What do accounting firms and bars have in common? Overpouring.

Posted on Tuesday, January 14, 2020 by Jessica Salerno

 By Shayna Chapman, CPA


If you have watched any shows about how to make a bar profitable, a constant throughout is how the bartenders are overpouring. The show’s main expert will then go through all the reasons this is bad:

  1. The obvious: you are losing money
  2. The maybe-not-so-obvious: You aren’t turning out a quality product when it is overpoured.
  3. The perhaps-even-less-obvious: You may end up on the costly end of a lawsuit.

How can accounting firms relate to this? Scope creep. It is the same concept as overpouring. And it’s bad for your firm for all the same reasons above. You might think you’re doing the client a favor but it really is not in anyone’s best interest.

Accounting firms can do a few things to stop scope creep from happening.

First, understand what your potential client needs and is willing to pay. Meet with the client. Have a clear understanding of what the issue is as they see it and what the issue is as you see it. Understand their budgets and what is most important to them to solve so you can align the budget with the priorities.

Second, take that information and clearly define what you are each responsible for in your engagement letter. As an example, if you are doing outsourced accounting, clearly define the specific services you are performing: accounts payable, payroll, bank reconciliations, financials, KPIs, etc. The devil is in the details, though. Go deeper: how many employees are they allowed to have on the payroll? How many accounts payable items will be sent? How often are you issuing financials and to what level of assurance, if any? How often are they allowed to call or meet face-to-face with you?  Define what you are doing for them in specifics. Most value pricers will already define and have fairly clear limits, as they don’t have an option to bill after the fact. But make sure you define them to specifics and convey them to the client.

Third, convey all of this to your team. They are the ones in the trenches. At the end of the time, if you are an hourly biller, you don’t want to make the client upset with an unexpected high bill, nor do you want your team to not reach its realization rates. If you are a value-pricer and pre-priced the service, you don’t want to figure out you left money on the table because your team was not watching or aware of the details.

So what if the client has issues that do need help, but aren’t within scope? Always have a sample change order document presented with the final engagement letter before work begins. This lets the client know that other items arise and those will not be for free. They will understand when you compare it to building a home: “you ordered Formica and now you want granite. That’s a change order.” How many times have we seen the TV home builders make that phone call? Better to have that conversation up front then take care of it and hope you’ll get paid for it later. So, after you discuss it, you will put the changes on this document and agree to add it to the fees, or as a value-pricer, agree to a price up front for that change. Or, you don’t do the work.

Change orders will help you stop the scope creep in your firm. Contain your costs. Turn out a quality product you are proud of because you defined it and agreed to it. It will also help stop a possible lawsuit because you knew something but didn’t act on it or you worked on something you weren’t engaged to work on and suddenly you are liable.

By maintaining a clear scope, you’ll have a more productive and profitable relationship with your clients and your team. And a reason to celebrate a successful engagement. Cheers!

Shayna Chapman, CPA, is founder of Shaynaco, LLC and has twice received the CPA Practice Advisor's 40 Under 40 honor and twice selected as one of CPA Practice Advisor's Most Powerful Women in Accounting. She contributes to articles regarding tax, accounting, technology, and small business issues regularly and also blogs regarding these issues.


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