Professional services are viewed by some businesses as grudge purchase, “buy because you know you have to [even though] you’d rather spend your money on something else.Well if you are paying for something why not get value from that purchase? The question to be answered is – am I getting value relative to my required needs, the overriding factor is value, something which few take into account or understand.
You need to go beyond taking the narrow view of the absolute cost and take both quantifiable and non-quantifiable factors into account, and this is exacerbated by the current economic climate where cash flow considerations are critical.
Cost/Benefit and fee comparisons
Cost/benefit is a decision making tool whereby comparisons are made of the costs of various projects to the respective benefits taking into account the client risk profile, needs and desired outcomes.
In order to make a meaningful comparison it is vital that the all factors are taken into account, both monetary and non-monetary. Comparisons of various proposals need to be compared on an equitable basis in order to formulate a meaningful decision.
What Questions should I ask of myself?
Before employing a professional ask yourself
· How serious are you about your business?
· Do you want to be build a legacy or not?
· Do I require advice?
· What problems do I need solved ?
· What are the key factors in coming to a decision?
· What type of professional am I looking for?
Interview the Professional
Interview the professional as you would a new employee, the professional is going to become part of your team, and the fee is irrelevant if the wrong person is doing the job. It is important to find out who you are dealing with. Ask relevant questions
• Client Requirements - What do you need?
• Professional Societies - Are they members of a recognised professional body?
• Services -What services do they offer? What do they specialise in?
• Location – Is it convenient for me?
• Communication – Good fit? Do they use online communications?
• Meeting - How often will you meet?
• Fees & Terms of Service – What are they? What's the value proposition?
• Internal Support Structure – Sole Practitioner or Partners, Software Systems.
• Response time – How quickly do they respond to queries?
• Team – Will he fit into our team structure?
• Communication – Does he/she appear to be an effective communicator?
The Efficiency Factor
Fees are based on the time and skill required to complete the task. A major impact on the cost is the efficiency of the professional and his team. Whilst this is difficult to determine accurately the client can reduce his risk by focussing on the skill and knowledge of the professional.
Professional A quotes R250 per hour for a job that should take 10 hours, Professional B quotes a rate R450 per hour for the same job. Through inefficiency A takes 20 hours, whilst B takes the expected 10 hours. It would have been cheaper to use B by R500 ((450 x 10) –(250 x 20))
Am I getting the value? The determination of value is subjective; some factors to take into account
· Will the service offered solve my problem?
· Is the fee fair relative to the expected return?
· Does the particular product or service add more value or better solve a problem than other similar offerings?
The client needs to be aware of the risks involved.
By choosing a less skilled, experienced professional the client’s risk increases some factors to consider.
Task may be performed inefficiently.
Higher overall fees.
Statutory standards may not met as shortcuts are taken.
Statutory penalties could be incurred.
Lack of experience and training.
Inaccurate information produced, resulting in poor business decisions and losses.
Questions to ask when comparing professionals fee estimates
· Can they satisfy my requirements?
· Do they have similar and the type of business experience I require?
· Have they a good track record in providing the services?
· How long have they been a member of their professional body?
· Can I communicate with them?
· Does the professional have an office structure – technology and staff?
· Will the service solve my problem?
· Is the cost fair relative to similar offerings?
· Will they fit well with the rest of the team?
Professional fees and their determination will always be subject to debate and the current view this as a grudge purchase, something they have to do because of prevailing laws and “big brother” is watching you. It is time we adopt a different approach to the payment professional fees, one that looks at getting value for money as well adding value to the running of the business, the professional fees should become an investment into the future growth of the business
Why do I say this? With the right professional advice and support the business owner will get a sounding board for business ideas, reliable information on which to make his better decisions thereby having a better chance of increasing his business.
So next time when deciding to engage the services of a professional, the buyer must beware of making the final decision based on a superficial examination of the facts and solely on price. Both monetary and non-monetary factors must be taken into account before making a final decision as well a change of mind-set. The client needs to consider these questions for ultimately he must resolve the problem or get a r objective is to solve a problem and/or get competent reliable service that will add value to the business, avoid pitfalls and resolve problems The decision process must not be blinded by low rates but must focus on the cost/benefit of the service being provided.
Brian Taylor is a director of TFA Global (Pty) Ltd a firm of accountants providing a holistic accounting service incorporating advisory, tax and accounting services to high professional standard at value related fees. Please contact us on 021-9481584 or email@example.com