Tax and accounting leaders have begun to rethink conventional wisdom in this time of change and adaptation. Digital automation and remote work have already transformed the industry. Could billing be next?
Subscription services are everywhere today—from streaming content to gym memberships to pet food. Your firm most likely pays monthly or annual fees for various Software as a Service (SaaS) apps. What if you used a similar model to sell your own services to clients? The debate over CPA as a Service (CPAaaS) is now in full swing. This model eliminates hourly billing in favor of a subscription structure for your tax and advising expertise. Here are some pros and cons to consider.
Pros of CPAaaS
Easier to track
With a CPAaaS model, you no longer need to tally every billable hour for each service. You and your clients agree upon an up-front price that covers the entire scope of work. Instead of worrying about how your workload will affect each monthly billing cycle, you can concentrate on the work itself.
Less client scrutiny
Most clients don’t understand the minutiae of tax work, which can be problematic when reviewing billed hours. If they’re charged a flat fee, clients don’t have the opportunity to critique the number of hours spent on a particular service. Your work is judged solely by its overall quality and turnaround time, which is less likely to attract pushback.
Opportunities for upselling and growth
Switching to a subscription model completely reframes the value of your firm’s services. You’re no longer selling your time for a specific job, like a 1040 once a year. Instead, you’re being paid to provide comprehensive financial expertise. Think of it like a lawyer on retainer. Your contract may include specific engagements, but the core value is the advisory relationship.
When clients focus less on billed hours and more on the holistic experience, you have a greater opportunity to form a lifelong (even generational) client relationship.
Cons of CPAaaS
Higher client expectations
Transitioning to a flat fee pricing model comes with an implicit expectation of improved client service. You must convince your clients that this move is beneficial to them. Otherwise, they could be hesitant to get on board. If your firm lacks the capacity to better service clients, a subscription structure may be a hard sell.
Potential scope creep
By selling your firm’s services for one recurring rate, you could risk blurring the scope of work. Clients may start to request services that exceed the initial agreement.
To make this model work, it’s imperative to clearly define what is and is not included in your business relationship. A well-documented statement of work can save your firm from miscommunications and legal disputes down the road.
Subscription fatigue
A CPAaaS model might be optimal for your firm, but some clients simply don’t want another subscription in their lives. It’s also possible that some clients prefer the oversight and incremental nature of hourly billing. You can combat skepticism by offering multiple tiers of service and shorter contract terms for first timers.
Is a CPAaaS model right for your firm?
Overhauling your tax practice’s billing structure shouldn’t happen overnight. Before making any abrupt changes, assess how practical it would be for your firm.
Does the bulk of your business come from one-off 1040 returns? If so, a subscription model might not make sense. However, if you offer more holistic advisory services, a subscription model could be an excellent opportunity to improve client service and strengthen relationships. If you have a tailored list of high-value clients or are looking to cultivate one, a CPAaaS model has even greater merit.
“This model lets you spend as much time as you want helping your customers, which is why you became a CPA in the first place,” said Ron Baker, founder of the VeraSage Institute, in a 2020 interview with Thomson Reuters. “As consumers, we have relationships with Amazon or with Netflix or, indeed, any business we subscribe to. Psychologically, it’s much different than a transaction — it’s a forever transaction, and I think that’s the future.”