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Accountancy Charge out rates
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15-03-2013 11:36am#1
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I can't imagine any business is in a rush to publish their costs for pricing. It's obviously not in their interests to do so.
I'm not sure you understand my question or perhaps I'm misunderstanding your response. Are you saying you can't imagine why any business would publish what it charges for it's services? Have you ever eaten in a restaurant without knowing looking at the menu to understand what you'd be charged for the various dishes? You'll probably say my restaurant analogy is comparing apples with oranges so how about an Orthodontist which is an expert professional service? Publishing their prices doesn't seem to have done these guys any harm http://eastcoastorthodontics.ie/price-list and there are lot's of other examples of published pricing from mechanics to quantity surveyors to conveyancing services.
The the Institute of Chartered Accountants of India has (refreshingly) published recommended minimum pricing for specific work undertaken by it's members which can be viewed here http://www.icai.org.in/bomrsoffmanmc.pdf
Perhaps if our leading firms took a leaf from their Indian friends they'd avoid being slated for operating cartel pricing
See http://www.finfacts.ie/irishfinancenews/article_1020057.shtml
As it happens I agree with you that it's not in the interests of leading firms to publish their pricing as that might bring the sort of transparency to the market for professional services which cartel operators really don't welcome.
The problem for you and me Morte is that it's our tax Euros which are paying the cartel prices charged to the Govt. Maybe we the focus should be on what's good for the customer rather than what's good for the partners who cream off the super profits :rolleyes:
Ben0 -
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Restaurants and dentists (not sure about orthodentists exactly) are required to publish their price lists. It's not that they all want to. Mandatory minimum pricing like the Institute of Chartered Accountants of India would generally be considered cartel behaviour as it would stop prices falling below this floor. It would have been very bad to have this in Ireland as we'd still be stuck with bubble prices probably.
There's obviously an element of haggling in all this. Firms will try to charge as much as they can and clients will try and pay as little as they can.
Let's ignore that though and focus on the theoretical side of things. Accountancy prices aren't set in stone like buying a can of coke from a shop. There is the "guideline" price that the firms use for a rough idea and then they will tailor it for each job. They will charge more at busy times of the year. They will charge more for risky jobs which might leave them open to bad pr or being sued. They will charge less for big jobs. They will charge less if the work is recurring or may lead to more work in the future. And so forth.
Publishing their "normal" prices doesn't tell people a whole lot as the prices will vary massively anyway. I don't believe it would help competition a whole lot. It certainly wouldn't help my tax money. The state takes out goodness knows how many contracts a year throughout all the state bodies. They know full well what a normal rate is.
Really we're back to the usual solution of making sure people shop around in order to drive prices down. For bigger jobs these should be put out to tender and the tender process needs to be done well.
I'm not sure why you've had trouble getting prices in the past. I've never been involved in hiring the Big 4. I'd guess that if you just rang them they'd be reluctant to give a guess over the phone as they don't know your business properly to give a correct quote. If they thought you genuinely might choose them for the work and weren't just ringing around then they'd talk it through with you and work out a quote. If they think you're just trying to benchmark and won't actually go to them then they won't bother wasting their time calculating a price. As you know their time is worth a lot. 0 -
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Sorry but that's just a pile of BS. Complexity = more hours = automatic adjustment to the price of the job and risk factors are dealt with in the terms of the engagement letter/agreement (limiting liability etc) but if the job is unattractive to the firm due to too much perceived risk or for some other reason (e.g. being asked to audit a Ltd company which has a reputation as being a front for criminal activity or is involved in an industry sector the firm has a policy of avoiding e.g. strip clubs) then it can simply decline the opportunity.
I know RRP/rate cards outlining the charge out rates for junior associates to the highest level partners exist for all the big firms (I have/had several of them) but they don't publish them, they make you ask for them. No one seems to be able to explain why they make you ask for something they already have and regularly issue to potential clients instead of just publishing it the way other professional service providers do.
Ben
Sorry, but it's not a pile of BS
The fact that you think risk is fully mitigated by the engagement letter shows that you don't have a full grasp of the ins and outs of the process. The engagement merely sets out the terms of the engagement, it doesn't necessarily protect the firm from being the subject of legal action, in the unlikely event that they issue an incorrect audit opinion that causes loss to someone for example.
Complexity is also a bit more intricate than you're suggesting. What might be dealt with by one firm using two senior associates taking a week might be dealt with by another firm using an assistant manager for 8 days. That's going to give you a big difference. What I'm trying to explain here is that each firm will have different strategies and staff availability for dealing with your job. For even a simple job, Firm A might assign two associates for a week, and Firm B might assign one senior associate for 9 days.
With all due respect, you don't know how the individual firms are going to staff the job. Looking at two rate cards is so close to irrelevant that it would almost be misleading for firms to just throw a rate card out there for potential clients, as it's not fair to anyone involved.0 -
The fact that you think risk is fully mitigated by the engagement letter shows that you don't have a full grasp of the ins and outs of the process.
C'mon TL, you sound cleverer than to selectively quote me to make your point. :rolleyes: I also said "if the job is unattractive to the firm due to too much perceived risk or for some other reason (e.g. being asked to audit a Ltd company which has a reputation as being a front for criminal activity or is involved in an industry sector the firm has a policy of avoiding e.g. strip clubs) then it can simply decline the opportunity."
Risk is completely mitigated by declining a job but is also mitigated through limitation of liability clauses in the terms of engagement and via professional indemnity insurance should the engagement agreement not prevent the firm being found negligent in a subsequent court case.Complexity is also a bit more intricate than you're suggesting. What might be dealt with by one firm using two senior associates taking a week might be dealt with by another firm using an assistant manager for 8 days.
Thanks for clarifying my point there ref complexity TL. That was EXACTLY the point I was making. If one firm uses 2 x senior associates x 40 hours each at €300 an hour = €24,000 and another firm would tackle the same job using 1 x assistant manager x 64 hours x €450 an hour = €28,800 the first firm would cost €4,800 less and, assuming both firms could start the job on the same day, the first firm would have the job finished 3 working days earlier. See complexity is absolutely reflected in and adjusted by the hours worked by various grades of staff.
QED I'd say
Now, does anyone actually know why the rate cards are not published by organisations who in the case of accountants have a responsibility for delivering transparency????0 -
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C'mon TL, you sound cleverer than to selectively quote me to make your point. :rolleyes: I also said "if the job is unattractive to the firm due to too much perceived risk or for some other reason (e.g. being asked to audit a Ltd company which has a reputation as being a front for criminal activity or is involved in an industry sector the firm has a policy of avoiding e.g. strip clubs) then it can simply decline the opportunity."
Risk is completely mitigated by declining a job but is also mitigated through limitation of liability clauses in the terms of engagement and via professional indemnity insurance should the engagement agreement not prevent the firm being found negligent in a subsequent court case.
Thanks for clarifying my point there ref complexity TL. That was EXACTLY the point I was making. If one firm uses 2 x senior associates x 40 hours each at €300 an hour = €24,000 and another firm would tackle the same job using 1 x assistant manager x 64 hours x €450 an hour = €28,800 the first firm would cost €4,800 less and, assuming both firms could start the job on the same day, the first firm would have the job finished 3 working days earlier. See complexity is absolutely reflected in and adjusted by the hours worked by various grades of staff.
QED I'd say
Now, does anyone actually know why the rate cards are not published by organisations who in the case of accountants have a responsibility for delivering transparency????
You've just given a worked example of how two different firms can give two different quotes based on how they internally staff the job. In a situation where a potential client has looked at the published theoretical rates on both firms websites and then received a quote from both firms, the potential client has now gained nothing from seeing the published rates. In my view, you've answered your own question.
Can you please explain clearly what further explanation you're looking for?
I mean, the very bottom line is, they don't want to publish their rate cards. It's not industry standard, and the firms gain nothing from it. The industry isn't what I would call a price competitive one. It's an industry defined by quality of work and client service, and prides itself on these aspects, not price.
If you're trying to pick fault with the firms for not publishing their rates, or trying to subtly complain about the situation, I don't think there's much more that I can say that will give you what you're looking for.0 -
Are you trolling?
You give the impression as if you've found out some major conspiracy.
You think you've answered the question of risk by saying a company can walk away given certain examples. Really!
No, honestly I'm not.
I know there isn't a "major conspiracy", just old practices which don't reflect modern transparent pricing.
I haven't tried to answer the question of risk by exclusively saying a firm can walk away. Are you trying to troll me? I said risk is managed in a layered manner via limiting liability etc in the engagement agreement, via professional indemnity insurance and ultimately, if the perceived risk is too haigh, by declining the job. Didn't you read my post? :rolleyes:
Ben0 -
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