Accountants across the nation are announcing 2023 price increases to clients this week, based on what we read in professional online discussion groups. These rate increases follow recent year increases that often approached 20%. This year the increases are more substantial: typically 20% to 50% according to what some of my peers report online. The increases being discussed by firms as small as sole practitioner bookkeepers to as large as regional CPA firms. The primary driver of price increase appears to be work overload rather than a push to boost income. The majority of new client inquiries I receive say that their accountant died (meaning they were working up until their death) or retired (more than half of firm owners surveyed by NJCPA reported that they are already working past their planned retirement age).
Accountants, in general, have demonstrated willingness to work long hours with modest pay. I often comment online about how much longer it takes to complete routine tasks. A simple tax account adjustment with IRS, for example, that could be done in an hour in the past now often extends into months with multiple steps and approaches required. I blame lack of IRS funding, increased security measures, and difficulties with new automation technology. That former business model no longer appears to be sustainable.
A price increases of this magnitude typically result in about 1/3 to 1/2 of an accounting firm’s clients leaving their accountant. That means that firm revenue remains the same rather than increasing, leaving fewer clients to cover escalating fixed fees of running an accounting firm. But the reduction in number of clients also triggers a sharp drop in labor requirements. Many firms, including mine, have trouble recruiting, training and retaining staff accountants.
The net result of fee increases is improvement in health and lifestyle of accountants. Many if us put in too many unhealthy long days sitting at a desk. Too many are literally killing themselves with an unhealthy work habits. The goal is often to reduce the desk workload to about 30 hours per week.
I have also increased rates but am trying a slightly different approach to lessen the impact:
- offering increased support for adapters of automation, artificial intelligence accounting tools, and do-it-yourselfers
- offering long term clients with income restrictions a way to reduce fees through their endorsement and recruiting activities
- offering three levels of pricing differentiated on level of personal access rather than on the tasks performed