CPAs and accounting firms have been charging clients using an hourly rate since the dawn of time. Well, maybe not the dawn of time. But since the inception of accounting services. It seems like a straight-forward pricing model. You charge for how many hours you work. Easy, right? Well, not necessarily.

Many accounting professionals are steering away from this traditional pricing strategy. The reasons are pretty simple. Hourly billing has created a correlation between more time spent on work and more money. This causes two problems. The first problem is that accountants can be tempted to take on more and more work leading to burnout. The other is that hourly billing doesn’t allow accountants to price their work based on the value they bring to clients.

Another reason CPAs are gravitating away from hourly billing is that AI has made many tasks quicker. What would have taken an accountant one hour could potentially take them 20 minutes as they take on a reviewer role rather than a doer role. As this shift towards AI occurs, accountants will take on a consultative role and provide more value than ever before. The domino effect will be value based billing naturally taking hold in the industry.

What Does It Mean to Price Based on Value?

Have you ever heard the expression “charge your worth”? Well, this phrase summarizes why hourly billing doesn’t work. Services and products should be priced based on the value provided to a client or customer. You aren’t just filing your client’s taxes. You are finding cost savings that allow your client to invest more money into the future success of their company.

Let’s say it takes you 2 hours to prepare your client’s taxes. If you charged $30/hour, that’s only $60 in revenue. However, in those 2 hours, you may have saved your client $30,000. What is that savings worth to them? In other words, what is the value of that service? Definitely more than $60.  

Hopefully you’re starting to think about changing your pricing structure to match the value you bring clients. We can guess your next question, though. How exactly do you determine the price of the value you offer? And your next question likely is: What pricing structure allows you to withdraw that price with ease?

We give you the subscription billing method.

First, What Is a Subscription Billing Model?

Subscription based billing is popular in industries such as entertainment and meal prep. Think streaming services like Netflix or food delivery subscriptions like Hello Fresh. Essentially, you determine the value of your services, assign a dollar amount that represents that value, and charge the price on a weekly billing cycle (or another fixed interval) by automatically withdrawing that amount from your client’s account. You can imagine the ease of not having to chase clients down with fluctuating invoices each month. The subscription billing method will automate payment collection for you. Your client receives consistent value, and you receive consistent cash flow. Sounds like a win-win, right?

However, there is an important element of subscription based billing that we haven’t covered, yet. To truly create a subscription billing model that works, you have to ensure that you deliver on the exceptional service you promise.

What happens when Netflix removes your favorite shows and doesn’t deliver on new shows worth watching? You cancel your subscription. The same goes for the services you offer. If the services you offer are not delivering the value you disclosed at the beginning of your client relationship, your client will cancel their subscription and find a better fit. Customer experience is even more important when it comes to a subscription billing business model.

The solution is to ensure your team is devoted to creating a strong and fruitful relationship with clients and adding lasting value through the impactful services you offer. We recommend implementing processes that make these services not only possible, but also consistent and reliable.

Determining Your Subscription Pricing & Packages

The first step to determining the price of your subscription plans or “packages” is determining the impacts each package creates. Remember, you are selling the impacts your services have, not the individual services themselves.

Here are a few common impacts accountants like yourself have:

• Reducing manual tasks, savings on taxes that can be invested back into the business
• Providing forecasting that informs business decisions
• Helping clients understand their money, decrease stress and time spent on finances
• Reducing paperwork
• Creating consultant relationships that provide insights into industry metrics.

Your package offerings will depend on the different services you offer to your clients. For us, we offer three pricing plans that correlate to three tiers of clients with different needs.

In one of our latest webinars, we had the chance to talk with Geraldine Carter, a renowned business owner who coaches CPAs on how they can increase the value they offer their clients while working fewer hours. In this webinar, she suggests that the first step to determining your value-based pricing packages is determining the impacts your services deliver to clients. She also suggests determining why clients chose you and the specific offerings they signed up for. Often, clients are going to hire you because you are known to have an expertise in a specific industry.

This aligns well with our own pricing guidelines. At Summit Virtual CFO by Anders, we price based on demand (which is influenced by the perceived value of our services). We do this by tying our pricing to conversion rates.

Our subscription-based billing method uses a baseline sales conversion ratio of 30%. Prices are adjusted based on fluctuations in the conversion rate – we increase pricing if the rate exceeds 30% and decrease pricing if the conversion rate falls below 30%. A higher conversion rate signals increased demand, justifying a price increase, while a lower rate suggests a decrease in market demand, possibly due to pricing issues.

Our firm's à la carte service model allows for targeted adjustments, such as raising prices for high-demand services and lowering prices for less popular ones, without affecting the entire range of packaged services. This approach enables flexibility in responding to changes in market demand for specific services, rather than implementing across-the-board price reductions or increases.

One last note on pricing. We have found that communicating to your clients at what time prices will raise avoids any surprises for the customer and ensures that your firm stays transparent. Our customers know that prices will increase between 5-10% at the beginning of each year. It’s even included in our contracts.

Automating Subscription Based Billing

Arguably the most important step in building a subscription billing model is automating payment collection. As a consumer, it seems like this is done automatically by the company providing you a service or product, but actually, most of these businesses are using a subscription billing software. We recommend that you use a subscription billing software to collect subscription payments. That way, the subscription management is automated and payment processing is a breeze. Some subscription billing systems include Stripe, CPACharge, and Chargebee.

Our clients are also able to contact their virtual CFO to “downgrade” or “upgrade” to the next subscription level based on their business needs. This increases customer satisfaction because their experience with our business is one of ease. Have you ever had to call your internet provider and wait on hold for what seems like hours to increase your plan to the next level? Yeah, we don’t want that for our clients. Any way you can streamline this process for your clients, the better.

We also have à la carte add-ons that clients can choose to include in their subscription. These are back-office tasks such as bill pay, client invoicing, payroll, employee expense tracking, etc. that our clients find easier to allow us to do. This is yet another way we provide value-add to our clients.

Subscription Based Billing Allows You to Charge Your Worth

There’s that phrase, again. But it sums up what we at Summit Virtual CFO by Anders keep preaching: subscription based billing allows you to charge what your services are worth. The number we charge is also not arbitrary. As you read above, the number comes from concrete metrics that influence the scalability of our firm while aligning with the value our clients place on our work.

No more guessing what your prices should be or Googling what you should be charging. The subscription based billing method will allow you to serve your clients better and create consistent cash flow for your firm through automated recurring billing. It may be surprising to you, but by changing from hourly billing to subscription billing solution, our profitability increased dramatically. That’s why you hear us talk about the subscription business model so frequently in our webinars and podcasts.

If this was a helpful article for you, we encourage you to check out our Virtual CFO Playbook Course. We deep-dive into how we created our Virtual CFO Services, and how you can do the same. (We even have a module on pricing if you’d like to learn even more about the subscription-billing process).