Magazine article The CPA Journal

2001 Professional's Guide to Value Pricing, Third Edition

Magazine article The CPA Journal

2001 Professional's Guide to Value Pricing, Third Edition

Article excerpt


By Ronald J. Baker

Published by Harcourt Brace Professional Publishing; 570 pp. with CD-ROM, $99

Reviewed by Mark J. Koziel

This latest edition of Ron Baker's Professional's Guide to Value Pricing can arguably be called the book to change the CPA profession. Its primary contention-that hourly billing is becoming obsolete for the accounting profession-is one that is long overdue.

In general, the book calls for a change from hourly billing to value pricing on a fixed-price basis. Baker makes some interesting points and provides considerable detail to support his position. He describes the profession in such a way that one cannot help thinking that there is a better way to service customers than charging by the hour. Baker discusses a number of subjects that affect public accounting and addresses each of them thoroughly, backed up by research. He categorizes them as follows:

* Economics, marketing, and price theory

* Profits and morality

* Hourly billing (and its alternatives)

* Psychology

* Management consultants and consuiting

* Selling

* Marketing, selling, and leadership

* Total quality service.

According to Baker, there has been little innovation in the accounting profession since Fra Luca Pacioli's introduction of double-entry bookkeeping in the 1400s. He also makes the point that the accounting profession is less profitable today than in the early days of the 20th century-- before the days of hourly billing. Baker claims-and many would agree-that the CPA profession is in the mature stage of the product lifecycle, if not in its declining stage with respect to traditional services. Baker also provides details concerning recent trends in the industry that support his position, such as consolidation, brand-name recognition, price competition, and increased marketing. The AICPA's Vision Project shows how the focus has shifted significantly to the customer.

Baker uses his background in economics to explain why people are in business, what people buy and how they buy it, and the economics of human behavior. He painstakingly explains consumer buying habits and how certain industries have capitalized on these habits. These areas are pivotal to the book and prime the reader to see beyond hourly billing, even before Baker analyzes the concept.

Baker breaks down the billable hour and disproves the notion that it is the only option for billing practices. He discusses hourly billing's advantages and disadvantages-which are far greater in number-and immediately dismisses the short list of advantages with better reasons to not use hourly billing.The book also discusses the effects that hourly billing has had on the number of write-offs. Baker describes fixed-price agreements (FPA), which provide a way for the CPA to inform customers up-front about the fee arrangement and eliminate the possibility of surprise fees or write-offs.

The chapters dealing with value pricing and FPAs are a how-to guide to implementing such agreements. Baker also discusses the advantages and disadvantages of other pricing methods and provides a checklist breaking down a variety of CPA services and suggested pricing methods for each. Any firm that has started to view pricing differently will find this to be a useful reference.

Some CPAs may have a difficult time relating to the theories proposed in the book because Baker suggests viewing pricing externally rather than internally. …

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