A professional fee is the price one pays as remuneration for our professional services. The said remuneration covers the overhead charges, costs of equipment used, staff salaries and mark up. The demands of the profession over the years have become much more complex in nature and much wider in scope because of day to day introduction of online compliances with various statutes around us.
CCBCAF & SMP PRESCRIBES MINIMUM RECOMMENDED SCALE OF FEES FOR THE PROFESSIONAL ASSIGNMENTS
Committee for Capacity Building of CA Firms and Small & Medium Practitioners, ICAI (CCBCAF & SMP) has prescribed Minimum Recommended Scale of Fees for the professional assignments done by the members of ICAI. The recommendation is about the fee to be charged as per the work performed for various professional assignments and the amount quoted under respective heads of professional work. The fee has been recommended separately for Class A and Class B Cities. As per their notion the prescribed Minimum Recommended Scale Fees will enhance the productivity and Capacity Building of Practitioners & CA Firms and will largely benefit the SMP segment. But in fact it is far from such expectations. The said recommendation was last updated on 17th October, 2014.
These suggestions define the responsibilities, the scope of work and services, and prescribed the mandatory minimum scale of professional charges with a view to making the Client fully aware of the duties and services which he may expect from the Chartered Accountant. The professional services required by the Client may not be comprehensive in scope in all cases and accordingly a clear understanding between the two must be arrived at. The Committee has prescribed the fee based on general practice of the profession in India. The revised version of these documents reflects the regulatory response to the many challenges which the profession is facing at present, and is constantly endeavoring to meet them with active concern and unflinching commitment. The regulator our Alma mater must issue a Pricing FAQ to support members endeavours to collect the money from their clients.
WE GET IN DIRECT PROPORTION TO THE VALUE WE DELIVER
Whenever we accomplished some work for the client, we must be rewarded with what we desire the most. What do we value? Is it gratitude, appreciation, happiness, recognition, feel good about ourselves or we desire appropriate money for the work executed by us. To make a living at what we love, the key is to assess what we truly desire as reimbursement. Whenever we will try to see outside the frame of the money certainly; it will sabotage our cash income and shall cause financial restrictions. In real term our success & our stats are directly linked to our cash income and this is tangible barometer that demonstrates we have successfully achieved our professional.
FEE IS ALWAYS BETTER THAN FREE
Many of the times we give free advice’s to our clients or to some referred by our clients. But the truth is that the person acts on the paid advice rather than a free advice. So we lost a prospective client by not charging for our advice. This behaviour of advice seeker is not alone. All of us value, paid-advice more than the free advice we get, irrespective of the quality of the advice. Why? Suppose we have booked our holidays, after 30th September means after completing our Tax audit assignments but with the declaration of Tax Audit date, the clients went back to their holes. We lose our charm of holidaying without completion of work in hand. But the money spent on the holiday booking troubles us so much that we drag our self for the holidays. You have a miserable time staying there. But we shall be happy that you did not waste the money for bookings etc.
Our decision to go to the destination should have been based on whether we would have enjoyed the holidays or felt good completing the remaining workload of the office. The booking cost, is sunk-cost — not relevant to the decision on whether to go to the destination or not. It is the same with advice. Often, we act on paid-advice because we feel compelled to justify the steep price we paid to get the advice. The client resolve this inconsistency by believing that the paid advice is worth more than it actually is so generally act on it. This is fact that a client tends to value advice based on the price they pay for it. It seems that we value advice the same way we value other goods — the costlier it is, the better it should be. This understanding should be taken as good lesson and decide not to give free advice anymore.
INSPIRING BRILLIANT STORY ✔
An engine in a factory failed. The owners tried one expert after another, but none of them could figure how to fix the engine. Then they brought in an old man who had been fixing engines since he was young. He carried a large bag of tools with him, and when he arrived, he immediately went to work. He inspected the engine very carefully, top to bottom. Two of the owners were there, watching this man, hoping he would know what to do. After looking things over, the old man reached into his bag and pulled out a small hammer. He gently tapped something. Instantly, the engine lurched into life. He carefully put his hammer away. The engine was fixed! A week later, the owners received a bill from the old man for Rs.10, 000.
“What?!” the owners exclaimed. “He hardly did anything!” So they wrote the old man a note saying, “Please send us an itemized bill.” The man sent a bill that read:
Tapping with a hammer.. ……. . Rs. 2/-
Knowing where to tap………. Rs 9,998/-
Effort is important, but knowing where to make an effort in your life, makes all the difference.
WHAT SHOULD WE CHARGE FOR PROFESSIONAL SERVICES?
Professional fees are based on mathematical formulas. Sometimes this is easy to establish. Sometimes it can be very complex. What is a fair and reasonable price for our services? Here the market often set standardized rates for our services and new comers then follow established guidelines/rates to charge for their services. Our professional straightly falls for this line. However, when we are doing something unique or unregulated, we may not have these guidelines/rates to follow. How can we establish our own rates or prices? There are many points to consider. Look at the investment in time and money that we have put into learning our skill. Our work takes considerable time, knowledge, expertise, talent or skill to perform, should be worth more than a technique that we have learned in a considerable time. Keep detailed and accurate time sheets. In addition to enabling to provide excellent billing for completed projects, time sheets will help us quote for future jobs by giving the best data from which to estimate how much effort a job will require.
The concern of “overhead costs” as our services now require expensive equipment & cost of technology up gradation.
“Overhead” is the sum of fixed operating expenses such as rent, utilities, telephone, insurance and property taxes. If we are located in a commercial unit, or pay for space, our expenses will be much higher than if we operate from home. This cost must be reflected in our fee. But generally Chartered accountants don’t charge a fee covering the overhead cost. We can calculate our yearly expenses on such facilities and may divide it on the number of clients with us.
An investment in technology, equipment has to be factored into our fee. It should be compensated for our financial outlay. We have additional expenses, such as those for office and technology maintenance. The cost of PC & printer maintenance, the cost of anti viruses, the cost of windows has sneaked into our offices which were not in existence a few years ago. Many of us haven’t applied this costing to our client’s fees. All these operating expenses must be considered within our own professional fee if cannot charge separately for them.
Calculate own wage into your professional fee.
On a per-hour basis, what is a fair and reasonable hourly wage for someone with our level of experience, skill, training, and professional reputation? If you were an entrepreneur, what would we pay someone to do this service? If we were a consumer, what would we be willing to pay for this service? Take into consideration our living expenses, how many hours a day you want to work, and much you must earn to live comfortably. Our fee may rise incrementally as our experience, skill and reputation increase. If we are a beginner, our fee or wage should reflect this. There should be a combination of our wage and all the other costs to determine our fee-for-service rate.
THE WAYS WE CAN WORK TOGETHER TO IMPROVE OUR LOT
Don’t undercut colleagues without careful consideration. Simply undercutting to win a job also puts downward pressure on our rates in general.
Networking is an important tool. We will be in a better position to source overflow work (when your colleague can’t fit a job in, and the client asks for a referral). It also builds marketing capacity by getting our ‘brand’ out there.
Take as many professional development opportunities as you can. This will lessen the self-doubt that makes us cut our rate in the face of a question from a client. By honing and improving our skills, we will be better positioned to negotiate from a position of confidence and strength, understanding the benefit we deliver for clients.
Be wary of discounting, and quote professionally. Once you’ve set a low rate, you’ll have difficulty asking more next time. Give clients a professional written quote-establish from the outset that they are dealing with a professional, giving them the confidence that they will get a professional service.
Get feedback from clients. Get feedback from colleagues. Share examples of your work with trusted colleagues, and work with other people to see what we can improve. – Build your reputation in fraternity. Consider different rates for different tasks, but make sure that you adequately distinguish the skills contributing to those tasks.
CA AMRESH VASHISHT, Meerut
(About the Author– Author was Member of ICAI- Regional Research Committee 2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email email@example.com or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA)