Scope creep can turn what started out as a lucrative flat fee into slaving for chump change!
Here’s a valuable tip I just learned this past week that can help assure that we don’t fall victim to this insidious trap that so many bookkeepers struggle with (self included).
Scope creep can especially be a problem if you are using a fixed price agreement (FPA) for monthly services, or you work on a project basis.
It’s when you and the clients agree to a mutually acceptable flat fee, but gradually over the course of the contract, additional work creeps into the services you provide for your clients… yet you’re not charging them for it!
At first it starts as just something small that’s not worth mentioning, but over time accumulates…. or it could be that after you get into actually doing the work, there’s more than you expected, but you feel like you can’t say anything, since you’ve already quoted a fee that the client accepted.
Not a good situation to be in.
Until now, my best solution was to track the time I spent on all client work, even when billing at a flat rate. Then on an annual basis I’d review the services actually being provided, compare them to the agreed services in the contract, and then when it was time to renew the contract, we’d discuss adjustments to the flat fee amount.
That works okay, but if there’s a lot of scope creep, it means I’ve been making significantly less than I should throughout the year, and the client feels like they suddenly have to pay more for the same services.
Both of us may feel at least a little uncomfortable as a result, and it can strain the relationship a bit.
But last week I heard about a much better way to handle the situation, and have the client feel happy to pay more! It’s brilliant really… and you don’t have to eat the scope creep costs for anywhere near as long!
You see, I asked a question about this problem of my business mentor, and he surprised me with a method I’d never heard of before (he’s not a bookkeeper).
He said that I should keep a log of all the work I’ve been doing for my clients and the specific benefits / results they get from what I’m doing.
Then on a quarterly basis, sit down for a scheduled meeting with my client to review the financial health of their business and the progress made (with my help) over the past 3 months.
For any clients where we use the Profit First process, (I have several) these meetings can also be where I let the client know what their quarterly profit distribution will be. That puts the client in a good mood, since it’s their reward for using the system that’s built into the way we do the bookkeeping. It’s always good news.
At that point, when the client is feeling rewarded, I then mention the additional services provided and the value the client has received as a result (from the accomplishments log). I then mention the adjustment needed to the fee. But because it’s done on a quarterly basis, the change is almost always going to be small and reasonable.
The client is very clear on how he / she is benefiting by working with me to watch over the financial health of the business, and the reward they are getting as a result.
It’s such a positive way to do it, with the focus on value, not cost!
I LOVE this idea, and plan to start using it right away with my flat rate clients. And I thought you’d find the concept helpful too, if you’ve been moving toward using flat fees in your practice, or haven’t been charging properly for all the work you’re doing for your clients.
By the way, I learned this tip from Mike Michalowicz, the author of Profit First on the bonus webinar we did together last Friday as part of the new TFB Premium self-paced class on Packaging & Pricing. He shared a ton of great tips I’d never heard before!
So how do you deal with scope creep in your bookkeeping business? Have you found a way that works well?