Fixed fees or billing by time?
When an accounting firm should quote a fixed fee and when to bill by time, and which records in Achekam support each way of charging.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A small business owner asks what the annual financial statements and tax return will cost. One partner answers with a number. Another answers with an hourly rate and an estimate. The client almost always prefers the first answer, and the firm often regrets it when the records arrive in a shoebox.
The argument between fixed fees and time billing never quite ends, because both have real strengths. The better question is which work suits which approach, and what records the firm needs so that either approach stays profitable.
What clients and partners each want
Clients want certainty. A fixed fee lets them budget, removes the fear of a bill that grows every time they phone, and makes the firm easier to compare with others. Many owner-managed businesses will choose a firm on that basis alone.
Partners want to be paid for the work actually done. Time billing protects the firm when the job turns out harder than expected, and it rewards the extra effort of a complicated year.
The tension is real, but the two sides overlap more than they seem. A client on a fixed fee still expects extra work to be charged if they cause it. A partner billing by time still needs to give an estimate. The approach is a starting point; the engagement letter does the rest.
Which work suits which
| Work | Usually suits | Why |
|---|---|---|
| Monthly bookkeeping, payroll, VAT returns | Fixed monthly fee | Predictable volume, repeated each period |
| Annual financial statements for a stable client | Fixed fee | Scope is known from last year |
| Audits and reviews | Fixed fee with clear assumptions | Clients expect a quoted fee; assumptions protect the firm |
| Advisory, restructuring, disputes | Time, with an estimate | Scope is uncertain at the start |
| First-year clients with unknown records | Time, or a fixed fee after a scoping phase | Too little is known to price safely |
Pricing from the service catalogue
Whichever way the firm charges, prices should come from somewhere consistent. A firm can keep a service catalogue under CRM & SALES > Leads > Services & quotes, and staff can save quotation templates and start new quotations from them. The prices in the catalogue stay blank until a person types them; the starter list Achekam adds carries no prices at all. That is deliberate: what a firm charges is its own decision.
When staff build a proposal or quotation, the fee lines are priced by a person, VAT is added at the standard rate for the firm's jurisdiction, and Achekam recalculates the total from the lines. One thing for Nigerian and Kenyan firms to know: CRM board amounts are shown in rand, even for firms outside South Africa, so read the figures there with that in mind.
A catalogue with considered prices stops the same service being quoted at very different fees by different partners, which clients eventually notice.
Fixed monthly fees as retainers
Many fixed fees are really monthly retainers: a set amount each month for an agreed bundle of services. Recurring fees from signed contracts appear under Retainers, where staff raise each period as a draft invoice, or a partner authorises the daily billing run to issue them. Achekam does not collect them by debit order or card, so the firm still needs a way for the client to pay, such as a pay link or EFT.
Investopedia's explanation of the retainer fee covers how retainers paid to lawyers, consultants and advisers work and the difference between earned and unearned retainer money. Accounting firms use the word more loosely, but the distinction between money for work done and money for work still to come is worth keeping in mind. The billing run itself is explained in retainers and the billing run.
Time records still matter under fixed fees
This is the point firms most often miss. Moving a client to a fixed fee does not mean the firm can stop recording time. Without time records, the firm has no idea whether the fee is profitable.
Two views make the difference:
- Hours: Allocated vs Consumed, under WORK & DELIVERY, compares each engagement's planned hours with the hours logged. On a fixed-fee job, the planned hours are the ones the fee was built on.
- Rate Cards & Realisation, under BILLING & FINANCE, shows the age of unbilled work, realisation and recovery from the firm's rate cards. Time with no rate is counted as unvalued rather than estimated.
On a fixed fee, the time recorded at standard rates compared with the fee charged tells the firm whether that client is worth what it costs. On time billing, the same comparison tells the firm how much it is writing down. How to read those figures is covered in rate cards, realisation and recovery.
Reviewing prices each year
Fixed fees go stale. The client grows, adds a branch, changes systems, or simply takes more of the firm's time than it did when the fee was set. Once a year, before engagement letters are renewed, review every fixed fee:
- Compare hours logged in the year with the hours the fee assumed.
- Look at realisation for the client on Rate Cards & Realisation.
- Note any work done outside the agreed scope, and whether it was billed.
- Decide whether the fee, the scope or both should change.
- Put the decision in the new engagement letter before the work starts.
Extra work that crept in during the year is the usual reason a fixed fee stops paying; recording scope changes shows how to catch and bill it.
Choose a handful of fixed-fee clients this month, run the comparison of hours against fee for each, and let the results shape how the firm prices the next year.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
