5 Reasons Why Retainer Based Services Are Good for Accountants
What are retainers? One of the biggest concerns for any firm is assuring a stable cash flow. One way to get regular assignments and have a predictable flow of income is to set up retainer based services. Flat fees and hourly rates may be the staple of the industry but do retainers really work for accountants?
Retainer clients are clients who are billed monthly or weekly for work performed by a firm. Often, the recurring bill is a flat rate with hours and expenses tracked indirectly. One of the benefits of offering retainer based services for accountants is that there is a consistent cash flow, usually on a monthly basis. It also allows your Clients to accurately plan for these expenses.
Many accounting firms offer retainer based services to generate a stable flow of income. Several accounting firms charge retainers for large business-related projects such as bookkeeping and GST returns plus the annual tax return. Others also charge a retainer for representing a taxpayer at an audit.
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Always make sure that your clients can afford these services before you offer them and make sure that you provide great service and real value to your clients.
Do your market research about what your client views as good value. According to research conducted by MBM, businesses are willing to pay 1% to 1.5% of their gross margin for ongoing financial type services.
If your client’s gross profit margin is $1.5 million for instance, you can offer retainer-based services that would cost them between $15,000 and $22,500 per year.
You must clearly and completely communicate with your client when charging them a retainer. Also carefully explain to them the billing cycle so that there are no surprises for the client.
Here are a few reasons why retainer based services aregood for accountants to offer:
1. Consistent Cash Flow
One of the main benefits of offering retainer based services is because there is a consistent flow in revenue for your business. There is a regular monthly income.
2. Guaranteed Reasonable Expectations from the Client
Do not tell a client that you’ll do whatever it takes; always let the clients know what you’re selling to them.
3. You can Bill Your Client in Advance
Bringing in money during the start of the job will help in generating cash flow immediately.
4. Review Results with the Client
One of the best things about retainer based services is that you have time to review the results with your client. A retainer relationship will work if you and your client find value in it.
5. Detailed Reporting Helps You Become Transparent with Your Client
Being open with your clients about the costs involved is very important – advising them of the work you’re completing, as well as which months are under-budget or over-budget. Detailed reporting can help with retainer planning as well as negotiations with your clients.
