wondering why there's so much resistance
Hasn’t all the other replies dealt with your question already?
Speaking of which, we haven't had a random12 post in a while..
I do invoicing every month, and clients generally expect to only be invoiced for work done. Interim invoices can range from few thousand to $80k or more.
What do the ACCC rules around prepayment for services say?
Mr Apple, I'd like you to meet your twin brother, Miss Orange
Should also add that we have a bunch of clients from Asia who insist on paying upfront
Look into setting up some sort of trust account, so you don't end up doing work and not getting paid for it.
Never pay upfront. What leverage do you have if the work is shite?
Never do it. Walk away until the service provider understands their place (servant-service not boss/employer).
Obviously, half upfront for contract killers and the like.
I find when I pay for services up front that have multiple hours of input there is often a backlog of work and the service is delivered in an un-timely manner.
My wife is using a tax accountant for her sole trader business and her mothers estate and they have taken months to complete simple tasks. Weeks just to answer emails. They owe her money and it's been near impossible to get a refund.
From your examples (not including buying a gift card):
*Thai massage - given immediately
*Pay for your mobile plan upfront - because it's a pre-pay plan with bonuses for up front payment. There are also post-pay plans as an option if you feel uncomfortable with pre-pay.
*You pay your airfares or activities upfront when travelling - this annoys me too. Especially paying for an airfare 12 months prior to departure.
*You buy a movie ticket before you see the movie - you get to see the movie straight away. It's also a ticketing / seating / safety control
By paying upfront you have relinquished any leverage you have if the end product is of poor quality or is not delivered in a timely manner.
Once you have all your payment, what incentive is there for you to complete the work in a timely manner or to even finish it all?
There is no scenario where the best place for my money isn't in my pocket so I'm going to keep it there for as long as I'm legally allowed to.
Trouble getting paid for your work upon completion of the contract? That's really a you thing to sort out.
Because the service involes a human doing something whereas your phone or airfares or movie tickets while tuey may involve humans they are fixed delivery. Not having paid fully for a service is a good incentive and insurance that you have a reason to not delay completing the service.
The other day, a client expressed that he's "uncomfortable" paying for accounting services upfront as in the past, our billing was often done on a progressive basis or at end of the job.
You've actively changed your charging model to the detriment of past clients, and you're surprised some of them are not thrilled?
There is either more to this that isn't being explained, or you are showing a total inability to see more than a single point of view.
Why People Feel Some Services Should Be Paid Upfront?